The 2014 California 50

Our survey of the state's biggest law firms reveals they are adapting to new conditions but cautious about growth in California.

Our annual survey of the 50 law firms with the biggest presence in California found most with fewer lawyers here this year than last-even if the firms added lawyers in other parts of the nation or world. Among the 15 midsize firms on the list (those with 130 to 350 lawyers overall), about half added lawyers in the Golden State. But most of the 35 giants saw drops here.

Firm leaders cited a variety of reasons, from "organic" events like retirements to fallout from a 2012 merger. Lyndon Parker, senior director with the placement firm Mestel & Co., says California emerged from the recession as "genuinely middle market," with fewer major corporate headquarters, so the focus for lawyers here has shifted to regional issues and newer and smaller clients.

"It was absolutely true before, and it's gotten worse through a combination of the recession of 2008 and the reality [that] living in California is not fun if you're a corporate entity," he says.

The California market is also maturing, says Parker. "Clients are smarter, law firms are smarter, working directly with clients on setting reasonable fees, keeping relationships good, ... not throwing twelve associates into a deposition-because they understand clients aren't going to put up with that anymore."

Ward Bower, a principal with law firm consultancy Altman Weil, says this market is ripe for midsize firms that don't "pretend to be a smaller version of a larger firm" but instead focus on "one or a few" key practice areas. In contrast, he says, big law firms are increasingly disbursing their growth into newer markets.

Indeed, at the employment firm Jackson Lewis, chairman Vincent A. Cino says, "We have benefitted from the largest firms marginalizing their employment practices." Managing partner Jeremy Roth at Littler Mendelson, the native-California employment firm that has long dominated the practice here, says his firm's position is solid - with 278 lawyers in state and 66 offices worldwide. "Full-size firms don't have the resources to invest in labor and employment, and midsize firms don't have the expertise," he says. And he notes that "California is still ground zero" for the practice. Dion Cominos , the San Francisco-based firmwide managing partner at Gordon & Rees, where the California head count held steady at 301, credits his firm's stability to its competitive position: "There's definitely a market for a national firm with a reasonable pricing structure."

The biggest single drop in California head count was at McKenna Long & Aldridge, which shrank by 55 lawyers, or 26 percent. The departures came mainly in two big waves, including the move of 21 real estate, insurance, and business litigation partners and associates to Sheppard Mullin Richter & Hampton. Michael R. Rizzo, the Los Angeles--based California executive partner at McKenna, says the departures mostly reflect the shakeout after the firm's merger in 2012 with San Diego's Luce, Forward, Hamilton & Scripps; most of the departed lawyers originated there, he said. McKenna's plan is for "solidifying its footprint in the U.S. and [for] growth internationally," Rizzo said. "Our commitment to California is unwavering." (See the CA50 chart.)

At Sedgwick, where the head count fell 8 percent worldwide but 11 percent in California, executive committee member Michael F. Healy cited the drop in trials, which he said has been more pronounced in California than nationwide.

Most firms roughly held their rank on the California 50 between 2013 and 2014. Near the top, Morrison & Foerster; Gibson, Dunn & Crutcher; and Sheppard Mullin shuffled places as MoFo's head count dropped and Gibson Dunn's and Sheppard Mullin's both rose. At the other end, Downey Brand fell off the list after it closed one California office and its statewide head count fell 32 percent in early 2014 for a current total of 78. Managing partner Scott Shapiro said the drop resulted from factors including retirements and attorneys leaving for boutique firms or to set up shop on their own.

"We had a lot of pent-up demand of people looking for other opportunities who felt they didn't need [our] big-firm platform anymore," Shapiro said. The threshold for the rankings also rose, from 115 to 123 in-state attorneys, as additional firms were surveyed. Joining the CA50 this year are Buchalter Nemer; McDermott Will & Emery; Bryan Cave; Winston & Strawn; and Jackson Lewis. And in Los Angeles, Mickey Mayerson, deputy chairman at Loeb & Loeb, says a slowdown in lateral hiring indicates "opportunities" here in coming months for his firm, even compared with Chicago or New York.

Detailed graphics based on the survey results show how the biggest firms in California distribute their resources, how they're hiring, and how they compare on diversity. Here's an overview:

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Riley Guerin

Daily Journal Staff Writer
rguerin@journaltech.com

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