Minnesota Lawyer
By: Barbara Jones
The managing partners at several of the area's largest law firms are predicting that the worst is over in terms of layoffs, office closings and other austerity measures. Nationwide the employment picture at larger firms has been murky at best the last few years. Several prominent law firms -- including Brobeck Phleger & Harrison in San Francisco, Skjerven Morrill in San Jose, Hill & Barlow in Boston and Peterson & Ross in Chicago -- have recently closed their doors. There have been a number of layoffs, consolidations and reductions in hirings.
Locally, the state's largest firm, Dorsey & Whitney, laid off 20 associates in December. Another big local firm, Oppenheimer Wolf & Donnelly, has closed some of its out-of-state satellite offices.
Despite the layoffs, Dorsey managing attorney Peter Hendrixson maintains that business was very good in 2002.
Profits were up about 10 percent per partner, and gross revenue was up 6.6 percent to $315 million, according to Hendrixson.
"Tokyo and Shanghai [offices] were very good last year," he said, acknowledging, however, that "London was down a little."
Oppenheimer's chief executive, Bradley Keil, told Minnesota Lawyer that he does not foresee any more bad news on the horizon.
"There is just news of prosperity," he said. "We've laid [all our information] out there."
But Michael V. Ciresi of the Minneapolis law firm of Robins, Kaplan, Miller and Ciresi believes that some Twin Cities law firms have "significant structural problems" that will need to be addressed soon.
"A lot of law firms have grown dramatically, and they are seeing the impact of that combined with economic downturns," Ciresi observed.
Expanding the base Ciresi noted that even the law firms that are experiencing tight purse strings are reporting an increase in their litigation business, and the Robins firm practices almost exclusively litigation. (The firm did consolidate its two California offices into one, located in Los Angeles, he said.)
Robins is in the process of opening an office in New York City, according to Ciresi. The office would probably have 10 to 15 lawyers and would concentrate on litigation, he said.
"The major decision-makers [in business] are located there," he observed. "They like a law firm close by even if the case is somewhere else."
Ciresi attributed the firm's growth position to its longtime strategy of developing the firm from within, depending on the partners for financial investment, and funding the lawyers' retirements so that leaving the firm is unattractive.
"All that was done way before the tobacco case," he said. "Our philosophy is to defer present income for future gain. We're committed to it. Our base has grown every year, leaving the tobacco case aside."
Ciresi said that the firm is not dependent on any one client or case."We don't bet the farm on any one event," he observed.
Good news, bad news
In contrast, the business law firm of Oppenheimer, Wolf & Donnelly, is reducing its presence outside Minnesota.
Last month, Oppenheimer announced that it would close its New York City office, merge its Los Angeles and Orange County offices and sell its 40-person Silicon Valley office. The actions have been seen as reflecting Oppenheimer's ties to the downsizing technology industry in California.
Oppenheimer still has an intellectual property practice in Orange County, Keil pointed out, and its representation of medical device firms "cross-pollinates" with the medical device practice in Minneapolis.
The New York office wasn't a good fit for Oppenheimer, said Keil. "New York is a capital market," he explained. "It was extremely difficult because we [represent] an emerging growth or niche market."
The Oppenheimer firm reports its litigators and commercial lawyers are very busy. "We'd add corporate [lawyers] if we could find the right people," he said.
Dorsey downsizings
News of downsizings at Dorsey & Whitney have been given quite a bit of press, which is not surprising given that Dorsey is the largest firm in the state. Dorsey laid off a total of 20 associates nationally in an effort to reduce overhead. About a year earlier the firm froze staff and associate salaries and issued a cash call to partners. (The salary freeze was lifted in August 2002.)
Some rumors have circulated that Dorsey was laying off equity partners, but Hendrixson said this is not the case.
"There are no partner layoffs," Hendrixson told Minnesota Lawyer. "We are in the midst of partner review. This is the time of year when we talk to our partners." There is consistently turnover in the firm, he added. "These are not economically driven changes."
Hendrixson acknowledged that the Seattle office rescinded some offers to associates and deferred two other offers, but said no similar changes are expected in Minneapolis. The firm has hired about 30 new lawyers around the world and expects a summer associate class of about 29 this summer, he said.
Hendrixson noted that Dorsey's litigation department saw about a 10 percent increase in business this year.
While Dorsey's merger and acquisition business is seen by some as vulnerable in the weak economy, Hendrixson pointed out that the firm was the second largest in the country last year in numbers of merger and acquisitions.
