Biglaw Brings In Big Bucks

Episode Notes

Transcript

Joe Patrice:

Well, well, we’re here again for another episode of Thinking Like A Lawyer.

Kathryn Rubino:

Hey.

Joe Patrice:

Hi. I’m Joe Patrice from Above the Law. I am joined by Kathryn Rubino, who’s already said hello and Chris Williams, who’s not said anything yet. Yet exactly. But we are here as usual from Above the Law to talk about some of the biggest stories in legal from the week that was and be depressed along the way. It sounds like these days, but first we’ll have some happy moments maybe by doing our little segment we call Small talk. Small talk, where we do some small talk. So yeah, hey, it was a lovely weekend in the New York area. Temperatures got up into the eighties a little bit there.

Kathryn Rubino:

Part of it was nice. Then we are back to the, not winter, not yet spring,

Joe Patrice:

Yeah. Then got cold. But

Kathryn Rubino:

Back again,

Joe Patrice:

We had a bit of a moment.

Kathryn Rubino:

There was a day that you could wear a dress without heavy boots.

Joe Patrice:

Yeah. What else does I do?

Kathryn Rubino:

That is basically it.

Joe Patrice:

Yeah. No, I think that’s probably right. Unfortunately. So I will say, I’ll spend some small talk to talk about a story I just wrote, which is,

Chris Williams:

Oh, come on. That’s not small. No.

Joe Patrice:

So anyway, so this story that I just wrote, because it is not in any way serious, but if you have an opportunity to go on TikTok, check out minor character theater who has a six part mockumentary deep dive into the former general counsel of the Willy Wonka company detailing exactly what happened to the in-house legal department when their boss started turning children into blueberries and stuff like that.

Kathryn Rubino:

I mean, nothing good. That is worst case scenario for in-house counsel.

Joe Patrice:

Yeah. That is a subject that we would never talk about on this show as part of our regular business, but it is something that

Chris Williams:

I, not necessarily, because that is an article you wrote today, and if it gets picked up traffic wise, we’ll talk about it next week. No,

Joe Patrice:

We still would. There’s not really a newsy hook to it, but it is fun, and I highly encourage people to have a little bit of fun with this. What

Kathryn Rubino:

I think is interesting about that particular piece, and I haven’t watched the entire series, but when it first caught your attention, you shared it with our internal group. What really has struck me about that series is that it’s the epitome of Thinking Like A Lawyer. It takes that lawyerly mind and turns it on A beloved classic. It’s really hilarious.

Chris Williams:

There’s a point where it’s like, oh, well, the sweepstakes, you had no purchase necessary for entry, right? No. Is absolutely

Kathryn Rubino:

Necessary.

Chris Williams:

Oh, so it’s illegal. What’s the name? Lottery gambling. It’s illegal lottery now.

Kathryn Rubino:

Where is it? Everywhere. Oh, so we’re running an international legal lottery. It’s really good, as you can tell, the fact that we’ve watched it once and are already quoting lines for a bit.

Joe Patrice:

Yeah, fantastic. A little bit to Kathryn’s point, this show, we did celebrate an anniversary recently. This show, the original format of this show was a lot closer to that. The original format that we had was to talk to somebody who would talk to a lawyer who does something a little out of the ordinary with their legal degree, somebody who does a lot of video game work or somebody who does a lot of screenwriting work, and then we would have a second segment where we posed hypotheticals like the Wonka situation and had them talk through a lawyer that has fallen by the side, which is

Kathryn Rubino:

Why I think it’s interesting. You were like, we would never talk about this. And I was like, well,

Joe Patrice:

We changed the format for a reason, so now it fits more into this fun loving segment than the

Kathryn Rubino:

Other. But on the fun loving section, I will reveal some personal information, which that it was the holiday weekend. It was Easter, so I took my child to see the Easter Bunny.

Joe Patrice:

Oh yeah. How’s she doing?

Kathryn Rubino:

Amazing. What I thought was very interesting was that I was able to get a picture of her smiling on the bunny. It was fantastic. Which I mean, given her interaction with Santa Claus, or should I say Santa Claus’s at Christmas? I was not optimistic. Quas quasi. Yeah. I made trips to several different Santa because they all were terrible like tears, not just like, oh, won’t smile. Actively horrified by the entire process, Including the Santa that gave her a little stuffed animal that she adores to this day still was like absolutely not. Everything about that seems awful. But the Easter bunny, she was pretty chill with

Joe Patrice:

Which Easter Bunny worked.

Kathryn Rubino:

It did, and I do. I wonder if it’s something about a face character versus a full head situation.

