Partnership Opportunities Drying Up

By AMANDA BRONSTAD

Staff Reporter

It’s that nerve-wracking time of year again the top brass at Los Angeles law firms gather around the conference table to decide who will make partner and who won’t.

This year, there are expected to be fewer lawyers becoming partners than in years past. Firm revenues have fallen, especially in recent months, making it a challenge to keep profits-per-partner lucrative enough to retain the necessary prestige and attract incoming attorneys.

“Once they get their collections and see how well or not well they did and I’m talking about collections in November and December they will make those determinations and they can project that 2002 will not be a great year,” said Alan Miles of legal search firm Alan Miles & Associates Inc. “They will err on the side of caution and not make so many partners.”

Last month, Latham & Watkins named eight partners for 2002, down from 22 last year. Gibson Dunn & Crutcher LLP named nine new partners, compared with 12 last year. Paul Hastings Janofsky & Walker LLP named six new partners, compared with nine last year.

The firms deny that those decisions are based on the economic downturn. They say naming a partner is a long-term decision not influenced by short-term factors. As evidence, many firms say that the partners named are not necessarily in practices that are doing well.

“How many of our candidates were corporate lawyers? Four,” said Greg Nitzkowski, managing partner of Paul Hastings. “Last year, when our employment law practice was down, we elected three to four employment lawyers. It has very little to do with the short term swings in the economy.”

At Latham & Watkins, the drop in new partners came about because of an adjustment that lengthened the period of time it takes to become partner from 7.5 years to 8 years, said Martha Jordan, managing partner of the firm’s L.A. office.

Still, many in the legal community say it’s impossible to believe that the economy will not impact partnership numbers. As businesses go bankrupt, law firm clients disappear and so do the dollars, said David Roberts, partner in charge of the legal services group of RBZ LLP, an L.A.-based accounting firm that hosted its first “2001 Law Firm Compensation Survey” seminar Nov. 29.

“People are now sitting around the table with a different conversation,” Roberts said. “Nowadays, rather than just letting people in, firms are evaluating the partner admissions much more significantly, much harder, much more stringently. And by that, you’re going to make fewer partners if you look at every single person and say, ‘what value do they bring to me?'”

A close look

At Weston Benshoof Rochefort Rubalcava MacCuish LLP, which is in the process of naming partners, candidates are being more heavily scrutinized for their earnings potential, said Chris Roux, managing partner at the L.A.-based firm that specializes in real estate and land-use law.

Having fewer new partners named may leave senior associates frustrated. Even some partners become disgruntled because it could signal financial difficulties at a firm. That might lead them to look elsewhere.

“If you have a $600,000 book of business, you may not be a significant partner or partner candidate in that firm, but a $600,000 book of business in a smaller firm might be very acceptable,” Roberts said. “If they don’t feel they need to compete in a 500-lawyer firm, they will go down to a 20-lawyer firm.”

Many of those partners likely to move will be in lucrative fields like bankruptcy or litigation. Joining them in the job market will be a larger number of associates, as firms continue to re-assess budgets. While not many L.A. firms have laid off en masse, a selected number of associate-level layoffs are expected to continue during the first few months of next year.

“Whether they’re asked to leave, whether they leave voluntarily, whether they leave from anxiety they feel or are lured away by some other firm, or they’re not sure of their firm because they started promoting fewer partners or laid off some associates, you’ll see significant movement in 2002,” Roberts said.

And firms won’t be looking just at layoffs.

“This is going to be a relatively more challenging year,” said Nitzkowski of Paul Hastings, whose fiscal year begins Feb. 1. “We’re going into the budget process being very prudent, but I don’t think that’s any different from any other year. This year won’t be a year for huge initiatives we don’t think. And we don’t think we’ll buy a lot of new hardware this year on our tech budget or begin major new software initiatives this year.”