Staying the course
The other large firms in the Twin Cities also generally reported that litigation is up, while business transactions are down. Hiring and salaries are steady, they said.
"We're the oldest firm in the cities," said managing partner Bruce Mooty of Gray, Plant, Mooty, Mooty & Bennett. "When you date back to the 1860s you've been through a lot. We try not to react too much." No layoffs or other changes are anticipated, said Mooty.
Like other lawyers, Mooty observed that litigation is up and transactions are down. "Litigation is more common in tough times," he said. "Clearly there are some businesses that are having tougher times, but some are buying. They might be doing acquisitions out of a bankruptcy.
"We try to partner with our clients to help them manage their legal expenses. We're in it for the long haul with them as we are with our employees," said Mooty.
Lindquist & Vennum managing partner Daryle L. Uphoff speculated that the strength of litigation in a down economy may be that "in good economic times businesses feel that their resources are better spent in business [rather than litigation]. I'm not sure that's a conscious decision."
According to Uphoff, Lindquist is so small compared to Dorsey or Faegre & Benson that it is easier to reallocate resources when necessary.
"Of course we're seeing a lot more workout business, intellectual property litigation is very strong, trademark registration and prosecution is strong and licensing is soft," Uphoff said. "We didn't invest what Oppenheimer had invested in dot-coms."
Konrad J. Friedemann, managing partner at Fredrikson & Byron, observed that the Fredrikson firm just moved into new offices in July and recently took another floor. Generally the firm is being cautious in view of the Iraq war and the economy, but no layoffs are planned, he said.
"Our success is tied to our clients," Friedemann observed. "They are fairly diverse, but our core practice is business litigation and transactions. Our litigation, bankruptcy, and health care are busy, but the transactional pace has slowed. Our real estate lawyers remain busy, much to their delight," Friedemann said.
Barry F. Clegg, managing partner at Rider, Bennett, said that its clientele, the middle market, is still "chugging along."
"Our markets are relatively unaffected," Clegg said. "We have a strong litigation group, and our business group is continuing to keep our lawyers busy."
Faegre & Benson has added 15 associates and has brought in one new partner from outside the firm in Minneapolis, according to Philip S. Garon, the firm's managing partner.
"Given the economy, we're very pleased," he said, adding that "there is no doubt it's a tough economy."
Garon also reports that transactional work is down, but said other areas of practice are up. The firm has a strong bankruptcy and insolvency practice as well as a thriving health care practice, he said.
Garon noted that Faegre added offices in London and in Boulder, Colo., last year and opened an office in Shanghai the year before that. At this point, the firm is planning to concentrate on expanding the existing offices and not on adding new ones, Garon said.
Leonard Street & Deinard is planning to expand, said managing partner Lowell J. Noteboom. He estimates the firm will add 10 to 15 lawyers by the end of the year, which would approach a 10 percent increase.
"It's been a very busy time for litigation, energy law and commercial real estate," he explained. "We were pleased at how commercial real estate has continued to be busy. If you had asked me about that a year ago I might have predicted something different."
The energy practice is up, but not sharply, Noteboom said. It is too soon into the Iraq war to predict whether that will have any impact on the energy practice, he added.
Briggs & Morgan is watching costs, but has actually added about five lawyers recently because of the influx of litigation work, said managing partner Richard G. Mark. "Like the rest of the world I'm concerned about the war, but I think we're positioned well," he added.
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IP firms also dealing with tougher market
Another Minneapolis law firm made news recently with the departure of several attorneys to start a new downtown practice. Merchant & Gould, which practices intellectual property law, lost Alan Carlson, three other partners, and one associate last January. The five lawyers left to start their own firm.
Merchant & Gould laid off seven lawyers in 2001-2002.
Managing partner Randy King said that that the firm is rebounding successfully from the split that has resulted in relatively little financial impact and no internal turmoil.
"I would rather have them here, but that's the way law firms are these days," he told Minnesota Lawyer.
The firm has substantially increased its recruiting and has hired three lawyers in Minneapolis since the recent departures, said King.
King acknowledged that the technology and patent investment market is not what it was several years ago. However, he said it is still strong, just not as strong.
According to King, the Minneapolis office has been hit less hard than the Seattle office. He also said that 2002 was a better year and Merchant & Gould has doubled its revenue to $70 million during the past five years.