Big-Tex Firms Post Biggest Overall Revenue Increase in Five Years

• Gross Revenue
• Profits Per Partner
• Net Income
• Revenue Per Lawyer
• The Texas 100

Net income � compensation to equity partners � increased by 11.1 percent in 2006, boosted by large increases at Akin Gump Strauss Hauer & Feld and Thompson & Knight, both of Dallas; Houston firms Locke Liddell & Sapp and Bracewell & Giuliani; and Dallas’ Munsch Hardt Kopf & Harr. A hefty 40.9 percent increase in net income at Akin Gump was due in part to a large contingent fee.

Net income in 2006 totaled $2 billion for the 25 firms, compared to $1.8 billion in 2005 and 2004.

Average revenue per lawyer increased by 3.4 percent in 2006. The average RPL at the 25 firms came in at $642,000, compared to $621,000 in 2005.

Average profits per partner also improved slightly in 2006, at $773,000 for the 25 firms, up 2.5 percent compared to 2005′s $754,000.

Those four measures in the Annual Report on Firm Finance help describe each firm’s financial performance and provide a means to compare them. Despite the strong financials posted by several large Texas firms, a handful of firms posted declines in gross revenue and net income, which depressed the percentage increases in the related average RPL and PPP measures.

For instance, while seven firms posted double-digit percentage increases in gross revenue in 2006, compared to 2005, gross revenue declined at five firms. And while net income improved dramatically at Akin Gump and several other firms, net income declined at eight of the 25 firms.

Firm-By-Firm

For the ninth year in a row, Akin Gump tops the list of the 25 highest-grossing Texas firms, with gross revenue of $726.7 million, up 17.6 percent when compared to 2005′s $618 million. As on last year’s list, Fulbright & Jaworski of Houston came in second, with $602.3 million in gross revenue, followed by Houston-based Vinson & Elkins, with $531.9 million.

The next four firms maintained their rankings on the gross revenue chart: Baker Botts, Andrews Kurth, Haynes and Boone and Locke Liddell & Sapp. Below that mark, the list differs from last year’s list. [See "Report Shows Mixed Results for Big-Tex Finances in 2005," Texas Lawyer, April 24, 2006, page 21.]

The gross revenue list is the master list for the Annual Report on Firm Finance.

Akin Gump, Fulbright & Jaworski, Baker Botts, Thompson & Knight, Bracewell & Giuliani, and Munsch Hardt posted the largest percentage increases in gross revenue in 2006. Gross revenue improved at 19 firms and declined at six.

Fulbright, as in 2005 and 2004, is at the top of the net income chart, with $268.2 million in 2006, up 8.2 percent when compared to 2005′s $247.8 million. Akin Gump is next on the list, up 40.9 percent with $267.7 million, compared to $190 million. V&E, Baker Botts and Houston-based litigation firm Susman Godfrey are the next three firms on the list. Seventeen of the firms posted higher net income in 2006, while net income declined at eight firms.

The average partner in the 25 firms made $773,000 in 2006, up 2.5 percent from the $754,000 in 2005. Partners in Susman Godfrey made a chart-topping $3,003,000 in 2006, on average, but partners in three other firms made more than $1 million on average. Those firms are Akin Gump, V&E and Baker Botts.

PPP improved at 21 of the 25 firms and declined at only four, including Susman Godfrey, where the PPP dipped 23.8 percent � $3,003,000 in 2006 compared to $3,941,000 in 2005.

Susman Godfrey also has the highest revenue per lawyer in 2006, coming in at $1,733,000, down 21.6 percent when compared to $2,211,000 in 2005. The next firms on the RPL chart are Akin Gump, V&E and Dallas-based Carrington, Coleman, Sloman & Blumenthal, where the $755,000 RPL for 2006 improved 15.8 percent from $652,000 the previous year. RPL improved at 21 firms and declined at four.

Texas Lawyer’s Annual Report on Firm Finance includes a firm-by-firm analysis that attempts to explain financial results for 2006. The fact that lawyers from the firms are quoted in this article is no indication of a firm’s cooperation with the preparation of the firm finance report. Lawyers at the firms simply responded to questions about work and development at their firms in 2006. Texas Lawyer does not identify the firms that cooperate with our reporting by providing financial information or those that don’t.

Also, for the fifth year, the Annual Report on Firm Finance includes graphs that illustrate the trend line for each firm’s revenues over the past several years. The revenue numbers were collected from previous Texas Lawyer firm finance reports. For a few firms, numbers stretch back to the first report in 1987, and other firms are newer to the charts. The graphs are not on the same scale, so should not be compared side by side with graphs of other firms. All the revenue figures illustrated in the graphs are for the calendar year, except for Gardere Wynne Sewell, which had a fiscal year ending on March 31.

� Brenda Sapino Jeffreys

AKIN GUMP STRAUSS HAUER & FELD

With its gross revenue up 17.6 percent and revenue per lawyer up more than 8 percent, Dallas-based Akin Gump Strauss Hauer & Feld had a terrific year in 2006, says Bruce McLean, the firm’s chairman who’s based in Washington, D.C. McLean cites an overall increase in activity in various practice areas, including corporate, international transactions, litigation, business and bankruptcy. “We were fueling on all cylinders throughout the year,” he says. The firm’s gross revenue climbed to about $726.7 million in 2006 up from $618 million in 2005, and its revenue per lawyer was $842,000 up from $778,000 in 2005. Its profits per partner soared to almost $1.3 million, a more than 34 percent increase from $964,000 in 2005. The 15-office firm also increased its total number of lawyers from 794 at the end of fiscal 2005 to 863 last year after decreases in its legal staff over the past three years. “We’re back to growing again,” McLean says. “We need to put the attorneys in place to get the work done.” Kenneth Menges Jr., partner in charge of Akin Gump’s Dallas office, says the firm has approximately 310 lawyers in Texas. McLean says a sizeable contingent fee from the $468 million settlement of a class action against Hillenbrand Industries Inc. and two of its subsidiaries buoyed Akin Gump’s bottom line last year. In September 2006, U.S. District Judge Henry F. Floyd of the District of South Carolina, Spartanburg Division, awarded more than $117 million in legal fees to Akin Gump and four other firms representing a class of hospitals, nursing homes and other customers in Spartanburg Regional Services District Inc. v. Hillenbrand Industries. The class had sued Hillenbrand over an alleged practice known as price-bundling, which requires a manufacturer’s customers to buy products in packages to avoid higher a la carte prices for purchases of single products. Kristen White, spokeswoman for Akin Gump, says the firm’s share of the contingent fee was about $58 million. After payments to staff and non-equity partners, the firm distributed about $32.8 million of the fee award to equity partners, according to information provided by White. McLean says Akin Gump also represented clients in three high-visibility matters in Texas in 2006. Those include San Antonio-based Clear Channel Communications Inc. in its $27 billion leveraged buyout by two private equity firms, Bain Capital and Thomas H. Lee Partners. Menges says 40 of the firm’s lawyers � about half of them from Texas � have worked on the transaction. The sale, which Clear Channel announced in November 2006, is not final. Menges says a strong market for energy mergers and acquisition also bolstered Akin Gump’s bottom line in Texas. Last year, the firm coordinated two massive simultaneous transactions for Anadarko Petroleum Corp. of Houston. Anadarko announced in June 2006 its agreement to acquire Kerr-McGee Corp. and Western Gas Resources Inc. in separate all-cash transactions totaling $21.3 billion, plus the assumption of about $2.2 billion in debt. Michael Dillard and Julien Smythe, partners in Akin Gump’s Houston office, served as lead co-counsel on Anadarko’s twin transactions. Dillard, head of Akin Gump’s corporate energy and emerging markets practice group, says up to 60 lawyers from the firm worked on the transactions, with about 90 percent of them from Texas. The firm’s Texas lawyers also scored a major victory in litigation last year. In June 2006, an Akin Gump team won a $153 million jury verdict in Hexion Specialty Chemicals Inc. v. Formosa Plastics, et al. in the 333rd District Court in Houston. “We had about 15 lawyers working on that,” says Steve Zager, a partner in Akin Gump’s Houston office. Zager and Ed Fernandes, a partner in Akin Gump’s Austin office, served as co-lead counsel for Hexion in the suit. Hexion sued Formosa alleging theft of trade secrets used to make a chemical called epichlorohydrin, an ingredient of epoxy resin. Zager says the parties reached a confidential high-low settlement, which Formosa paid on July 9, 2006.

