Legal industry’s wealth gap: Rich lawyers get richer

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A wealth inequality effect of sorts is underway among U.S. law firms, an industry that's hardly hand to mouth but is seeing a widening gap between the haves and have mores.

In its annual ranking of the top 100 law firms released on Monday, The American Lawyer (AmLaw) crowned Latham & Watkins as the top earner among white shoe law firms. Latham, which is based in Los Angeles but has offices globally, earned about $2.6 billion in gross revenue last year, a 14 percent jump from 2013, according to AmLaw's data.

The firm outmuscled DLA Piper, which topped the list in 2013 and landed in the No. 3 spot last year with nearly $2.5 billion in revenues, and edged out Baker McKenzie, which pulled in $2.5 billion and saw revenues jump 5 percent year over year.

"What's more, 2014 showed us that the 'Super-rich' firms, with average profits per partner exceeding $2 million are getting richer still and more firms are achieving this status," AmLaw said in a statement.

Even at the bottom, no one is poor

All told, 27 firms earned at least $1 billion in 2014, the publication said, up from 23 in the prior year. The list also illustrated a growing gap between those who occupy the upper echelon of the legal field, and those at the bottom. The top 20 legal firms earned more than $30 billion collectively, nearly four times the revenues of the bottom 20—which pulled in less than $8 billion altogether.

"Even at the bottom of this list nobody is poor," said Kim Kleman, editor in chief of The American Lawyer, in an interview, who added that mergers and acquisitions deals and technology financing were two specialties that helped buttress law firm profits this year.

Elite firms such as Latham tend to serve as advisors in M&A deals, a highly lucrative market that surged to $3.5 trillion total in 2014, up 47 percent from the prior year.

After the 2008 crisis, even big law firms were forced to retrench, but began expanding their ranks once the recession abated.

"At the top of the list … are the firms getting the elite work," Kleman said. "It's less price sensitive than commodity work. Law firms at top still have to cut deals with clients," but less so than those firms at the bottom, she added, "because only two or three firms are able to pull off the work because the deals are so complicated."

Still, AmLaw's data comes at a time when a growing body of evidence suggests recent law school graduates are having a difficult time finding work. Yet for partners at the top firms, things appear just fine: AmLaw's rankings showed average profits per partner gained by 5.3 percent to $1.5 million, while average revenue per lawyer rose 3.7 percent.