Several years of boom times for L.A.'s largest law firms came to a screeching halt in 2008 as some posted a decline in profits per partner, the key metric of firms' financial performance.
Profits per partner at L.A. stalwarts Gibson Dunn & Crutcher LLP, O'Melveny & Myers LLP and Paul Hastings Janofsky & Walker LLP saw single-digit decreases, while market leader Latham & Watkins LLP posted a 21 percent drop. Latham & O'Melveny have both laid off large numbers of attorneys and support staff as a result of the downturn.
However, litigation powerhouse Quinn Emanuel Urquhart Oliver & Hedges LLP remained strong despite the poor economy, ranking No. 1 in profits per partner for the fourth consecutive year on the Business Journal's annual ranking of law firms. The firm posted an 11 percent increase.
Quinn Emanuel's profits were boosted by several high-profile litigation matters, including a multimillion-dollar victory in the battle over the popular Bratz fashion dolls. The firm's profits per partner were $3.3 million, up from $3 million in 2007.
Profits per partner is a common way to measure a firm's financial standing. In 2003, Quinn Emanuel was the first L.A. firm to hit $1 million in profits per partner. In 2006, it hit $2 million, again the first to achieve that level, and it was the first to hit $3 million, attaining that in 2007.
But other firms were gaining, too; five local firms got at least $1.5 million in profits per partner in 2006, '07 and '08.
However, the weakening economy started taking its toll in 2008. Of the firms that reported profits per partner to the Business Journal, four had increases while 10 had decreases.
More recently, firms began laying off associates and support staff, and freezing salaries.
Latham & Watkins announced two weeks ago that the firm laid off 190 associates and 250 support staff. The cutbacks were the deepest reductions by a large law firm here since the economy soured.
On March 4, O'Melveny laid off 90 attorneys and 110 support staff firmwide.
At both firms, the job losses were concentrated in the Los Angeles and New York offices.
Before Latham's layoffs, the firm announced in December that it was freezing associate salaries. Other firms followed suit, and in January, Sheppard Mullin Richter & Hampton LLP in Los Angeles announced that associates' 2009 base compensation would remain the same as 2008's.
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