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A thriving legal market and climbing legal fees pushed equity partner salaries over the $1 million mark at a fourth Boston-area law firm last year as firms across the city raised rates and amassed more revenue and profit.
Lawyers at the city's largest law firm, Ropes & Gray LLP, joined the millionaire club with the firm's 182 partners earning an average of $1.06 million, according to the American Lawyer magazine's annual list of the nation's top 100 law firms. Unlike Ropes' single-tier partnership structure, the three other top-25 Boston firms with per-partner profits above the $1 million mark also have non-equity partners earning far less. At Bingham McCutchen LLP, Goodwin Procter LLP and McDermott, Will & Emery, equity partners all reaped about $1.2 million, while average partner compensation ranged from $745,000 at Bingham to $935,000 at Goodwin.
Five firms with a smaller Boston presence also posted equity partner payouts of more than $1 million, including Skadden, Arps, Slate, Meagher & Flom LLP and Weil, Gotshal and Manges LLP, which each paid equity partners $1.7 million.
Billing rate increases also boosted gross revenue and revenue per lawyer, said consultant Tom Clay, a principal at Newtown Square, Pa.-based legal consulting firm Altman Weil Inc. Revenue per lawyer, for example, ranged from $475,000 at Holland & Knight LLP to $810,000 at Ropes, for the 10 firms that are also among Boston's top 25 firms.
Although increases varied by practice group, Clay estimated that firms across the country raised rates by 3 percent to 7 percent last year.
Several local law firms, including Bingham, Fish & Richardson PC and Ropes, said they hiked rates by a few percent. Rate increases helped drive up law firm revenue and profits over the past five years, said Bingham Chairman Jay Zimmerman.
After "modest" rate increases last year, Wilmer Cutler Pickering Hale and Dorr LLP's Boston lawyers now start at more than $100 for associates to a top rate of over $700, according to co-managing partner William Lee: "We do challenging work that demands good rates."
Boston has successfully raised rates over the past few years, said Peter Twining of Stone/Twining Legal Recruiting and Consulting LLC. And when clients resist rate hikes, firms have carved out deals involving a guaranteed amount of work that ultimately generate more revenue, he said.
Firms also report that high-margin practice areas -- including corporate, intellectual property, litigation and private equity -- are on the mend with the recovering economy. Ropes Chairman Brad Malt said capital markets and mergers and acquisitions came back to life last year.
But the gulf between the lowest- and highest-paid equity partners, and between non-equity and equity partners, appears to be widening.
Among firms with a Boston presence on the American Lawyer list, profits per equity partner started at $450,000 at Holland & Knight, which has a strong presence in the lower-rate Southeast, and top out at $1.7 million for New York-based Skadden and Weil.
Non-equity partners at big Boston firms collect much smaller paychecks, ranging from about $250,000 to $450,000, according to Mintz Levin Cohn Ferris Glovsky and Popeo PC's co-managing member (the firm's term for a partner) Steven Rosenthal. Recruiter Twining, who pegs the non-equity partner pay range at $185,000 to $410,000 at large Boston firms, said non-equity partners are valued differently from firm to firm and even within firms.
As firms increase their ranks of non-equity partners, which ranges from none at Ropes and Wilmer Hale to 59 percent of the Mintz Levin partnership and 60 percent of Bingham partners, the pay gap will widen, said Clay. As part of a national trend to narrow the path to equity partnership, Fish & Richardson this year adopted a two-tier system with a partial-equity track.
"Firms are trying to be a little more rigorous about making equity partners and not letting too many people slip through the cracks," Clay said.
Sheri Qualters can be reached at squalters@bizjournals.com.
