Law Practice
Jul. 24, 2002
Survey Ranks West Coast Firms No. 1 in Profits
LOS ANGELES - You've got to spend money to make money, and West Coast law firms know this better than any other in the country, according to a survey on law firm economics by Altman Weil Inc., a legal consulting firm in Newtown Square, Pa.
The survey, released Monday, broke down the legal world into nine U.S. regions and looked at 2001 numbers in areas such as attorney compensation, billable hours and profits per attorney. California was in the Pacific region, along with Oregon and Washington.
The most profitable law firms are located on the West Coast, according to the survey. West Coast firms also carry the highest overhead, with money spent on luxuries such as ample support staff, technology and marketing.
The national average spent on each attorney reached $155,120 annually. In comparison, West Coast firms spent 32 percent more per attorney, according to the survey.
Meanwhile, the national average for profits per attorney was $208,000, while the average profits per lawyer was $234,655 on the West Coast. The West South Central region, which includes Texas, Nevada and Utah, came in second with profits of $229,179 per attorney.
Marina Park, managing partner of San Francisco's Pillsbury Winthrop, isn't surprised by the survey's results.
"It's becoming increasingly more expensive to hire and pay associates," Park said. You have to keep investing in your people and your infrastructure to stay competitive and stay at the top of the list at getting complex legal matters."
The median for attorney compensation on the West Coast topped the survey at $329,446 for partners and $129,424 for associates. The national median was $240,311 for partners and $109,424 for associates.
The West Coast also enjoys the best associate to partner ratios in the country, with nearly one associate to every partner.
Kenneth Doran, firmwide managing partner of Los Angeles' Gibson, Dunn & Crutcher, said that, while technology is an increasingly important tool for firm lawyers, profit numbers could have been higher for West Coast firms because Los Angeles firms haven't been as hard-hit by the lag in the technology sector and capital markets as their Bay Area counterparts.
James Cotterman, an Altman Weil principal, agreed that spending more gives firms a competitive advantage.
"The fact that the most profitable firms spend the most may seem to contradict conventional wisdom of economics of scale and lowest cost producer models," Cotterman said. "But law firms that invest in infrastructure, training, marketing and the like can attract high-caliber lawyers and command higher rates."
Keith Wetmore, chair of San Francisco's Morrison & Foerster, said that, during tough economic times, managing the firm's expenses is a delicate balance.
"When things were red-hot in the middle of the boom," Wetmore said, "we were not telling the corporate associates, who were billing 2,400 hours a year, to please not take a cab home at night. That doesn't make sense."
Last year, associates on the West Coast on average billed 1,810 hours, while partners billed 1,718 hours, the survey results reflect.
The average hourly rates for West Coast partners was $291, according to the survey. In this category, however, the Mid-Atlantic region, which includes New York, beat out the West Coast region by $8. Hourly rates for associates were the highest on the West Coast, with firms charging, on average, $198 an hour.
Responses to the survey were received from more than 20,000 lawyers from 401 U.S. law firms.
Liz Valsamis
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