Having already alienated lawyers departing the firm, Howrey chairman Robert Ruyak is now trying to justify the firm’s precipitous 16% drop in PPP.
In an unabashedly self-serving explanation, he says it’s because the firm had unusually high contingency payments in 2009.
Exclude those, and the drop was “only” 10.9%
We poke a pin in that balloon after the jump.
“Our swing in 2009 wasn’t as great as it looked,” Ruyak says. “When you add in the episodic income from the contingencies, it makes for a much bigger [difference].” In each of the past five years, Howrey’s revenue per lawyer has risen or fallen by $70,000 or more, and in four of those years, the differential was more than $100,000.
Of course, he said nothing about excluding the non-recurring income when it bolstered PPP in 2008.
In fairness, Howrey isn’t the only firm that has had outsized results due to contingency work.
Howrey was not the only Am Law 100 firm affected by alternative fees in 2009. In fact, contingencies helped push two Second Hundred firms onto this year’s top hundred: Cozen O’Connor, which recorded a 23 percent increase in gross revenue, to $291 million, and Davis Wright Tremaine, where gross revenue rose almost 18 percent, to $276.5 million. Cozen’s revenue per lawyer and profits per partner jumped 10.6 percent and 19.3 percent, respectively, while Davis Wright’s rose 5.2 percent and 17.3 percent.
Another firm that got a boost from alternative fees was Fish & Richardson. President Peter Devlin declined to give details about specific matters but says that in 2009 the firm benefited from both full contingency cases (in which no hourly fee was charged and the firm got a piece of the recovery) and “hybrid” contingency matters (which were billed on a reduced rate and included a smaller piece of the recovery).
The two biggest/best examples of this were
- Wiley Rein in 2007, when the firm posted $4.4 million in PPP on the back of the Blackberry settlement, better than Wachtell and everybody else that year; and
- Robins Kaplan, which in 2000 came in at #2, with PPP of $3.05 million, just behind Wachtell ($3.4 million) and well ahead of #3 Cravath ($2.1 million) (no one else broke $2 million that year). The number was inflated by the firm’s role in the huge tobacco settlement that year.
Anyway, cash is cash, so it makes no sense to try to exclude contingency payments in bad years. There’s nothing wrong with higher volatility if it leads to higher expected value.
Related posts:
{ 2 trackbacks }