By ALEXA HYLAND Staff Reporter
Thanks to its lucrative litigation work, the Los Angeles-based law firm Quinn Emanuel Urquhart Oliver & Hedges LLP hit $3 million in profits per partner in 2007 a figure never before reached in Los Angeles.
Quinn Emanuel ranked No. 1 in profits per partner for the third consecutive year on the Business Journal's annual ranking of law firms. That figure jumped 24 percent from a little over $2.4 million in the previous year.
Only three New York firms have topped the $3 million level in profits per partner, which is a standard way of measuring law firms' profitability.
Quinn Emanuel's profits are not strictly related to the number of hours billed. The firm specializes in litigating cases for a contingency fee. Although that's a higher-risk strategy that major corporate firms tend to shy away from, it gives law firms the potential to recoup larger sums by receiving a percentage of their clients' monetary awards.
"One significant reason (for the high figure) is that we had some success with a number of contingency fee matters," said A. William Urquhart, a name partner in the firm.
"Quinn is different because that $3 million isn't calculated purely on hourly rates," said Larry Watanabe of legal search firm Watanabe Nason. "Some of that is from hybrid contingency cases or from settlements they received."
Hybrid contingency arrangements are a Quinn specialty. Instead of a pure hourly rate or a contingency in which the law firm gets a percentage of any award, a hybrid calls for a reduced hourly fee plus a contingency.
Urquhart said the firm in 2007 took on several cases that involved such a hybrid contingency arrangement. In one case, Quinn represented California restaurant owners against Chicago-based Rewards Network Inc. The owners alleged the company engaged in unfair business practices, gouging them on loans. The case ended in a $60 million settlement, and Quinn received $10 million in hourly fees plus unspecified contingency fees.
With the potential for such outsized pay-outs, high-stakes litigation remains Quinn Emanuel's bread and butter. And Urquhart believes the firm is likely to take on more cases in 2008 as the credit crisis spawns litigation.
"The crisis has led to a tightening of credit and financial institutions, which are backing out of commitments to provide financing," Urquhart said.
Latham & Watkins LLP trailed Quinn Emanuel with partners' profits of $2.27 million. Paul Hastings Janofsky & Walker LLP came in third. Gibson Dunn & Crutcher LLP remained a close fourth.
"It was good year with a steady and consistent performance," said Kenneth M. Doran, Gibson Dunn's managing partner. "Litigation was busy in all parts of the firm, and the transactional practice was busy in the first half and third quarter, but slowed a bit in the fourth quarter with pressure from the credit crunch."
Not every major firm saw an uptick. For the firm with the most lawyers in Los Angeles, O'Melveny & Myers LLP, partners' profits were flat at $1.63 million.
Meanwhile, a strong showing by Paul Hastings pushed the firm into the spotlight as the third powerhouse. With 1,200 lawyers worldwide, Paul Hastings' profits per partner rose 20 percent, from $1.61 million to $1.92 million.
The firm, which was founded in 1951, represented Dubai World, a holding company that manages the Dubai government's portfolio, in its joint venture with MGM Mirage in the CityCenter mixed-use project on the Las Vegas strip. Dubai World contributed $2.96 billion for 50 percent of the equity in CityCenter.
Latham & Watkins had the highest overall revenue, up 23 percent from $1.6 billion to $2 billion.
Quinn Emanuel, which has three offices in California and one in New York, saw its firm-wide revenues rise 29 percent, from $298 million to $385 million. Quinn Emanuel went international in December when it opened a litigation-only office in Tokyo. Japanese clients include Seiko Epson, Nokia and Mitsubishi Rayon.
Paul Hastings' revenues grew 20 percent, from $813 million to $976 million.
While some firms found success in Europe and Asia, Gibson Dunn moved into new territory when it opened a Dubai office at the end of 2007. The firm, which was founded in 1890, represents local companies, banks and family offices in the Middle East.
But even firms with limited reach performed well in 2007. Irell & Manella houses 172 lawyers in two offices, Century City and Newport Beach. The firm reached profits per partner of $1.9 million, according to The Recorder, a legal trade publication. Irell & Manella declined to disclose partners' profits for the Business Journal survey.
Irell & Manella's strong performance can be attributed partly to its intellectual property practice, led by high-profile litigator Morgan Chu.
Chu and a team of Irell & Manella lawyers successfully defended Texas Instruments against patent infringement claims brought by a subsidiary of Newport Beach-based Acacia Research. The patent-holding company was seeking more than $94 million in damages and a permanent injunction against Texas Instruments.
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