In the wake of a red-hot hiring market for attorneys these past few years, many law firms are starting to hit the brakes.

How firmly they hit the brakes varies wildly by market, and in Los Angeles, lateral hiring remains elevated compared to the pre-pandemic years – particularly among partner-level laterals. Much of that is being driven by L.A., as a market, staying hot. Last year, partner laterals exceeded pre-pandemic levels by 10%, while associate laterals were steady, up around 1% from the 2017-19 window.

“The Los Angeles market, due to its diversity in firm types, practice areas and available talent, demonstrated relative resilience to broader market fluctuations,” observed Greg Hamman, chief data officer of lateral recruitment research firm Decipher Investigative Intelligence. “These trends suggest that firms in L.A. placed a strategic emphasis on partner recruitment to drive growth, while rebalancing associate headcount to historical levels.”

Hamman, whose company handles background research on lateral candidates for law firms, added that his data indicates high-dollar partner groups remain the preferred way for law firms to grow their operations. He characterized the current pattern as “the new normal,” adding that the drop in associate hiring can be viewed as a correction for over-hiring in 2021 and 2022.

Still, some firms here remain proactive in trying to get younger as they also try to grow their revenues.

“We’ve got more work than we’ve got bodies. I could add 15-20 attorneys tomorrow and actually be OK,” said Dennis Kass, managing partner of downtown-based Manning & Kass, Ellrod, Ramirez, Trester LLP. “Trial attorneys are harder to find. We could use some newer attorneys who could grow and learn to be trial attorneys. We’re looking at every level.”

Balancing out the stats

While at first glance, the year-over-year numbers will say that attorney hiring is down, that misses a lot of context.

A surge in legal activity from 2020 through 2022 provoked a frenzied hiring spree at all levels, with fat hiring bonuses and lucrative salaries being used in the fight for headcount. According to Decipher’s research, 2021 and 2022 had more total lateral moves than the prior four years combined.

Those years are obvious outliers by comparison, so Hamman’s conclusions typically weigh last year’s figures against the six-year average – similar to how the Port of Los Angeles and Port of Long Beach need to rely on longer-term figures to balance out their pandemic-related outliers.

“Following the unprecedented hiring levels of 2021 and 2022, a decrease in lateral activity was inevitable for both groups, regardless of location or practice area,” Hamman said. “The larger issue is to determine how much these reductions would vary across markets and practices.”

While partner hiring here continues to remain competitive, Hamman said there is a market correction occurring among associates. On top of reducing headcounts, firms are also not offering nearly the compensation they did as recently as two years ago.

“When the markets are red hot, you just see growth,” observed Perrie Weiner, partner-in-charge of global megafirm Baker McKenzie’s Century City office. “Firms will hire for the sake of hiring and then they’ll deflate as quickly as they would inflate.”

By contrast, Weiner has kept a gradual growth pattern at the office, which he took charge of in 2018 with just four other attorneys. At the start of this year, the outpost had about 35 attorneys.

“I’ve seen a lot of different movements in the market over time, up and down,” he said. “What I see, from the perspective of a person born and raised in L.A., is that firms that are smart act opportunistically but effectively. You don’t want to sacrifice a firm’s culture for the sake of growth.”

With that in mind, Weiner in April poached a large transactional team – 11 partners and six associates – from downtown-based Munger, Tolles & Olson LLP. With the office well-stocked with securities litigators, a consumer class action team, labor and employment, product liability and tax law, Weiner said this move figures to be the last major puzzle piece of his project – mergers and acquisitions, private equity and finance.

“That was really the one thing we were missing,” Weiner said. “There isn’t a lot of movement in those areas, so when opportunities arise, you need to be opportunistic and seize it. This was a unique opportunity for our firm and for their practice, it was a perfect marriage.”

As of this month, Weiner said his office now boasts 66 attorneys – enough to vault it from the 114th largest law office by headcount in the Business Journal’s list of law firms to striking distance of the Top 50.

Planning for the future

At Manning & Kass, the firm hosts about half of its total headcount in L.A. and remains active in shoring up that number.

The firm last week brought on board 11 attorneys and a handful of paralegals at its New York office. That plaintiff team focuses on insurance fraud cases.

As the economy adjusts from the pandemic and the Fed uses interest rates to tamp down inflation, Kass added that these developments often inform the planning processes for law firm.

“Having done this for 35-plus years, the thing that dictates growth more than anything is the economy,” he said. “Just before 2008 hit, we knew something was happening. We didn’t know what, but we saw certain practice areas really picking up and others starting to crash.”

Hamman’s data breaks down lateral moves by practice group as well.

Laterals were up last year

Compared to the six-year average, real estate partner laterals across all major and mid-size U.S. markets were up 51% last year, followed by banking and finance being up 39%. At the associate level, banking and finance was up 29% compared to the six-year average, followed by antitrust being up 16%.

In the L.A. market, Hamman said transactional work has seen a resurgence – validating Weiner’s move this year – and financial advisory work is also growing. Among smaller practice areas, private client and estate planning have been “growing like wildfire” alongside other niche practice areas like data privacy and cybersecurity, aviation and emerging therapies. And broadly, competition for large books of business “has never been greater,” he added.

“Hiring a rainmaker or a team is the easiest, most efficient way to increase the bottom line. Firms are willing to pay – and sometimes overpay – for partners that can port clients,” Hamman said. “Obviously, identifying those partners who actually have the client relationships is an important and difficult part of the talent acquisition process, but the goal is to strategically focus on these types of hires.”

Increasing their LA presence

Large firms from the East Coast, South and Midwest have in recent years sought a West Coast presence to tap into the California market. San Francisco has traditionally been an entry point there, but Palo Alto and San Diego have also had their heydays.

Increasingly, however, L.A. is becoming that destination.

“The future is where technology intersects with content and L.A. has that, hands down,” Weiner said. “My feeling is for that L.A., as great as it’s done, the future is even brighter.”

Hamman envisioned a similar future for L.A. He observed that among the vaunted Am Law 200 firms – the 200 largest law firms by revenue, ranked by the publication American Lawyer – many of the back-quarter of those are finding entry points in L.A. by acquiring smaller firms based here.

Among the biggest of those firms, he said, growth is going to come by way of poaching those rainmaking partners and groups.

“In Los Angeles, with the number of large firms already reaching a saturation point relative to demand for legal services – particularly among AmLaw50 firms – I expect competition for individual partners to intensify through lateral hiring over the next few years,” he said.