� Mary Alice Robbins

ANDREWS KURTH

Andrews Kurth posted mixed results in 2006, doing better on the revenue side than the profits side. The firm’s gross revenue came in at $237 million in 2006, up 5.3 percent compared to $225 million 2005, but net income declined by 6.6 percent to $92.9 million from $99.5 million in 2005. Revenue per lawyer improved by 10 percent, jumping to $662,000 from $602,000 in 2005, and profits per partner increased a more modest 3.5 percent to $731,000 when compared to $706,000 in 2005. Managing partner Howard Ayers says the firm’s lawyers are pleased with the increase in RPL, and the firm took the opportunity to pour some of the cash back into the firm: opening a new office in Beijing, upgrading existing offices, and hiring directors and staff for professional development and diversity initiatives. “It’s easier to make investments when you have an uptick. We had the RPL uptick,” Ayers says. The firm has fewer equity partners � 127 at the snapshot date of Aug. 31, 2006, compared to 141 the previous year. Ayers says the decline is due in part to departures and in part to some lawyers moving to non-equity status because of pending retirement or for a more flexible work schedule. The number of non-equity partners increased to 50 in 2006, up a total of 13 from 2005. That is due mostly to promotions and lateral hiring, Ayers says. Overall, Ayers says, the financial results reflect the cyclical nature of the business. “We had a very strong year on the transactional side of the house and not as strong a year as we traditionally have on the litigation and bankruptcy side of the house,” he says. Thomas Perich, a banking and finance partner, says business transactions lawyers did a considerable amount of traditional banking and finance work for clients, including New York-based J.P. Morgan Chase Co., Wells Fargo & Co. of San Francisco and the Royal Bank of Scotland, and it handled several project finance deals, including a number of wind farm transactions for clients including Babcock & Brown in San Francisco. Transactional lawyers also did a lot of conduit lending work and real estate and energy finance deals, he says. “On a scale of 1 to 10 for the business transactions section, this year was a 9,” Perich says. Robert Jewell, co-head of the firm’s corporate and securities practice, says lawyers handled a number of initial public offerings, including some for master limited partnerships, and the lawyers were busy with corporate governance work that involves internal investigations and advising corporate boards, special committees and audit committees. On the mergers-and-acquisitions side, lawyers worked on a number of private equity and public deals, including several in the energy arena, Jewell says. While bankruptcy work is down in Texas, the firm picked up bankruptcy work in the Southern District of New York, says Hugh Ray, head of the firm’s bankruptcy practice. The firm represents the ad hoc preferred shareholders committee in the Adelphia Communications Corp. Chapter 11 and represents the ad hoc equity committee in the Refco Inc. Chapter 11, both filed in the Southern District of New York. Ray says the firm’s bankruptcy lawyers also did some work in 2006 for Mirant Corp. in its Chapter 11, which was filed in the Northern District of Texas. In January 2006, Mirant emerged from bankruptcy protection. Houston partner Rosemarie Donnelly, co-head of the firm’s litigation section, says lawyers handled a lot of oil and gas litigation in 2006, including a number of royalty disputes, and the firm’s probate litigation practice was busy during the year. Other hopping areas include toxic tort defense and a managed health care docket, in which the firm represents insurance companies sued by health care providers or policyholders over managed care coverage, she says.

� Brenda Sapino Jeffreys

Baker Botts

At Baker Botts, just about every department had a good year in terms of financial performance in 2006, says managing partner Walter J. Smith at the Houston-based firm. “We had a strong year all across the board,” says Smith. “As long as I have been practicing, I have never seen it strong in all areas.” Baker Botts’ gross revenue rose 15.7 percent from $434.6 million in 2005 to $502.7 million in 2006. At the same time, the firm’s net income rose 11.9 percent from $205.5 million in 2005 to $229.9 million in 2006. Smith says those increases are attributable to the rise in the lawyer count at Baker Botts. “Primarily it’s about more lawyers. Our firm has relatively high fixed costs, so it matters how many you hire. We hired aggressively laterally,” Smith says. The firm’s total head count increased from 624 on Aug. 31, 2005, to 676 as of Aug. 31, 2006. Smith notes that strength in the energy sector helped Baker Botts’ bottom line. Chambers Global, a trade research organization, ranked Baker Botts first among firms that handle energy sector work. In the editorial review of Baker Botts’ strengths internationally, Chambers researchers stated: “This Texas energy star is establishing itself as a major player in projects spanning the world.” Similarly, the firm was ranked No. 1 in an IP Law & Business survey published in the magazine’s November 2006 issue. IP Law & Business is a Texas Lawyer affiliate. Smith says the firm’s transactional intellectual property work as well as its IP defense litigation increased in 2006. “We are doing that work all across the country now,” Smith says.

� Miriam Rozen

BEIRNE, MAYNARD & PARSONS

Gross revenue at Beirne, Maynard & Parsons dropped to $55.7 million in 2006, down 9.1 percent from $61.3 million the previous year, due to the firm’s decrease in lawyers, says Martin D. Beirne, managing partner of the litigation-only firm. Tort reform is the driving force behind the firm’s 9.8 percent decrease in total lawyers from 102 in 2005 to 92 in fiscal year 2006, he says. “The huge dockets of mass tort cases are dwindling,” Beirne says. Net income at the Houston-based firm also decreased, sliding 4 percent from $17.3 million in 2005 to $16.6 million last year. The downsizing, which included support staff, was normal attrition for a firm adjusting to the changes in Texas litigation, he says. Some of the firm’s former lawyers are now in-house counsel, Beirne says. Profits per partner inched up 1 percent to $874,000 from $865,000 in 2005, and revenue per lawyer also increased almost 1 percent to $605,000 from $601,000 in 2005. Beirne points out that the firm’s performance in 2006 is neither a surprise nor a disappointment. “We supported tort reform,” says Beirne. “We testified on behalf of the new laws. It is what our clients wanted.” Beirne notes that the success of a firm is not measured by its gross revenue or by the total number of its lawyers, but rather by its profits per partner and revenue per lawyer. “We exceeded our goal on both counts,” he says. Beirne says last year firm partners Scott Morris and Keith Oldenwelder successfully defended client Chevron Phillips Chemical Co. in a $30 million suit. He says the firm also successfully represented longtime client Baylor College of Medicine and a pediatric ophthalmologist against a $60 million medical malpractice claim.