Joe Patrice:

I just thought that the Easter bunny at the Menlo Park Mall was more convincing.

Kathryn Rubino:

Okay. Okay. I like the mall rats reference

Joe Patrice:

There. Yeah, there we go.

Kathryn Rubino:

But as we are making a trip to Disney World this summer, I feel like this Easter bunny extravaganza bodes well for our character breakfast where we’re going to meet Mickey and Minnie and all that good stuff. So I felt like, okay, we’re doing things. We’re moving in the right direction. We’re going to have some lasting childhood memories. It’s

Chris Williams:

Great. It’s beautiful. I went to a friend’s book release. They released a book of poetry, one of my friends from a cohort, and it was nice to see, it was nice to see the homie out in a different setting. When you saw Neil Ka Burning Man, it’s like, oh yeah, know him. He’s doing different things and look at the whimsy. You can tell by the hat. So it was just very nice. And then I had Easter dinner. I think I might’ve blown some people’s minds. I don’t know if this is the case, but I think it’s the case Easter Bunny chocolate Eggs. It’s poop because they’re mammals. Because they’re mammals and they don’t lay eggs. So what other egg thing, right? That’s

Kathryn Rubino:

Why they’re also chicks as part of, I mean, that’s why the whole Cadbury Bunny laying eggs was a joke and as the advertisement, right, it was funny.

Chris Williams:

I thought it was poop. I thought it was poop. That’s why they’re chocolate eggs.

Joe Patrice:

No, they’re chocolate because who wants a gift of a yolk? Although at this point

Chris Williams:

In 25, maybe be yoked

Joe Patrice:

By Jesus 2025. Maybe real eggs

Kathryn Rubino:

Are, but that’s also why chicks are part of the aesthetic for Easter. Like little chicks, and they give you the chocolate

Joe Patrice:

Egg to go full circle on this. You have not watched, I guess all the way through the series, but the episode of the series where the Intrepid General counsel talks about the Golden Egg, the golden geese, and just as he puts it, something along the lines of every question you ask takes you down to a darker place. And

Chris Williams:

On that note,

Joe Patrice:

So yeah, on that note, let’s get to our regularly scheduled depressing programming, but actually this isn’t all that bad. The AMWA 100 came out.

Kathryn Rubino:

Yeah, American lawyer as per usual, at least since the mid eighties, I think when they first began that have put out their annual ranking of big law firms buy gross revenue, which is a listen, they calculate a lot of different metrics as part of the ranking, but the predominant one is that gross revenue number, and overall, there’s lots of smaller stories we can talk about that happened to individual firms or whatnot. But the big story is that 2024 was a hell of a year for big law

Joe Patrice:

Yet

Kathryn Rubino:

Again, just really strong. The 2023 numbers the year before were much more, oh, well, we’re trending in the right direction. Nothing wild, but we see everything seems to be all systems go. Whereas this year, I think Patrick Smith who wrote the AM law coverage described it as big law is crushing it. There’s really no other way to put it. There are I think 26 or 27 firms that are over 2 billion in gross revenue. In order to crack the top 10, you need to have posted over 3 billion in gross revenue. I think Kirkland is at 8.8 billion. Latham number two at 7 billion. With all those billions of dollars, still not enough money to fight Donald Trump. Mind you.

Chris Williams:

Yeah,

Joe Patrice:

Exactly.

Chris Williams:

If you got laid off because there had to make some budget cuts, you should be mad.

Joe Patrice:

So yeah, this was obviously a monster year and it has been going like that for a while here. Now obviously a lot of this started in Covid Times. Prior to that, we had a series of years of kind of slow but steady growth. Demand was generally stagnant to slight increase. We had firms would make more money, but largely made up by the process of raising rates, et cetera, which there’s some studies that suggest they needed to do because they were actually a little bit behind on rate raising. As hard as that may be for clients to stomach in a world where they’re charging thousands of dollars an hour, but they were behind the inflation curve a little bit covid happened, which one would think would cause a bunch of issues, but it caused a boom in legal work, the demand was up, costs were down because people weren’t flying anywhere. We then had a couple of years of adjusting just to the extent that the costs came back because travel came back, but demand still was moving in a positive direction and then this year, a monster year. Now what happens in the looming market as we record this, the market has already tumbled like a thousand points today. What does that mean for law firms? The good news for law firms is they can make business in almost any economic climate. It’s just a shift.

Kathryn Rubino:

Well, it depends what your practice area

Joe Patrice:

Mix is, shift in practice area, and so we’ll see how all these firms come out of it. And sometimes bad economic times are actually good for the practice areas. You might think of as good times, areas like m and a, because what happens when people start going out of business is other people buy them. And so there can be

Kathryn Rubino:

Deals to be had

Joe Patrice:

Cyclical. What you would think of as cyclical practice areas can actually survive and thrive in counter-cyclical times depending on how they approach it and where their clients are.

