O’ Melveny Profits Are Outpacing Large Firm Rivals

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O’ Melveny Profits Are Outpacing Large Firm Rivals

LAW

by Amanda Bronstad

Staff reporter

Profits at O’Melveny & Myers LLP leapt 33 percent in 2001, the highest by far among the five largest law firms in Los Angeles.

While profits per partner were up at many Los Angeles-based firms, the percentage increases hovered around the teens. O’Melveny saw its profits jump to $940,000 per partner approaching the $1 million mark already surpassed by Latham & Watkins and Gibson Dunn & Crutcher LLP during 2001 from $705,000 per partner in 2000.

The profits are the highest ever at O’Melveny, which ended its fiscal year Jan. 31, said Seth Aronson, head of the firm’s L.A. office.

“A lot of this seems like a big jump, but it has to do with a few years of planning and making the investments both in our talent and in offices,” Aronson said. “This is the result of a process that was more than one year in the making.”

O’Melveny has been moving away from a “lock-step” compensation system, which bases compensation on the number of years a lawyer is with the firm. It has moved toward performance-based compensation, Aronson said, where financial contributions to the firm weigh more heavily than before.

“What they’re saying is you’ll have to hustle,” said Edward Poll, principal of Venice consulting firm LawBiz Management Co. “To continue to be a rainmaker, you will have to make hours that are billable. And you will have to spread the work around so that others can become involved.”

As law firms increasingly are run like corporations focusing on profitability many have taken to adding more performance-based compensation for both partners and associates, Poll said.

“If you see a similar jump in 2002 for 2002 numbers, you will know there has been a systemic change in their system, and in their structure, as opposed to a blip that resulted from a particular case or a particular client or a particular situation in the economy.”

During the past year, O’Melveny has handled a number of big cases, including representing former Enron Corp. Chief Executive Jeffrey Skilling, Aronson said.

But he said the 2001 profits aren’t necessarily due to those cases. For example, investments in additional office openings are just now starting to pay off, he said. Between 1999 to 2001, the firm opened offices in Irvine, Menlo Park and Shanghai that, at first, “kept some of our numbers flat,” Aronson said. Between 1999 and 2000, profits declined 4.8 percent to $705,000, according to American Lawyer magazine.

In addition, the number of partners at the firm in 2001 held steady at just more than 200.

Sun Setting Aside Managing Duties For Lawsuit Work

Brian Sun, the Sun in O’Neill Lysaght & Sun LLP, is relinquishing his administrative duties at the firm by stepping down as co-managing partner.

John Moscarino, the other co-managing partner, will oversee finances and overall strategy. Moscarino, who joined the firm in 1988 and has been a partner since 1993, said part of the management change stems from Sun’s increasing caseload.

“Sun has always been an extremely busy guy, and as time has gone on, the attention that is required to his legal matters has increased and his prominence to the community has increased,” Moscarino said.

Among Sun’s more recent cases was the representation of Wen Ho Lee, the Los Alamos National Laboratory scientist accused of stealing top-secret information. The firm’s other name partners have had their hands full, representing DirecTV in a class action case and Roy Olofson, former vice president of finance at Global Crossing Ltd. who was a recent whistleblower in that company’s pending securities fraud investigations.

Frivolous Idea?

Bill Simon, the most conservative of the three Republican gubernatorial candidates in the March 5 primary, has resurrected a proposal to have the loser in a lawsuit pay the winner’s attorneys fees.

The proposal, which when presented as a proposition has been rejected in past elections, would alleviate some of the rising costs among businesses, said Simon who noted, “Right now, we don’t have a pro-business climate.”

But Christine Spagnoli, president of the Consumer Attorneys Association of Los Angeles, said frivolous lawsuits aren’t that numerous. She cited Judicial Council of California data that showed the number of all civil cases filed in 2001 declined 4 percent from 2000.

“It’s just such an old, worn-out claim to bash the trial lawyers and bash consumers to protect corporate America,” Spagnoli said. “It flies in the face of suggestions that corporations should take personal responsibility for their conduct.”

Civil Tribunals

The Beverly Hills Bar Association was one of five bar associations that co-sponsored a resolution defining the official stance of the American Bar Association regarding the use of military tribunals.

The action came in response to the Nov. 13 order by President Bush to use military tribunals in the war on terrorism. Bush’s order did not define who would be subject to the military courts, and the ABA drafted a resolution to make sure those defendants would still have certain rights.

The resolution “declared that defendants tried before a tribunal should be presumed innocent and must be proved guilty beyond a reasonable doubt as provided for by the Constitution. In short, that due process and fundamental fairness must be accorded them,” according to a draft of the resolution posted on the ABA’s Web site.

Staff reporter Amanda Bronstad can be reached at (323) 549-5225 ext. 225, or at

[email protected].

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