� Jeanne Graham

BRACEWELL & GIULIANI

Hiring former New York City Mayor Rudy Giuliani in 2005 to open a New York office was the key to Bracewell & Giuliani’s financial success in 2006. “The biggest factor for us was New York,” says Patrick Oxford, managing partner of the Houston-based firm, which was known as Bracewell & Patterson before Giuliani joined as a partner. Oxford says the firm expected to lose $3 million or $4 million in 2006 in New York during the first full year of the office’s operations but lost only about half of the budgeted amount. “We expect to make money in New York this year,” he says. Oxford says Giuliani helped increase the overall image of the firm, provided contacts in New York, helped recruit skilled lawyers and put in billable hours. The firm’s gross revenue in 2006 was $201.6 million, up 17.2 percent from $172 million in 2005. Net income improved by 19.4 percent, when comparing $73.8 million in 2006 to $61.8 million the year before. Profits per partner were $690,000, up 16.2 percent when compared to $594,000 the previous year, and revenue per lawyer was $607,000, up 19.3 percent from 2005′s $509,000. Those positive financial results came in even as the firm’s head count was flat; the firm had 332 lawyers as of Aug. 31, 2006, compared to 338 the previous year. But Oxford says the firm added lawyers in late 2006, including a number in New York. Those New York hires include Mark Palmer, who now heads the corporate practice in New York. Palmer says he brought a number of private equity and hedge fund clients to the firm, and the firm also added a broker-dealer practice in New York led by partner Julian Rainero and a bankruptcy practice led by David Albalah. “Things just worked out well,” Palmer says. “We had excellent client support; we were able to make some complementary key hires.” Firmwide, Oxford says, the transactional practice was hot in 2006, specifically private equity, energy and energy finance. White-collar crime defense also was important in 2006, and the firm did a lot of related corporate governance work, he says. “It’s not only the criminal work, but a huge amount of work in this options backdating scandal. Every big company in this country had to have an ethics investigation, and we are very well suited for that,” he says. One corporate governance client is Affiliated Computer Services Inc. of Dallas, which hired the firm in 2006 to help conduct an internal investigation into its historic stock option practices and to represent the company in an investigation conducted by the U.S. attorney for the Southern District of New York and the U.S. Securities and Exchange Commission. Also, Oxford notes, the firm’s overseas offices had a strong year, particularly in Kazakhstan. “It’s a huge energy play there, and we are the firm in Kazakhstan,” he says. The firm’s litigation lawyers were busy in 2006, says Carrin Patman, a partner in Houston. She says the firm is national counsel for San Antonio-based Valero Energy Corp. in litigation involving gasoline additive methyl tert-butyl ether. In 2006, the firm expanded its securities litigation practice, she says. Also, litigators handled all types of energy suits, including royalty cases and litigation over gas purchase contracts, she says. G. Alan Rafte, a partner in Houston who heads the firm’s energy finance and infrastructure group, says, “In the energy world for us it seemed like just about everything was busy. For us, the one thing that wasn’t real busy was project finance.” He says the firm represented a number of exploration and production companies on several mergers and acquisitions, joint ventures and financings. One client was Leor Energy of Houston, he says. The firm represents independent directors at Houston-based Kinder Morgan Inc., which is going private, and lawyers worked on some other deals for KM in 2006, he says. Rafte also says lawyers in his group represented a number of private equity funds in power deals. Everyone was busy in 2006, he says, and the firm hired transactional lawyers during the year to help ease the workload. “We were pretty much at max, or close to max, all the time.”

� Brenda Sapino Jeffreys

BROWN McCARROLL

A drop in the number of lawyers at Austin-based Brown McCarroll resulted in a 3.9 percent decrease in the firm’s gross revenue. Brown McCarroll generated $68.9 million in gross revenue in 2006, down from $71.7 million in 2005. But Brown McCarroll’s revenue per lawyer increased by 8.3 percent from $424,000 in 2005 to more than $459,000 in 2006. “We had fewer attorneys doing higher-dollar work,” says Robert Werner of Austin, Brown McCarroll’s managing partner. Werner says Brown McCarroll, which had about 150 lawyers at the end of August 2006, lost about 20 lawyers last year as part of the firm’s two-year phase-out of less profitable litigation practice areas. Werner says the firm raised its rates in intellectual property litigation and utility litigation, but he declines to disclose specifics about the rate increases. Tom Watkins, a partner in Brown McCarroll’s Austin office, says the commercial litigation practice group enjoyed major successes in 2006, including the firm’s defense of a California-based communications technology company against allegations of theft of trade secrets and patent infringement in Silicon Laboratories v. Axiom Microdevices, et al. In April 2006, a jury in the U.S. District Court for the Western District of Texas in Austin returned a verdict rejecting Silicon Laboratories’ allegations of patent infringement and all but one of the allegations that Axiom misappropriated its trade secrets. Watkins says the case was “a huge fee-generator for us last year” but declines to disclose the amount of fees the firm received. Werner says the firm’s utility practice group, formed in September 2005, also had a successful year in 2006, handling a myriad of utility projects. Among those projects was Brown McCarroll’s representation of Credit Suisse, the lender for the sale of the Coleto Creek coal-generating plant in South Texas. Utility practice group partner Marianne Carroll of Austin says American National Power Inc. bought the plant from Topaz Power Management Co. Carroll says that up to eight Brown McCarroll lawyers worked on the more than $1 billion transaction, which closed in late June 2006.

� Mary Alice Robbins

CARRINGTON, COLEMAN, SLOMAN & BLUMENTHAL

In 2006, Carrington, Coleman, Sloman & Blumenthal partner Bruce W. Collins and a team of firm lawyers continued to represent former Enron Corp. chairman and chief executive officer Kenneth Lay in his criminal trial on securities, wire fraud and conspiracy charges in connection with the collapse of the Houston energy company. Collins told Texas Lawyer last year that Carrington, Coleman was Lay’s civil defense firm for Enron-related litigation, and it was hired to do document and deposition support for Lay’s criminal trial. [See "The Ramsey Factor," Texas Lawyer, June 5, 2006, page 1.] Collins said that Lay’s criminal-defense team was working seven days a week, devoting almost every waking hour to the case. Although a federal jury in May 2006 found Lay guilty of six counts of conspiracy and fraud � a conviction U.S. District Judge Sim Lake vacated in September 2006, because Lay died in July, making it impossible for him to appeal his conviction � those long hours spent on Lay’s defense undoubtedly boosted Dallas-based Carrington, Coleman’s bottom line in fiscal year 2006. Gross revenue at Carrington, Coleman totaled $64.9 million in 2006, a 3.7 percent increase over the previous year. The firm’s net income increased slightly to $26.1 million, up 1.6 percent over $25.7 million in 2005. The number of lawyers at Carrington, Coleman decreased 10.4 percent, from 96 in 2005 to 86 lawyers last year. Profits per partner reached $669,000, up 4 percent from $643,000 the previous year, and revenue per lawyer jumped to $755,000, up 15.8 percent from $652,000 in 2005. Managing partner Fletcher L. Yarbrough declines to comment.

