Duane Morris Sees Some Success

“We certainly suppressed our profits as a result of the merger, but we didn’t have any surprises,” O’Donnell said, adding that Hancock’s lower legacy rates also diluted RPL.

Consultant Peter Zeughauser said it can be difficult to find a California merger partner. “They’re paying a price to get into California,” said the Zeughauser Group consultant.

O’Donnell said that he anticipates an additional $1.5 million in merger-related costs for 2007, but he also expects that both revenue per lawyer and profits will grow again at the pre-merger rate.

ADJUSTABLE RATES

Some Hancock lawyers worried that their existing clients would balk at the new rates that would come with the merger.

“We were going to be joining an Am Law firm. That meant that the rate structure would be different � higher, as it were,” said Ronald Ruma, a legacy Hancock partner. “We were anxious.”

Ruma said the two firms discussed the issue during the merger talks and agreed to make the rate hikes gradual.

“We have had to adjust our billing rates for the clients we carried over, but not all in one fell swoop,” Ruma said. “It’s been an incremental increase.”

O’Donnell said Hancock lawyers’ rates were about 80 percent of Duane Morris’ when the two firms merged. Now, he said, that gap has been cut in half, with the Hancock group expected to match the Duane Morris rates in another two years. The average Duane Morris partner rate is about $500 an hour.

Zeughauser said it is essential that the firm be “moving Hancock’s rates up to Duane Morris’ and then moving Duane Morris’ up to the California rates,” he said.

Lawyers there say they aren’t losing clients over the rates, though they are losing some lower-margin work.

“[We want] to focus on areas that there is high risk and high exposure,” O’Donnell said.

Clients are willing to pay a little more for the bigger firm, said Seabolt. “In a larger firm with more support with more efficiency, you can provide better services for clients,” he said.

WIDENING PRACTICES

Hancock was long known for its insurance carrier practice. With clients like Lloyd’s of London, the firm prospered in the 1990s on huge fights between carriers and their policyholders over pollution coverage. But as some of that work slowed, the firm began to shrink, and some Hancock lawyers felt painted into a corner.

“The last 10 years at Hancock, we had so much made our name in these huge pollution coverage cases,” said Seabolt, a litigator. “We were so associated with that, it frankly was a little bit tough to break out of that � it is much, much easier to diversify the practice being in an Am Law firm.”

Already Seabolt has had commercial litigation work thrown his way by legacy Duane Morris lawyers. In one of the those cases � a dispute between airport developer Airis, a Duane Morris client, and the city of San Francisco � Seabolt has been leading a trial team drawn from both firms.

It’s also gone the other way. Since the merger, Seabolt has been able to offer longtime client Yahoo additional expertise and, for out-of-state matters, lawyers with East Coast offices.

While some legacy Hancock lawyers have branched out, the insurance practice is still a formidable force.

“I think that Duane Morris has a very strong insurance practice today � stronger than it was � as a result of the merger,” said Paul Glad, Sonnenschein Nath & Rosenthal’s S.F. managing partner, who represents carriers. “On the East Coast, it historically had a strong insurance practice, but it couldn’t duplicate that on the West Coast. Hancock brought to Duane Morris that same strong insurance practice.”

Although the insurance coverage group continues apace, Hancock lawyers say they’re glad to be at a firm where their livelihood doesn’t depend on it.

“The breadth of the client base makes managing the risks much easier,” said Ruma. “[It's] not having so many eggs in one basket.”