It is worth noting that another article that we had about this same ranking and breaking down some of the internals of it, of the am law 100, we’re now at a point where almost half, I think it’s like 41, have crossed the threshold of 1.1 million in revenue per lawyer, which in a lot of ways that’s the more useful, in my mind metric because that is of lawyers on staff, how much cash is coming in per, because profits per partner is one thing, but what are you getting for each marginal person you add to your payroll and when you’re making 1.1 and you’re at best paying people, your top most senior people 800 and most of them down in the two hundreds, that’s a lot of money.

Kathryn Rubino:

And I mean the very top of the RPL number is held by Wachtel of course, and it’s 4.4 million per lawyer. That’s a lot. That’s a lot. And all these numbers are pretty much up. Suman Godfrey is sort of the one exception, but that is not anything about their business. Last year as much as it was, they had that giant Fox News defamation fee that came in. So they are a little bit of an outlier in that respect, but even though they are down 33% from the year before is RPL number, they are still at 2.3, almost 2.4 million per lawyer

Joe Patrice:

And Bo Schillers like this too, which is why they fluctuate in and out of the AmLaw 100. They have normal billable hour business, but they also, both of those firms engage in contingency fee cases, and that does mean that some years they’re going to make a whole bunch.

Kathryn Rubino:

Those contingency fees do not come in on a regular schedule. That’s the nature of them. And so one year you might have quite a few and the next year you’re still paying those lawyers to potentially get those fees, but they haven’t come in yet.

Joe Patrice:

But still it’s a very good year. One expects this to continue. We’ll see what the market does to it. Obviously, even though that you can’t have that kind of countercyclical work, the fact that inflation is a problem in a tariff based world does suggest assuming we don’t have the Supreme Court and Trump combined to get rid of Humphrey’s executor and allow him to fire the Fed and cause a real crash, if assuming that doesn’t happen, interest rates are going to stay up to hedge against that inflation. And if that’s true, that makes it a lot harder to buy things like mergers and acquisitions. It’s nice to be able to get cheap money to make those deals work and when those are high, that does cause problems. So interesting times a lot of economics to break down going forward and seems like it’s not going in a great direction right now.

Kathryn Rubino:

So I don’t know if you’ve taken a deep dive, but just a quick off the top of your head, PPP profits per equity partner, what’s the top number, do you think?

Joe Patrice:

Like an 8 million kind of space? Where is that

Kathryn Rubino:

8 million would put you in the number four spot.

Joe Patrice:

Okay. What do we got?

Kathryn Rubino:

9.2.

Joe Patrice:

Okay,

Kathryn Rubino:

9.2 is k and e. Wachtel comes in at just about nine.

Chris Williams:

Just so much money. Just an unfathomable amount of money.

Kathryn Rubino:

Well, when you think about these stories that we’ve covered in the past year, which is that they’re getting guaranteed money for lateral partners upwards of 20 million. They have to have these numbers in order to offer that as a guaranteed number to some of their high billers. Right?

Chris Williams:

I wonder if that’s still up to date if we’re going to get news this year that it’s up to 25 or something, if it just jumps in relation to the profits being made.

Joe Patrice:

Well, the issue is very few firms are lean enough where the partners are getting all of that money. So you’ve got some Rainmaker who’s probably bringing in 40 million, but also that Rainmaker is not collecting that necessarily. When we’re dividing out profits per equity partner, that’s just a pure division of revenue. Past expenses divided up by partners, but different ones are making different amounts. And it’s also true that in the corporate side you’ve got the rainmaker making that big amount, but you’ve also got usually partners who are part of that team who do not have independent books of business. Your bank act people may not be bringing in money independently, so that comes out of that share. So it’s a rich tapestry,

Kathryn Rubino:

But still a lot of

Joe Patrice:

Money, A lot of money. The takeaway is industry healthy right now. We’ll see how that goes. All right. We’re back. I guess talk about the ongoing depressing topic that we’ve had for a while. Everything that’s going on in gestures wildly around us. This one, we’re going to hinge it on a specific story. I mean, there’s a lot happening. We’ve had emergency orders from the Supreme Court jumping, jumping ahead of the Fifth Circuit to stop further deportations, and we’ve got

Kathryn Rubino:

Literally the Supreme Court was like, I’m going to stop you right there. Yeah.