� Jeanne Graham

CLARK, THOMAS & WINTERS

After Austin-based Clark, Thomas & Winters experienced a record year in 2005, Larry McNeill, president of the firm, said last year that he did not expect to repeat that success in 2006. But in a recent interview, he says, “While this has held true, we did exceed our budget forecast for 2006, and credit should go to the shareholders of the firm for holding the line on overall expenses and locating new work.” Clark, Thomas’ gross revenue dropped 7.2 percent from $50.2 million in 2005 to $46.6 million in 2006. The firm’s revenue per lawyer totaled about $398,000 in 2006, a 13.5 percent decrease from $460,000 in 2005. However, the firm experienced a slight increase in its total number of lawyers, growing from 109 in 2005 to 117 last year. In July 2006, five attorneys formerly with Minter, Joseph & Thornhill in Austin and Brownsville joined Clark, Thomas. With the expansion, Clark, Thomas gained its first office in the lower Rio Grande Valley, in addition to its offices in Austin and San Antonio. Clark, Thomas shareholder John Joseph of Austin, former managing director of Minter, Joseph, says the now-defunct firm had opened an office in Brownsville in January 2006. The expansion also marked Clark, Thomas’ re-entry into the land use and municipal government affairs practice. McNeill says the firm has not had a land use practice that offers comprehensive legal services since the 1970s. Joseph, head of Clark, Thomas’ land use and government affairs group, says Minter, Joseph had about 60 active cases prior to the merger. One of the projects the Minter, Joseph attorneys brought to Clark, Thomas involves the expansion of services and revisions of the planned unit development (PUD) for St. David’s Hospital in Austin. Joseph says the practice group worked on revisions to St. David’s PUD so that the hospital could increase the amount of its square footage and height to expand critical care services, including its emergency services, surgery and the hospital’s neonatal intensive care unit. As part of the project, the practice group also has worked on revisions to the St. David’s North Austin Medical Center PUD, Joseph says.

� Mary Alice Robbins

COX SMITH MATTHEWS

Cox Smith Matthews of San Antonio made the list of highest-grossing Texas-based firms for the second consecutive year. The largest Texas firm based in San Antonio posted gross revenues of $49 million for 2006 � 13.7 percent more than 2005′s $43.1 million. Net income also increased in 2006 by 10.9 percent to $19.4 million, compared to 2005′s $17.5 million. The firm continued to take on more attorneys as well, adding 12 in 2006 for a total of 118. James B. “Jamie” Smith, the firm’s managing director, says the practice groups that performed best in 2006 included energy, tax, corporate and intellectual property. He says these groups have “historically done well and continued to grow pretty dramatically in 2006.” The energy group, in particular, performed better than projected. “The energy group stepped out. They had more work than they could get done,” he says. Jon R. Ray, shareholder and head of the energy group, says commodity prices remained high enough to continue to generate a lot of interest in exploration and production. “There is a lot of available capital, so there’s just a great deal of regular routine exploration and production activity,” he says. As a result, there was a steady demand for their services and “only reasonable resistance to rates. We just had a good year.” So good that the firm is looking to add staff to the practice group. “Our folks are pretty well at capacity, so we’re actively trying to find some additional associates,” Ray says. A big selling point could be that the firm’s revenue per lawyer increased by 2 percent in 2006 to $415,000 from $407,000 in 2005. Profits per partner were $396,000 in 2006, up 13.1 percent from $350,000 in 2005. The firm’s biggest clients include Kinetic Concepts Inc., Brookshire Brothers, AT&T Inc., International Bank of Commerce, CPS Energy, Initial Security, Sirius Computer Solutions, South Texas Project and Clear Channel Communications.

� Kristine Hughes

FULBRIGHT & JAWORSKI

Gross revenue at Houston-based Fulbright & Jaworski jumped above the $600 million mark in 2006, fueled primarily by the firm’s corporate practice, which saw a 30 percent growth in revenue, says firm chairman Steven P. Pfeiffer. The firm’s $602.3 million in gross revenue represents an 11.7 percent increase over the previous year’s $539.2 million. Net income reached $268.2 million, an 8.2 percent increase over 2005′s $247.8 million. The firm added 45 lawyers in 2006, an increase of 5.3 percent for a total lawyer count of 903. The firm also added eight corporate lateral partners during the year, which was the firm’s largest practice area for lateral growth, Pfeiffer says. In 2006, Fulbright profits per partner increased 8 percent to $771,000 from $714,000 and revenue per lawyer grew 6.2 percent to $667,000 from $628,000. He says the firm added about 20 to 21 lateral partners last year and three new offices during the fall: Beijing, Denver and St. Louis. About 250 of Fulbright’s 903 lawyers in 2006 were focused on the energy industry, says Michael P. Irvin, a Houston partner and head of the firm’s energy and real property group. Mergers and acquisitions represented a large part of the group’s practice last year with the firm assisting Noble Energy Inc. in the disposition of about $1 billion of its Gulf of Mexico assets, handling a $600 million project for Millennium Pipeline Co. and handling asset sales for Anadarko Petroleum Co., Irvin says. The firm also increased the amount of work it does for deepwater exploration companies, work that requires lawyers with skills in dealing with host governments, construction, engineering, procurement projects and transportation issues, he says. The firm’s practice in China is gravitating toward complex M&A work, says Jeffrey A. Blount, the partner in charge in Hong Kong and Beijing. Currently there are 10 lawyers in the two offices, with plans to hire two lateral associates in Beijing, he says. The firm’s biggest client in China last year was PetroChina Co. Ltd., Blount notes. He says part of the firm’s strategy is to represent Chinese companies as they become more prominent and begin buying assets in the United States, Europe and elsewhere.

� Jeanne Graham

GARDERE WYNNE SEWELL

Gardere Wynne Sewell skated through 2006 in more ways than one. The firm’s gross revenue increased 8.4 percent, up from $153.1 million in 2005 to $166 million last year. The firm’s net income also rose to 12.5 percent, an increase from $63.2 million in 2005 to $71.1 million. Lawyer count was 261 as of Aug. 31, 2006, up 2 percent from 258 lawyers as of Aug. 31, 2005. The jump in revenue is due to the firm’s increased transactional and corporate work, says Stephen Good, managing partner of the firm. “We’ve seen an increase in transactional and corporate business across the board,” Good says. That increase in revenue was due, in small part, to shoes with wheels in the heels that are popular with pre-teens. The shoes are the product of Carrollton-based Heelys Inc., a business Gardere has represented from its inception and through the patenting process. The firm helped the company go public in December 2006 and continues its representation today. “It’s fun to see somebody take the idea and build it up from their garage and make it a public company,” Good says. The firm’s litigation practice also was busy last year, handling about 20 high-end intellectual property cases and taking on two mass tort cases, Good says. The firm saw a jump in its hospitality work, handling cases for hotels in Hawaii and California. The only practice area that stalled a bit during 2006 was bankruptcy, Good says. Revenue per lawyer was up to $636,000 � a 7.3 percent increase � compared to $593,000 in 2005. Profits per partner also rose 12.5 percent, up from $672,000 in 2005 to $756,000 in 2006. Gardere’s profits have remained high, because they’ve been able to attract clients outside of Texas, Good says. The firm is attractive � especially among East Coast clients � because Gardere’s legal bills seem lower to those clients, he says. “We charge our normal rates, but to them it’s less than they’re used to paying in New York,” Good says. “We’ve been successful in competing for work at a national level. We’ve been able to keep our profits up, which keeps our partners happy.”

