When it comes to the Los Angeles Business Journal's profits-per-partner list, the rich keep getting richer a lot richer.
Leading the city's law firms in earnings for the second consecutive year, intellectual property specialists Quinn Emanuel Urquhart Oliver & Hedges LLP fell just shy of $2 million per partner at $1.96 million, a 2 percent increase from last year.
The bounty was broad-based: seven firms managed more than $1 million per partner last year and four of those eclipsed $1.5 million.
Major trials, mergers and the continued consolidation of entertainment and media companies have swelled bottom lines. Overseas business also has grown.
"It's like the perfect good storm as opposed to the perfect bad storm," said name partner A. William Urquhart of Quinn Emanuel. "There's a great demand for transactional legal services. So when you overlay a super-hot deal market over an already hot litigation market, the recipe is for a lot of firms doing very well."
Quinn Emanuel, which has 193 attorneys operating in Los Angeles, has experienced double-digit revenue growth for the past 12 years. The firm picked up some major clients last year, including American International Group Inc., Seiko Epson Corp., chip manufacturer MediaTek Inc. and Coral Shell Trading, the trading arm of Shell Oil Co.
The profits-per-partner number is an industry metric that signals how profitable a law firm is.
Gibson Dunn & Crutcher LLP was second on the overall list at $1.64 million per partner. A surge in work on the East Coast and in Europe powered an 8 percent rise from 2004.
"For us, and the others as well, it's less about Southern California and L.A. as it is about national demand for legal services and, to varying degree, the international demand," said Ken Doran, chairman and global managing partner at Gibson Dunn.
The firm picked up a number of high-profile clients in 2005, including Wal-Mart Stores Inc., Ford Motor Co., UBS AG and Swiss Reinsurance Co.
But that doesn't mean the new business is confined to Gibson's corporate practice. There were increases in litigation, antitrust, mergers and acquisitions and environmental law. The growth, Doran said, "cuts across industries, practice areas and geography."
Doran and Urquhart both said that the economic resurgence of 2003 was the underpinning of the boom in their business.
"After the dot.com bust it was in dreadful shape," Urquhart said. "I don't think people realize how many lawyers were involved in every deal of significance.
"For example, when Company A takes over Company B, you've got lawyers for both sides, for the principal investment bankers lawyers for the bondholders, investors you maybe have 10 firms involved in every deal," Urquhart said. "The number of deals (after the bust) fell off the face of the Earth. There were hardly any venture capital deals or IPOs, and now everything has come back."
O'Melveny & Myers LLP, which showed the biggest rise at 24 percent to $1.62 million, ranked third. Latham & Watkins LLP was fourth at $1.6 million, up 14 percent. Paul Hastings Janofsky & Walker LLP rounded out the top five with $1.33 million, up 11 percent from last year.
It's worth noting that success does not always translate into a high spot on the profit-per-partner list. A growing firm that adds partners may see its profits-per-partner number collapse. And the strategy adopted by some firms can skew their ranking.
For example, Sheppard Mullin Richter & Hampton LLP gained 15 percent from last year to $785,000 per partner, well behind the largest firms. But Sheppard Mullin has opened five offices in the past five years.
"We do all our investment out of our cash flow," said Guy Halgren chairman of the firm's executive committee, "and that means we don't have any long-term debt. It just takes longer to catch up."
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