In down year, law firms chase fees

The city's largest law firms confirm that corporate law work is scarce, and a few are beginning to acknowledge vaguely that revenue numbers are going south.

Those developments, coupled with an ailing economy that has some companies living month-to-month, have pushed law firms to step up their collection efforts.

Jeff Coburn, a legal consultant and principal of Boston-based Coburn Consulting, said revenues at the city's large firms are "typically off 5 (percent) to 10 percent and maybe in some cases more."

But firms with substantial practice groups in trusts and estates, intellectual property, international law and bankruptcy are faring better, he said.

"Some (firms) aren't off a lot, frankly, and others are off 10 (percent) to 20 percent," Coburn said.

At Boston-based Hill & Barlow PC, this year "hasn't been as profitable ... as the prior year," said managing partner Charles Dougherty, but he declined to quantify the change.

Many of the law firms contacted by the Boston Business Journal declined to talk about their revenue pictures, but a few that experienced stable revenues, or even an uptick, were willing to share their results.

Revenue figures this year are "about the same" as last year, said David Baer, the managing partner of 30-attorney Ruberto, Israel & Weiner PC. Revenue is up "in the low single digits" at Boston-based Nutter, McClennen & Fish LLP, said managing partner Michael Mooney. Nutter had experienced double-digit growth for the past seven or eight years, Mooney added.

"It's clearly been a softening, not an alarming softening, a leveling off," Mooney said.

Some other firms that claim business is good, including Testa, Hurwitz & Thibeault LLP, balked at providing details. Bingham Dana LLP's managing partner Jay Zimmerman wouldn't reveal numbers for the Boston office, despite the firm's acquisition of 75-attorney New York City firm Richards & O'Neil during the spring.

Breaking ranks, Kirkpatrick & Lockhart LLP's Boston administrative partner Mark Haddad said the office's year-to-date revenue increase is "over 15 (percent) to 20 percent."

And a "banner year" in the energy, intellectual-property and government-relations practices has more than offset a 10 percent to 15 percent decline in corporate work at Boston-based Brown, Rudnick, Freed & Gesmer, according to managing partner Andre Jasse. When the firm's fiscal year ends on Jan. 31, Jasse expects the average revenue per lawyer to be up by 4 percent.

Many firms claim that a spike in litigation is keeping them busy, but the number of cases filed in both Suffolk and Middlesex counties appears to be relatively stable. Suffolk County logged 496 new civil cases in November compared with 402 in November 2000, said Shirley Grohs, case management coordinator for the administrative office of the Massachusetts Superior Court. Grohs said Middlesex County had similar numbers of filings during these dates -- 457 this November compared with 466 last November.

To boost this year's revenues, and ultimately profits per partner, firms are engaged in a "very big push" to collect money this month, Coburn said.

"Law firms, like any businesses, try to maximize their profitability," Coburn said. "They want to pay the lawyers the bonuses and the partners their share of the profits."

Since law firms are organized as partnerships, they operate on a so-called cash basis for accounting purposes, rather than an accrual basis. That means firms log revenue on the books only when cash is collected. In contrast, the accrual system recognizes revenue when a sale is made or a fee is earned.

"They can't collect on Jan. 2 and have it apply to this year," Coburn said. "When the economy goes soft, it becomes an enormous challenge. Clients ... have their own cash-flow problems."

Most managing partners say firms have strict collections controls, ranging from monthly or bi-monthly meetings with individual attorneys to separate collections departments. Still, collecting money is harder this year, confirmed Nutter's Mooney. "Clients are experiencing financial difficulties," Mooney said.

Years are often made or broken by December collections, said Paul Morton, executive director of Burns & Levinson LLP in Boston. Lawyers may also be especially eager to collect bills if they fear a client is approaching bankruptcy, Morton said.

"If there's a fear that client (companies) may not continue to exist next year, (lawyers) certainly want to get bills paid before clients disappear," Morton said.

Law firms' cash-flow management problems started last December and became more acute throughout 2001, said Jim Cotterman, a principal at Newtown Square, Pa.-based legal-consulting firm Altman Weil Inc.

"You're starting to see the implications of that coming out in different ways: law firms not as aggressively pursuing students in law schools ... no year-end bonuses, selective reductions in personnel," Cotterman said. "And some firms (have) started to come out and say we're actually making some cuts."

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