More than ever, AmLaw 200 firms are feeling the pressure to improve profitability. The recent downturn in the M&A and other transactional work that firms have traditionally relied on to bolster revenue has reduced profits per partner and manifested in several dramatic ways, including the dissolution or merger out-of-existence of several prominent and old firms. Law firms seeking to grow revenue, but frustrated in their efforts to do so internally, are paying big dollars to bring in lateral partners perceived to have clients. As a result, the lateral partner market has never been busier and the competition for talent is fierce. Law firm partners who feel that their own compensation is being unfairly dragged down by underperforming partners at their firms are taking full advantage of this frothy lateral market.

All this is exacerbated by the increasing public nature of law firm and per-partner profitability. Numerous law-related periodicals now regularly publish revenue and profits per partner statistics. The ability for AmLaw firms to both retain and bring in the best new legal talent depends on their ability to present consistently strong numbers. Indeed, in this market any material drop in the numbers can be calamitous—it may lead to departures and, in some extreme cases, start a partner departure death spiral.

The Growth of Contingency Practices

Since nearly the beginning of time, AmLaw 200 firms have focused their litigation practices on defense-side work billed on an hourly basis. But in recent years, these same firms have looked to various alternative fee structures including, in many cases, taking an interest in plaintiff-side cases by working on a contingency basis, agreeing to take their fees in the form of a portion of the ultimate judgment or settlement. By doing so, these firms have an opportunity to get additional client work not previously available—representing clients who would not otherwise bring litigations because they either did not have sufficient funds for huge legal fees required for a protracted litigation or who simply wanted to avoid the ongoing drag that paying those fees would have on their bottom line.