Dot-Com Downturn Hits Area Law Firms

Article excerpt

Byline: Tom Ramstack

A slowing economy and layoffs are hitting home in several Washington area law firms.

Local firms that have increasingly relied on dot-com ventures for business are feeling a ripple effect from the turbulent stock market and the technology industry slowdown. Some are laying off entry-level attorneys and, in some cases, demoting partners, according to recent research on law firm trends.

Partners who were earning half-million-dollar yearly incomes might be getting by on half that amount. Some even get less.

"It's because some of the things that were the windfall, the IPOs [initial public offerings] and the high margin matters, just aren't there," said Gerry Riskin, a law firm management consultant for Edge International. "That usually results in at least a temporary decline until the law firms adjust."

Partners are the top managers who divide up the profits at the end of the year after all expenses are paid.

Although last year was a profitable year for many firms, revenue is generally down this year for firms heavily invested in the technology industry.

At the Washington law firm of Skadden, Arps, Slate, Meagher & Flom, take-home pay per partner reached $1.6 million in 2000, according to a survey by Legal Times, an industry weekly publication. First-year lawyers at the firm started at $140,000 per year in 2000, with eligibility for bonuses.

At Arnold & Porter, the law firm with the biggest gross revenue last year, partners earned $670,000.

Among Washington's top law firms, partners at Arent, Fox, Kintner, Plotkin & Kahn earned the least, $430,000 each. The firm had 96 partners out of 241 attorneys in 2000.

Firms often measure their success or failure by earnings per partner. Some firms appear to keep earnings high by demoting partners, thereby spreading profits among fewer people.

At Sidley, Austin, Brown & Wood, the number of partners was cut by 67, or 35 percent, to 193, according to research published in the current issue of the American Lawyer magazine. Morgan, Lewis & Bockius dropped the number of its partners by 60; Kilpatrick, Stockton by 19; Arter & Hadden by 14. All of the firms have Washington offices.

Carter Phillips, managing partner for the Washington office of Sidley, Austin, Brown & Wood, said any reductions in the number of partners at his firm predated the crash of the dot-com industry.

"It's not nearly as dramatic as it might sound," Mr. Phillips said. He described the demotions as a routine personnel and financial move.

Most firms have tried to avoid demoting partners to ride out the current economic downturn, Mr. Riskin said. But that might not last long. "If things don't get better quickly, the holdouts will be outvoted by the people who say we need to act," Mr. …