� John Council

Godwin Pappas Ronquillo

Partner Don Godwin says he wants his firm to have about 100 lawyers � the perfect size. But Godwin Pappas Ronquillo’s lawyer count fell to 85 in fiscal year 2006, down from 138 in 2005 and a high of 150 in 2004. Gross revenue dropped 9.1 percent from $55 million in 2005 to $50 million in 2006, and its net income fell 10 percent from $10 million to $9 million. Profits per partner dropped 20 percent, from $625,000 in 2005 to $500,000 in 2006, while revenue per lawyer increased 47.4 percent, from $399,000 in 2005 to $588,000 in 2006. But Godwin says he’s not looking for his firm to become as large as it once was. “The costs are higher than the rewards. The size gets out of hand. In the next couple years, maybe we’ll grow to 95 or 100 lawyers,” he says. No question, lawyers have defected from Godwin Pappas at a steady clip. The firm, then known as Godwin Gruber, made its debut on Texas Lawyer’s Annual Report on Firm Finance in 2002. But in late 2005, name partner Mike Gruber defected, along with three partners and three associates, to form Dallas’ Gruber, Hurst, Johansen & Hail. Godwin’s firm renamed itself Godwin Pappas Langley Ronquillo. But in March of this year, name partner Keith Langley left, along with two partners and five associates to form Langley Weinstein Hamel, and Godwin’s firm changed its name again, this time to Godwin Pappas Ronquillo. Godwin says the departures are with his blessings. He expects lawyers to break off and form smaller firms, because, he says, smaller firms are the optimal size for making money. In its current form, Godwin Pappas Ronquillo offers clients litigation and appellate services, specifically intellectual property, energy and employment litigation. “It’s what we do best,” says Godwin. “And now we are continuing to fine-tune what is the right size.”

� Miriam Rozen

HAYNES AND BOONE

In a legal market that has seen much upheaval, including the closure of two of the city’s notable firms, Haynes and Boone has been the model of stability in Dallas. The firm has grown slowly, adding lawyers when needed � but not at the rapid pace that has caused concern for other Dallas firms. In fact, in 2006, Haynes and Boone added only six full-time lawyers, pushing the firm’s lawyer count to just over 400 attorneys. Most of those attorneys were hired to staff satellite offices. And for the first time since the firm was founded in 1970, Haynes and Boone employs more lawyers outside of Dallas than within the city limits, says Terry Connor, a partner who serves on the firm’s board of directors. “We intend to grow in Dallas as well, but it is indicative of increasing geographic diversity, which I think is helpful to the clients,” Connor says. For example, the firm increased the number of lawyers in its Moscow office from three to seven to take advantage of corporate and energy work inside Russia. Slow, steady growth seems to suit Haynes and Boone, as the firm saw an 8.5 percent rise in its gross revenue � up from $216.8 million in 2005 to $235.3 million in 2006. The firm’s net income also increased by 10.5 (percent � up from $95.2 million in 2005 to $105.2 million in 2006. “Every practice area was up in comparison from ’05 to ’06,” Connor says. “Corporate, securities, and merger and acquisitions were really fueling a lot (of the firm growth.” Revenue per lawyer rose 6.8 percent � up from $548,000 in 2005 to $585,000 in 2006. Profits per partner also increased 3 percent � up from $675,000 in 2005 to $692,000 in 2006. Keeping profits up and lawyers happy has led to the enduring stability at Haynes and Boone, Connor says. “We have a very stable law firm and partnerships, and we have not suffered defections like at other firms,” Connor says. “Stability is based on culture. It’s a real asset. Our lawyers focus on a number of things. They want to do the best work for the best clients. And they are also interested in the financial rewards. But unlike a lot of firms we don’t make the financial reward the only thing.”

� John Council

Hughes & Luce

Although newly anointed Hughes & Luce managing partner Ed Coultas hates to use the term “flat” when comparing his firm’s 2006 gross revenue with 2005′s, he resorts to it time and again. “We had a flat year,” he says. “Our litigation and bankruptcy side was down. There were so few filings, because the economy is good, and when the economy is good, credit is easy to get, and people are reasonably happy when deals are going good.” Gross revenue for 2006 ticked up slightly for Hughes & Luce at $69.6 million increasing 1 percent over its 2005 revenue of $68.9 million. Nonetheless, Hughes & Luce’s bottom line still looked modestly strong as net income rose by 8 percent up from $25 million in 2005 to $27 million in 2006. Coultas points to strength in the firm’s transactional practice areas such as corporate real estate, land use and tax, which thrive in good times and compensated for any downside in litigation. Several areas on the litigation side did perform well, adds Coultas, such as white-collar crime, “officer and director type suits” and the defense of professionals, particularly accountants and lawyers. “We are a defense firm, and we are seeing that plaintiffs lawyers who don’t have as much to do because of medical malpractice and tort reform are looking for new niches,” he says. “There has been a steady increase in these types of malpractice cases.” With regard to hiring last year, Coultas again says the firm was “flat,” decreasing its total head count from 140 in 2005 to 132 in 2006. Yet the number of equity partners has increased from 45 to 47. The firm had taken a hit in 2005 when it lost five partners in its corporate practice area to Fulbright & Jaworski, but has rebounded significantly, says Coultas. “We have added corporate lawyers who have brought in business, and that business has blossomed, and we have exceeded collections from when we lost that big group,” he says. “It’s been a great transition, and we haven’t lost a step.” Despite things being flat, 2006 saw Hughes & Luce profits per partner and revenue per lawyer on the rise. Profits per partner increased by a modest 3.2 percent, up from $556,000 in 2005 to $574,000 in 2006. Revenue per lawyer saw an even more substantial jump, increasing by 7.1 percent up from $492,000 in 2005 to $527,000 in 2006. Coultas figures the world of Hughes & Luce will not remain flat for long.

� Mark Donald

Jackson Walker

Whatever hit Dallas-based Jackson Walker’s 2005 financial numbers took, largely because of its investment in labor-intensive contingent-fee cases, it clearly was “temporary,” says managing partner Mike Wilson. “In 2006, we had a record year in the history of the firm.” Jackson Walker resumed its typical growth path focusing on “traditional noncontingent work,” says Wilson, and it has paid off. Gross revenue for 2006 climbed 7.7 percent, in-creasing from $133 million in 2005 to $143.2 million, while net income increased 11.6 percent, jumping from $47.5 million in 2005 to $53 million in 2006. Wilson attributes this success to two factors: growth in the economy, which in turn stimulated growth in the business of several practice areas, and the addition of a number of top-quality lateral hires who contributed significantly to the firm’s bottom line in 2006. “We saw a boom in our corporate, banking and financial services practice areas,” Wilson says. “We also had growth in our health care and intellectual property [litigation and nonlitigation] practices. It was really a combination of all these components that contributed to our success.” Over the past 18 months, adds Wilson, “we have had a meaningful influx of laterals from other law firms,” although the actual number of lawyers has decreased just slightly from 287 in 2005 to 284 in 2006. The number of partners, however, rose 3 percent from 90 in 2005 to 93 in 2006. “Our laterals and even senior laterals will come into the firm as income partners,” says Wilson. Profits per partner increased more than 8 percent, up from $528,000 in 2005 to $570,000 in 2006 while revenue per lawyer increased 8.9 percent from $463,000 in 2005 to $504,000 in 2006. The firm may show still more growth in lawyers in 2007 now that Jackson Walker has taken into its fold 10 lawyers from Jenkens & Gilchrist’s San Antonio office and one from Dallas. The addition increases to 40 the size of Jackson Walker’s San Antonio office and makes Wilson express confidence that “the new year is starting out pretty well.”