Joe Patrice:

So we’ve got a lot of things going on, but one article that I put together that I thought was an interesting framing to talk about, sometimes we get folks usually angrily writing in that we don’t seem bipartisan enough or we’re not both siding the whole gulag thing. So I decided to kind of write out a piece explaining some of the major reasons why that’s not true. I didn’t even really get too deep into them. There’s reasons why objective journalism is kind of a fake thing, myth, and that it is easily exploitable and there’s some arguments to be had that when you’re writing to an audience of lawyers, we know that the population of lawyers is overwhelmingly toward one point of view. And so it kind of makes sense that lawyers writing to those lawyers are also in that view. But the real point that I made in this article is there is a bipartisan consensus here.

It’s just not what a lot of people think is going on because I tell the story, and this is relevant to what happened last week, judge Wilkinson of the Fourth Circuit wrote the opinion that really shut down the DOJ on this story of the Maryland deportation, where he wrote a scathing argument that this is an insult to the concept of justice. It is critical to remember that this is the guy who wrote the article saying that you could put people in Guantanamo Bay forever and not even let them have lawyers. This is a person who, when I started at this job, I would’ve, if you asked me to name who the most right-wing voice on the judiciary was, I probably would’ve guessed him. The fact that

Kathryn Rubino:

Maybe on the short list for sure.

Joe Patrice:

Oh yeah, sure. The fact that he’s writing this opinion, that’s where I push back against these folks saying, can’t you be more bipartisan? I’m like, the intellectual far right is we’re simpatico on this right now.

That’s where we are now. The other judge I would’ve said was on that short list of the most far right when I started judge, he started working here would’ve been Judge Looting who is on TV all the time saying that the administration is at war with the Constitution. These are the kind of real luminaries on the right, and it’s not just them. Now, you wrote an article last week, I think it was last week, Kathryn, where Alan Dershowitz, who has very much adopted a Trump apologist tone. Even he was saying, whoa, whoa, whoa, this isn’t appropriate. NYU, their faculty had said an open letter in which they lashed out at the whole attack on academic freedom, and it’s signed by their more right wing people. You would imagine from the NYU faculty. There’s consensus.

Kathryn Rubino:

This is not, you’re not cherrypicking issues here. I think that it has come across in multiple different avenues for the Trump administration. If you’re talking just about the big law executive orders, so far, four firms have fought those orders. They’re in front of four different judges, two of which were reported by George W. Bush, all of them, all four, regardless of who appointed them, have universally said that granted, the TROs have said that these are shocking, chilling, problematic, all the things that make you think that these are eventually going to be found to be unconstitutional. That is across the board, no matter which judge is in front of it. They’ve all been shocked by these orders.

Chris Williams:

What I want to know is what the speculative, this unbiased approach, what they would expect that to look like in writing.

Kathryn Rubino:

Well, I mean I think that part of it is that people expect, or a certain portion of trolls, let’s say, that’s not impune our whole audience here, but I think certain people expect what they hear on their cable news outlet of choice, not realizing of course, that that is a self-selected set of opinions that they’re being fed. And just because Fox News talks about something or Newsmax talks about it in a particular way, does not at all mean that that is the consensus in, especially when you’re talking about lawyers and the intellectual, which I think is a really good distinction, Joe, that your article had drawn

Joe Patrice:

And I mean it’s an Overton window situation sort of right? When the media presents two sides defined broadly as the people in the current administration or the people who aren’t, then yeah, there’s a weird middle if you create that. But when you start actually talking to the National Review is writing articles about meeting to oppose this administration. David Brooks is quoting the Communist Manifesto. We’re through a looking glass here as far as bipartisanship goes,

Kathryn Rubino:

And I think that has to be one of the more uniting aspects of all the various fights that are going on against the administration, whether it’s birthright citizenship, whether it’s the El Salvadorian renditions, whether it’s these big law things, is that there is a weird bipartisanship that I don’t think mainstream media is talking about, and I think that Above the Law as sort of focused on lawyers, that’s our primary audience has that sort of luxury and responsibility. I would say even to talk about, because this is our bag,

Joe Patrice:

It is an interesting times that we live in where we’re all kind of a number of people who probably didn’t think they would be on the same side of things, have joined forces, strange

Kathryn Rubino:

Bedfellows, if you will. It’s almost like there’s a saying about this

Joe Patrice:

Almost. I think it’s one in Texas. Yeah, I was trying to think through what joke wanted to put there. Alright. Okay, so

Kathryn Rubino:

What I like about this next story, just as kind of a starter here, is that it’s terrible news, but not at all related, at least not directly to the Trump administration.

Joe Patrice:

So this one, although again you say not directly, and I think it’s very, very related, but we

Kathryn Rubino:

Heard nothing that they did.

