CHARLOTTE, N.C. (Legal Newsline)-Partners at the top U.S. law firms are raking in 4 percent less revenue than they did in 2007, partly because of a downturn in litigation, a new survey shows.
Partners are bringing home less revenue because litigation did not pick up as would typically happen in a recession, because discretionary lawsuits have been deferred and because bankruptcies did not emerge quickly in the first half of the year, according to a study by Wachovia Corp.'s Legal Specialty Group.
"We have seen downturns before, but in past downturns typically you see litigation pick up when transactional corporate work was down," said Jeffrey Grossman, a senior vice president in the group.
The Wachovia study found that while gross revenue for U.S. firms was up by about 7.5 percent through September 30, expenses increased significantly more, 9.5 percent.
"Because expenses had grown faster than the revenue line, income was essentially flat for the nine months," Grossman told Legal Newsline.
He said in a telephone interview from his office in Charlotte, N.C., that law firms' expenses grew in part because of hiring made in the second half of 2007 and the first part of 2008.
"When we look at this next year, I think you'll actually see a different story," Grossman said. "You'll see revenues slowing, but you'll see expenses slowing even more."
The Wachovia survey, which included 50 firms in The Am Law 100 and five in The Am Law 200, looked at 55 law firms' finances through the third quarter. The smallest law firm in the sampling has 250 attorneys, and the largest firm has more than 1,000.
The survey found that revenue per attorney only grew 1.5 percent for the nine months period, Grossman said, noting that for the same period hours per attorney were down roughly 4.5 for equity partners and 4 percent for attorneys, with even "more severe" reductions for the other timekeepers.
"Gross hours for attorneys will continue to be down for a while, and as there are reductions in terms of timekeeper staff, that will lead to further revenue reductions down the road," he added.
American law firms are expected to increase billing rates in 2009, about 5 percent on average, Grossman said.
From Legal Newsline: Reach reporter Chris Rizo at firstname.lastname@example.org.