Duane Morris saw a 5.4 percent increase in gross revenue in 2009 thanks to some timely contingency fee payouts and an overall increase in billable hours for the year, the firm said.
Gross revenue grew from $368 million in 2008 to $387.7 million in 2009, putting the firm back ahead of its 2007 revenue performance of $375 million.
Although Chairman John J. Soroko said contingency fees were secondary to billable hour improvement, he said the fees contributed between $15 million and $20 million to the top line.
The firm has historically budgeted 4 percent to 5 percent of its billable time to contingency matters and Soroko said between 5 percent and 10 percent of the firm's revenues in 2009 came from contingency and other types of alternative fee arrangements. Because the firm is familiar with handling such matters, he said, it is interested in more alternative fee arrangements and sometimes its interest in them exceeds its clients' interest.
Soroko said the firm was closer to the billable targets it set for 2009, with associates being "extremely busy" and partners being busier than in 2008.
Though hours were up, revenue per lawyer (RPL) fell less than 1 percent from $637,000 to $633,000. Profits per equity partner (PPP) increased 3.6 percent from $727,000 to $753,000. The firm hit an all-time PPP high in 2007 at $800,000. The average compensation for all partners in 2009 was $511,000, up more than 2 percent from $499,000.
One of the biggest impacts on Duane Morris' financials and headcount in 2009 was the acquisition of 53 lawyers in April from dissolved Wolf Block, including the labor and employment practice and the Cherry Hill, N.J., office.
Duane Morris' headcount grew 6.1 percent from 578 lawyers to 613 in 2009. The equity partner tier increased nearly 8 percent from 121 to 130 and the non-equity partner ranks grew 15.7 percent from 191 to 221.
Soroko said the initial plan was to pay for the acquisition of the Wolf Block group over the next few years. He said he was happily surprised near year-end, when the group was profitable enough that the firm could just expense the cost out of its 2009 profits. He said the firm paid about $2 million in 2009 to pay off the investment. Soroko said the Wolf Block lawyers ramped up revenue generation "very, very quickly" allowing the firm to recoup nearly its entire investment within the eight months they were onboard.
Soroko said the firm had a similar experience with the group of Thelen construction litigators it brought onboard at the end of 2008, playing into the 2009 financial performance.
Aside from construction litigation, Duane Morris had a strong year in its national bankruptcy practice, intellectual property and IP litigation groups. The firm recently signed on as counsel to the unsecured creditors committee in the Orleans Homebuilders bankruptcy and represented a number of generic pharmaceutical companies in litigation in 2009. The firm secured a $52 million verdict in Texas for a client in one IP case in late 2009, but that didn't factor into 2009 financial results, Soroko said.
While the corporate practice wasn't as strong as the firm might have liked it to be, Soroko said the group's focus on middle market clients in the private equity realm held the practice pretty steady.
NO NEWS IS GOOD NEWS?
While other firms faced systemic changes to their business models in 2009, Duane Morris avoided mass layoffs, kept starting salaries at $145,000, didn't defer associates, held a summer program, had a firmwide retreat and brought on more than 50 laterals.
Soroko said he doesn't see the need to move associates to a levels system or cut back on salaries or younger attorneys. The firm did most of its "hard work" in 2008, cutting back on the marketing department and other staff positions. Soroko said the firm felt a little lift from that in 2009. And while he is always looking at headcount for both staff and attorneys, Soroko said the firm is in the range it wants to be and might want to soon hire associates, particularly in corporate practices.
Associates beat budget in terms of billables in 2009 and 10 new associates started in the fall. Soroko said that was a function of Duane Morris never having huge summer associate programs or over hiring when it comes to younger attorneys. That means there are no associates to lay off and the ones who are there are kept busy.
The career opportunities at the firm, Soroko said, are "superior because they're not fighting a numbers game."
Soroko said he doesn't think Duane Morris has to change its approach to hiring and promoting associates, and instead just has to continue being successful at what it is doing and do it more efficiently.
"I don't see a major restructuring in how we operate as a firm because we've done things a little differently for a while now," he said.
In looking ahead at 2010, Soroko said he wants to achieve critical mass in some of the firm's key offices outside of Philadelphia. The firm has more than 100 lawyers in New York and wants to move in that direction in offices like Chicago, San Francisco, Boston and Atlanta. He said he is also very interested in growth opportunities in Philadelphia even though that hasn't been a focus in the last couple years.
This will be another difficult year for the industry, Soroko said, so the plan is to keep on top of cost management while still being open to investment opportunities.
"Firms thinking about coasting because they'll get a significant uplift from an improving economy are making a very poor gamble," he said.