Joe Patrice:

Correct, yes. It is not them doing anything. So this is coming up on some of the subreddits talking about law school admissions. We see a story, can’t necessarily confirm, but they’re quoting the email that they said they got from the law school. In this case it was Arizona law, but it could just as easily be so many other schools doing this, unfortunately, claiming this article, this poster said that they actually got in, got told that they were going to get a full scholarship, and then less than a week later and still three weeks from the deadline to accept, they got informed, oh yeah, sorry. We’re cutting the amount of financial aid we’re giving you down because too many people are applying that we want to let in. And so if you haven’t paid your seat deposit, we’re taking back what we said we were going to offer.

Kathryn Rubino:

That is such bullshit.

Joe Patrice:

So the process of picking law school is hard enough trying to evaluate all these different packages. Ellie and I, back when we hosted the show, often did an episode every year where we would evaluate people’s options where it was like, I can go to this school but only get half my money or this school and get a full, we would talk those through because it is hard. It becomes extra hard when those are all exploding offers

Kathryn Rubino:

Without deadlines,

Joe Patrice:

Without deadlines that you can rely upon. And the way that this comes back to Trump is it appears as though the issue here is that the school was not thinking through that there would be an uptick in applications, which we knew happened in the last Trump administration. It appears to be happening again. On top of that, this time around we have the aforementioned economic collapse, and when the economy goes down, people try to go to school to extend out the real world a little bit longer. So there’s just more people and dealing with this problem by saying, we’re going to start messing with the financial offers we’re giving people, is the worst possible way to do this. I would say that the answer would be you could do many things, and this happened before, by the way, or something similar happened before years ago. Notre Dame had an issue sort of like this that we wrote about at the time, not us, but someone writing for Above the Law, and here we are again. And there are other options you could say. You could have planned ahead about how many people you’re letting in. You could be telegraphing that it’s conditional out of the gate at the very, at a

Kathryn Rubino:

Minimum, at an absolute minimum,

Joe Patrice:

You could be creating incentives for people to defer, which we’ve seen in the past. You could be creating incentives for people to not just defer, but to get different offers, lineup, internships and stuff on the backend that will fill in that gap if the school really can’t afford it. And there’s also just raising more money. One aspect of the world in which more people are applying to law school is it tends to mean there’s an appetite for people who want to give to law schools too. So there’s an opportunity for that. There’s so many different ways of dealing with this. Instead of calling somebody or emailing somebody less than a week after you give them an offer and taking it away,

Kathryn Rubino:

It’s really shitty and it’s so unprofessional seeming as well. That is not what grownups do when they make a mistake.

Joe Patrice:

Yeah, it’s not good. And I guess there’s something to be said for public law schools, state law schools have a slightly different economics to it, but a private law school, the other option is just suck it up. You lose a little bit of money this year, make it back next year. It might be true that they have some sort of a, you can’t run a deficit rule. I know that’s a thing in some states, but in any event, it’s really unfortunate and I hope that the original poster finds a good place to land, and I also hope that everybody out there finds a place, finds a good package and just be careful and be aware that this could be cropping up. Unfortunately,

Chris Williams:

I just think it’s so weird that I know this is how it’s played out over periods of time, but I just think it’s so weird that more people start applying to law school during rule of crisis, rule of law crises. It just seems like we’re at most, if it has already happened yet, or a week or two away from Trump pulling a King Louis being the I am the state sort of thing, we see with, I think there was some spat between Trump and I think it was a woman who’s a mayor of Maine or something like that, where they were talking about the governor of Maine, the governor of Maine. He was like, I am. He basically pulled a, I am the executive, what I say is the law sort of thing. And as we moving further down that line, the stuff on statues doesn’t matter as much as the stuff on his mind, but yeah, we’ll see how it plays out.

Joe Patrice:

Alright, well, with all that, let’s, that’s it for this week. Thanks everybody for listening. You should subscribe to the show to get new episodes when they come out. You should leave reviews, write things, say it’s great, give it some stars that helps more people find it. You should be reading Above the Law. Of course you read these and other stories before we talk about them here, you should be listening to the Jabot, another podcast that Kathryn host. I’m a guest on Legal Tech Week Journalist Roundtable. You can check out some other shows on the Legal Talk Network and you should follow on social media. It’s at Above the Law dot com on bluesky. I’m at Joe Patrice, she’s at Kathryn one. Chris is at writes for Rent. Occasionally I’m over on Twitter at Joseph Patrice, but barely anymore. It’s mostly dead, basically. I’m only there to retweet the few insane people who are over there still troll them. But that’s everything. Bye. Peace.

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