� Mark Donald

Jenkens & Gilchrist

2007 marks Dallas-based Jenkens & Gilchrist’s last appearance on Texas Lawyer’s Annual Report on Firm Finance. On March 31, the firm closed for business. Most of the 100 or so lawyers who remained at the firm as of that date, despite previous mass defections and the shuttering of all of its branch offices, moved to the Dallas office of Richmond, Va.-based Hunton & Williams. In 2006, before the exodus and closure took place, the firm’s net income totaled $44 million and gross revenue totaled $168.1 million compared to $46.9 million in net income and $179.1 million in gross revenue for 2005. With 236 lawyers in fiscal year 2006, the firm’s gross revenue fell 6.1 percent from 2005, and its net income fell 6.2 percent. The firm had 281 lawyers in 2005. Former Jenkens chairman Patrick Mitchell, now the managing partner of Hunton’s Dallas office, says, “I think the people that stayed did a phenomenal job in extremely difficult circumstances. Until the decision was made for the greater good to move, the economics of the firm were good. It was a strong group of lawyers that commanded top rates with great clients. I would hope that it is not a shock to anyone that this was a very competitive group for this market. Jenkens management was proud of those lawyers and the productivity of those lawyers.” Mitchell says no particular practice area stood out as significantly more profitable than any other last year. Instead, he says, the firm continued to work hard for loyal clients seeking transactional, real estate and advocacy services.

� Miriam Rozen

KELLY HART & HALLMAN

For years, Kelly Hart & Hallman wanted to be known as Fort Worth’s firm. It had a satellite office in Austin � but not for long. The firm has been profitable by sticking to a business strategy of operating primarily inside Tarrant County. But the firm’s partners grew restless years ago and began looking to expand into new territory, says Dee Kelly, a founding partner of the firm. It was a slow process, but Kelly Hart finally decided on Houston and will open a 10-lawyer office in Texas’ largest city on June 1. “We had studies made, and everybody recommended Houston. And we finally got the courage to do it,” Kelly says of the new office in the Wells Fargo Tower, which will focus on energy, corporate, partnership and international work. “We’ve got a 10-year lease, so we plan on being there a while.” In 2006, Kelly Hart gross revenue rose by 1.8 percent to $46.3 million, up from $45.5 million in 2005. The firm’s net income rose 4 percent to $28.3 million, up from $27.2 million in 2005. “There has been a tremendous amount of activity and increased litigation. It was good last year,” Kelly says. “But if it keeps going, we’re going to have to add lawyers.” Kelly Hart did add lawyers last year, increasing its total lawyer count to 100 last year, compared to 95 in 2005. However, the firm’s equity partner count dropped by four � from 49 in 2005 to 45 in 2006. The firm’s revenue per lawyer dropped by 3.3 percent to $463,000 in 2006, down from $479,000 in 2005. But profits per partner saw a boost, from $555,000 in 2005 to $629,000 in 2006, a 13.3 percent increase. Fort Worth has been good to Kelly Hart, Kelly says. “It’s one of the fastest growing cities in Texas,” he explains proudly. Despite its new Houston digs, “We’ll always be a Fort Worth firm,” he says.

� John Council

LOCKE LIDDELL & SAPP

Net income and profits per partner tell the story of Locke Liddell & Sapp’s financial results in 2006. While the firm’s gross revenue and revenue per lawyer improved in 2006, net income and profits per partner took a huge leap at the firm for the year. Net income increased by 21 percent to $78.9 million in 2006, up from $65.2 million in 2005. Profits per partner averaged $831,000, up an impressive 16.1 percent when compared to 2005′s $716,000. Gross revenue came in at $221.9 million, up 6.8 percent from 2005′s $207.8 million. RPL was $693,000 in 2006, 4.7 percent higher than in 2005, when it was $662,000. Managing partner Jerry Clements, a litigation partner in Austin, attributes the much-improved bottom line to lots of hard work by the firm’s lawyers, who “took advantage of a great legal market.” She adds, “This is just really a recognition that our lawyers are working very hard and the work we are doing is very complex and sophisticated.” Some of those lawyers were highly rewarded for their efforts: The highest-paid partner in the firm made 12 times as much as the lowest paid. That compares to an 8 to 1 ratio in 2005. Clements says she’s pleased to see the ratio improve, because it’s proof the firm is committed to paying everyone, even top performers, at market rates. “We just had some partners who were really superstars and had incredible years,” she says. Clements says the firm’s energy practice was busy in 2006. Other hot practice areas include real estate investment trusts, finance, private equity and corporate governance, she says. The firm’s litigation practice has felt the impact of tort reform on the tort defense side, but a busy docket of commercial and pharmaceutical suits balanced that out, she says. Dallas litigation partner C. Michael Moore says the firm is national counsel for pharmaceutical company Schering-Plough Corp., of Kenilworth, N.J., handling average wholesale price litigation suits filed by state attorneys general and by private litigants in about 20 states. Also, Moore notes, the firm’s litigators represent a number of large lenders and mortgage lenders in lender-liability suits. The firm’s energy practice was busy across the board in 2006 for all sorts of energy clients, says partner Bill Swanstrom of Houston, co-head of the firm’s energy practice group. Swanstrom says the firm’s work in 2006 includes representing Houston-based Kinder Morgan Inc. on two pipeline projects, and representing Shell Oil Co. of Houston on a large windfarm project. Deals lawyers also represented Houston’s Dynegy Inc. on some power plant merger and acquisition work, he notes. Private equity work was important at Locke Liddell in 2006. “It’s booming,” says partner Billie Ellis of Dallas, who formerly managed a private equity fund, The Halifax Group. “We have been very busy on all kinds of private equity things: representing groups forming new firms, representing existing funds that are doing things and investing, entrepreneurs buying companies from funds . . . also representing companies that are being bought or being invested in by private equity groups,” he says. Ellis says the firm’s private equity clients include Halifax, Texas Pacific Group and The Carlyle Group.

� Brenda Sapino Jeffreys

MUNSCH, HARDT, KOPF & HARR

After gaining lawyers and losing revenue in 2005, Dallas’ Munsch, Hardt, Kopf & Harr reversed that trend in 2006. The firm went from 104 attorneys in 2005 to 100 in 2006, a decrease of almost 4 percent, and boosted its gross revenue to $52 million, up 16.1 percent from $44.8 million in 2005. Munsch, Hardt also saw its net income increase in 2006 to $17.2 million � an 18.6 percent improvement over 2005′s $14.5 million. Revenue per lawyer rose to $520,000 in 2006 from $431,000 in 2005, a boost of 20.6 percent, and profits per partner improved to $573,000, a 26.5 percent rise over 2005′s $453,000. Chairman and chief executive officer Glenn B. Callison says 2006 was more than just a “good” year for the 21-year-old firm. “We actually had our best year ever in terms of our financial performance,” he says. “We saw 2006 as a return to a very good, upward trend that we’ve generally enjoyed throughout the history of our firm.” Callison ascribes the success to good clients and a dynamic staff. “Our attorneys were more productive and able to deliver very high quality service to our clients, and that was reflected in the . . . good results that we had.” Among the practice areas that performed best, he says, were commercial real estate, bankruptcy and commercial litigation, which saw an especially good outcome from contingent-fee arrangements. However, he says, it was the corporate securities and mergers and acquisitions transaction group that saw the biggest improvement, year-over-year, because of representing clients in several large transactions. “The corporate group saw an increase in deal flow,” he says. Some of the firm’s biggest clients are JPI Multifamily Investments, BNP Paribas and Wells Fargo Bank, NA. But Callison says several of the firm’s newer, smaller, emerging growth-type clients were a pleasant surprise in 2006, when the firm’s focus was on targeting mid-market clients looking for the right firm for their work. “While we’re very pleased with the excellent results that we experienced in 2006, we really are focused on our continued growth in 2007,” he says. “With really record profits . . . we see that as getting us a very good, stable platform on which to build.”

� Kristine Hughes

PORTER & HEDGES

The gross revenue increase at Houston-based Porter & Hedges to $49.4 million in 2006, up 3.3 percent from $47.8 million the previous year, was primarily driven by increased activity in commercial litigation, says firm chairman T. William Porter. Net income reached $21.6 million, an increase of 6.4 percent compared with the previous year’s $20.3 million. The firm added only two lawyers during 2006, for a total lawyer count of 83, a 2.5 percent increase compared with lawyer count in 2005. Profits per partner grew by 6.4 percent from $580,000 to $617,000 and revenue per lawyer increased by almost 1 percent to $595,000 from $590,000. “The highlights of the year were substantial increases in real estate and real estate finance, general business litigation and estate trust and probate,” Porter says. During the year, the firm saw minor decreases in bankruptcy, corporate, environmental, tax and construction litigation work, he says. “General business litigation was up, toxic tort was flat, construction litigation was soft,” Porter says. By paying attention to expense containment, the firm was able to turn a moderate increase in revenue into a considerable improvement in net income and profits per partner, Porter says. The firm did not spend or lose any money on speculative contingent-fee work in 2006. “All in all, we think we had a pretty good year,” Porter says. The growth in commercial litigation was largely due to a few suits that went to trial, consuming a large number of the firm’s lawyers for substantial periods of time, he says. Most of the litigation the firm handled for clients related to the energy sector, such as disagreements over royalties or disputes over the ownership of oil and gas producing property, says David L. Burgert, practice group leader of the firm’s litigation section. The firm also has stayed busy with toxic tort cases and is national counsel for several tort defense clients in other states, including Wyeth, he says. “Our lawyers have been very good at showing our clients that the best way to avoid a big payoff is to fight,” Burgert says. Energy transactions were up about 10 percent in 2006 compared with the previous year, due to private equity groups making more capital available for energy deals and transactions, says Robert H. Thomas, head of the firm’s energy group. “We did [handled] a lot of buying and selling assets and buying and selling companies,” Thomas says. For example, in 2006 Porter & Hedges represented Todco in its $2.3 billion sale to Hercules Offshore Inc. and closed the $1.3 billion sale of Kerr-McGee’s oil and gas property to firm client W&T Offshore. The firm also represented Anadarko Petroleum Corp. in the transfer of about $250 million in assets last year, he says.

� Jeanne Graham

STRASBURGER & PRICE

It’s been a long haul for a firm that once focused most of its practice on insurance defense work � and suffered because of it over the past several years. For years, the firm’s revenues have slipped as it transitioned away from its traditional roots as tort reform measures reduced the work available for insurance defense lawyers. So the firm started replacing its insurance defense practice with commercial litigation, even before the Texas Legislature passed the H.B. 4 omnibus tort reform bill in 2003, says Dan Butcher, Strasburger’s managing partner. “We adopted some strategies to grow our commercial side starting in ’99,” he says. “Some of our insurance defense practitioners have found it better to go to a boutique environment, but we continue to have some of that work.” But now that the firm focuses its practice primarily on business litigation and transactional work, revenues are growing. The firm’s gross revenue was $74.1 million in 2006, up slightly from $74 million in 2005. Strasburger posted a net income of $21.1 million in 2006, up 3.9 percent from $20.3 million 2005. “It was kind of across the board. Our corporate group and the real estate group had good years,” Butcher says. “Our commercial litigation had a good year � a lot of that was environmental.” What really pushed up the increase in revenues in 2006 was that firm expenses stayed the same while Strasburger took in fees doing more profitable work, Butcher says. “Our practice mix was a little heavier on what would be higher-end work for us,” Butcher says. Revenue per lawyer at the firm dropped by 9.3 percent � down from $454,000 in 2005 to $412,000 in 2006. But profits per partner rose 9.3 percent � up from $322,000 in 2005 to $352,000 in 2006.

� John Council

SUSMAN GODFREY

Susman Godfrey managing partner Stephen Susman’s initial assessment of his firm’s financial picture in 2006 � “we had another great year” � is undercut slightly after subsequent reflection. “Well, it wasn’t my best year, but it was certainly a good year for the firm.” His firm’s 2006 numbers reflect an 11.3 percent dip in gross revenue from $168 million in 2005 to $149 million in 2006. Net income also dropped from $134 million in 2005 to $117.1 in 2006. But Susman Godfrey attorneys shouldn’t despair. “I keep telling people that the law practice today is not what it was 20 years ago,” says Susman. “The cases are not there, the competition is too much, and Texas has become a victim of tort reform. Having said that, the past five years have been the best in our law firm’s history.” Just look at Susman Godfrey’s profits per partner, which despite declining from $3,941,000 in 2005 to $3,003,000 in 2006, dominated the category. The firm also led the revenue per lawyer category, despite dipping from $2,211,000 in 2005 to $1,733,000 in 2006, a 21.6 percent decrease. Susman says he doesn’t want or anticipate unusually large growth for his firm, which he founded. “If you look at all our offices other than Houston, we grow at an average of one lawyer per year,” he says. “Houston, which began in 1980, has had more growth than that.” Susman anticipates strong growth within his newly minted New York office. “We have doubled our size [from two lawyers to four] and our space. Now we have room for 10 lawyers and are looking for more,” he says. Overall, the firm has seen strong growth in patent litigation, with more than 35 patent cases pending. “The big sea change for us is we have become patent litigators,” says Susman who partly attributes this growth to his firm’s proximity to the Eastern District of Texas. “It’s the hottest district in the country for plaintiffs filing lawsuits. Patentees all want to be there.” The firm size increased from 76 in 2005 to 86 attorneys in fiscal year 2006, including four new partners. “Our partnership track is so short at four years, we are brutally frank with our associates,” says Susman. “We tell them every six months how they are doing. After two years they realize if they are going to make partner. We are not for everyone. There is not a lot of handholding, not a lot of tender loving care for lawyers, and not all of them like it.”

� Mark Donald

THOMPSON & KNIGHT

Thompson & Knight continued a strong upward trajectory in 2006, building on several years of growth and benefiting from a surging energy industry. Last year the firm’s net income swelled by 25 percent, to $83.2 million from $66.4 million in 2005, while its gross revenue increased 18 percent, to $203.1 million from $172.2 million in 2005. Meanwhile, profits per partner rose 19 percent, to $800,000 in 2006 from $671,000 in 2005. The firm’s revenue per lawyer rose by 9 percent, up from $519,000 in 2005 to $566,000 in 2006. An increase in corporate transaction work in the energy area accounted for about half of Thompson & Knight’s growth in 2006, says managing partner Peter J. Riley. Rising energy prices, Riley says, led to increased exploration worldwide, which spurred a spike in big deals, especially mergers and acquisitions. The firm handled more than $10 billion in transactions for 25 to 30 clients that are energy-focused private equity firms, including EnCap Investments LP and NGP Energy Capital Management, says Diane Scheffler, Thompson & Knight’s chief operating officer. The firm also handled about $10 billion in transactions for clients involved in new construction, infrastructure work and sales of liquefied natural gas facilities, Scheffler says. Another large energy transaction, Riley says, was the $2.6 billion sale of Chief Oil & Gas, a natural gas drilling company the firm represented that drills mainly in North Texas’ Barnett Shale, to Devon Energy Corp. and Crosstex Energy. Other than energy, much of the remainder of the firm’s growth last year came from real estate transactions, Riley says. Jeffrey A. Zlotsky, a Dallas corporate and securities partner, says one notable transaction handled by the firm was the $1.8 billion sale of Dallas-based ClubCorp Inc., which owns about 170 golf clubs, private clubs and resorts worldwide, to KSL Capital Partners, a private equity firm. The firm represented the Dedman family, the previous owners of ClubCorp., in the sale. In addition to benefiting from the rising price of oil, the firm grew its fortunes through billing higher rates, internal cost controls and attorney willingness to work long hours, Riley says. Several firm partners agree that the firm’s litigation and bankruptcy departments were down or flat overall in 2006. Nonetheless, many litigators kept busy with Sarbanes-Oxley Act work. Over the past few years, Thompson & Knight also lured back eight attorneys who had left Thompson & Knight for other firms. The reason they returned, Riley says, is that Thompson & Knight used to be a “typical old law firm” with a “demotivating” seniority-based compensation system. Several years ago, however, the firm switched to a more merit-based compensation system and cultivated a more entrepreneurial culture. Total lawyers rose 8.13 percent, to 359 in 2006 from 332 in 2005.

� Jonathan Fox

VINSON & ELKINS

Average profits per partner topped $1.1 million at Vinson & Elkins in 2006, the second year in a row the Houston-based firm posted a seven-figure PPP. Net income, which is compensation to equity partners, declined slightly, dropping to $239.8 million compared to $244.1 million in 2005, but gross revenue improved to $531.9 million in 2006, up 4.3 percent from 2005′s $510.2 million. Revenue per lawyer at V&E was $807,000, up 2 percent compared to RPL of $791,000 in 2005. Managing Partner Joseph Dilg characterizes 2006 as “another really strong year” for the firm. According to Dilg, transactional and capital markets lawyers were extremely busy in 2006, and the firm’s international practice took off, with the firm’s offices in London, Dubai and China particularly busy. “It was a good year, and we’ve got some room to improve going forward,” Dilg says. “I view my job as keeping our lawyers coming back through the door every day.” The firm lost a net of 15 equity partners in 2006, dipping to 213 from 228. Dilg says that’s because several lawyers retired during the year and others left the firm to take in-house jobs at clients or to join other firms. Meanwhile, the firm’s non-equity ranks grew to 72 partners in 2006, compared to 58 in 2005. Most of the increase in non-equity partners is due to promotions, he says. On the litigation side, Houston partner Karl Stern, a co-head of litigation, says the firm’s securities litigation practice grew steadily in 2006, and the firm picked up some options backdating work in the latter part of the year. Also, the firm’s international and domestic arbitration practices were booming in 2006, Stern says, and lawyers handled a number of oil and gas royalty suits for exploration and production companies including Anadarko Petroleum Corp. of The Woodlands, Houston-based Shell Oil Co. and BP of London. The firm also won an important defense verdict for client Wyeth in March 2006 in Geers v. Wyeth, a fen-phen diet-drug suit in the U.S. District Court in the Western District of Texas, he notes. Also, he says, the firm has a large intellectual property docket in the Eastern District of Texas, and the firm’s condemnation and eminent domain practice is “humming along.” Mark Kelly, a partner in Houston who is co-head of the corporate finance and securities section, says, “We had, on both the M&A and on the finance front, capital markets front, just an incredible year.” Lawyers worked on a large number of financings, he says, and many initial public offerings, including some for master limited partnerships. The firm also expanded its public equity practice in 2006, he says. James “Jay” Cuclis, a partner in Hong Kong who coordinates the firm’s international practice, says the firm’s Dubai office was especially busy in 2006. “That’s a function of a number of factors. Obviously the high energy prices have created a lot of wealth in the Middle East,” he says. The other significant growth areas were in Asia, including work for Asian energy companies acquiring oil and gas assets in other parts of the world, and in London, where the firm expanded its finance and capital markets practice in 2006. Cuclis notes that the Islamic finance practice is a “new booming area” as the firm works on deals involving Middle Eastern investors.

� Brenda Sapino Jeffreys

WINSTEAD

Real estate and structured finance are two important practice areas for Dallas-based Winstead, and the firm posted strong financials in 2006 because those areas were smoking hot throughout the year. “The broad real estate industry is a sweet spot of this law firm,” says Denis Braham, the firm’s chief executive officer since January 2007. “Existing clients have been very, very busy. There is just a tremendous amount of money out there chasing deals, both on the loan side and the development side, and the structured finance practice is all tied into that.” Braham says the firm’s litigation and financial services practices were also busy in 2006, along with its technology practice. In 2006, Winstead’s gross revenue came in at $151.7 million, up 6 percent from 2005′s $143.1 million. Net income also improved by the same percentage to $52.8 million in 2006, compared to $49.8 million the year before. Revenue per lawyer was $564,000, compared to $518,000 in 2005, up 8.9 percent, and profits per partner averaged $562,000 in 2006, up 6 percent from the previous year, when they averaged $530,000. The firm had 276 lawyers as of Aug. 31, 2006, a head count virtually unchanged from the previous year, making the improvement in net income and PPP more impressive. Braham says he was pleased with the firm’s financial performance in 2006 but not satisfied. “We can always do better, and we will, and that’s what I’m excited about,” he says. Shareholder Kevin Sullivan of Dallas, head of the firm’s real estate structured finance group, says lawyers in his group were working nonstop in 2006 on real estate financings that can be securitized. “Interest rates over the last few years have been quite low, so it’s been a very good time to put debt on commercial properties, just as it’s a good time to put debt on people’s houses,” he says. “We’ve been busier each year, compared to the one before it, for six years in a row.” Sullivan says the firm’s clients in real estate structured finance include Column Financial Inc., the commercial lending subsidiary of Credit Suisse, New York’s J.P. Morgan Chase & Co. and California-based Countrywide Financial Corp. Dallas shareholder Michael Alessio, who works in the real estate investment and development practice group, says all areas of the firm’s real estate practice were busy in 2006, except for foreclosures and workouts. The biggest uptick was in speculative development deals, he says. Overall, Alessio says, there was a really high volume of deals in the $100 million to $150 million range. “It was across the board for many, many clients with many equity types and sources, all different product types, and different geographies and also included all kinds of risk models; we were out there doing deals,” he says. Clients with a lot of work for the firm in 2006 include Crow Holdings and L&B Realty Advisors, both of Dallas, and Houston-based Weingarten Realty Investors. Litigation shareholder Jeff Joyce of Houston says the firm’s litigation/dispute resolution practice area was busy overall in 2006, a situation that he believes is not typical for Texas firms for the year. Because the financial services and real estate practices are so important to the firm, there was a “healthy amount” of related litigation in 2006, he says. For instance, he says, litigators did substantial work for Dallas-based loan servicer ORIX Capital Markets LLC, the proprietary trading, investment and asset management unit of ORIX USA Corp. The firm also did work for Carter & Burgess Inc. a Fort Worth-based engineering firm, and lawyers represented Plano’s Rent-a-Center Inc. in class actions pending in several states, Joyce says. Also, shareholder Michael Cash of Houston represents Exxon Mobil Corp. of Irving in some mass-tort litigation, Joyce says.

� Brenda Sapino Jeffreys