Flush with cash, law firms eye uncertain economy

By Sara Merken, Mike Scarcella and David Thomas

March 6 (Reuters) - (Billable Hours is Reuters' weekly report on lawyers and money. Please send tips or suggestions to D.Thomas@thomsonreuters.com)

After a strong financial year in 2024, law firm leaders and legal industry consultants said they see obstacles and opportunities in the policy upheavals ushered in by U.S. President Donald Trump's administration so far this year.

"For us, geopolitical changes represent a catalyst," said Miguel Zaldivar, CEO of law firm Hogan Lovells, discussing the firm's work for clients amid uncertain market and policy changes.

Hogan Lovells, a global firm with more than 2,800 lawyers, on Thursday said it grew revenue 9% to $2.96 billion last year. Average profit per equity partner reached $3.07 million, up from $2.74 million in 2023, the firm said.

Looking ahead to this year, Zaldivar said the firm expects a pipeline of deal work "to be active imminently," even if economic uncertainty and questions about interest rates have caused some slowdown.

Despite concerns about how tariffs and other policies will affect the economy, change can spur demand for legal advice and can be good for law firms, said Les Starck, a senior consultant Wells Fargo's Legal Specialty Group. "Generally speaking, firms feel like there's going to be a pretty robust market for legal services this year," he said.

Overall, law firm revenues increased an average 12.5% last year and profits per equity partner rose nearly 16.9% across more than 130 firms surveyed by Wells Fargo's legal group, driven in part by billing rate growth that averaged a 9.1% increase from 2023.

Philadelphia Federal Reserve President Patrick Harker said on Thursday that trouble may be brewing for a U.S. economy that is currently in good shape but showing signs of stress in the consumer sector and risks to the inflation outlook. The Trump administration's policies have also cast a chill over the deal market thanks to rapid-fire global policy and economic changes unleashed in the first six weeks of Trump's term.

"There's been a fair bit of dislocation across the marketplace and geopolitically in the first two months of the year," said Brad Karp, chairman of law firm Paul Weiss. "My assumption is that as the year plays out, things will settle down, and that we'll have a market that is conducive to deal activity."

Paul Weiss is also coming off a strong year, when the firm's revenue increased by 31.6% to hit $2.63 billion, and its average profits per equity partner rose $7.51 million, marking a 14.7% increase, a spokesperson confirmed. Karp said the firm has been busy the first few months of 2025 in its transactional practices and guiding clients through regulatory changes.

At Baker Botts, where revenues increased 11.8% to $820.2 million and profit per partner increased 17.6% to $2.89 million last year, managing partner Danny David said the firm recently hosted a regulatory webinar that drew a record audience.

"I think the notion of being able to anticipate changes in the regulatory environment is one that clients put a tremendous premium on now," he said.

— Along with their clients, salaries and investments, financial disclosure forms submitted by lawyers entering top federal government posts shed light on another source of income for law firm partners: retirement pay.

Christopher Landau, Trump's nominee for deputy U.S. secretary of state, said in a disclosure last week that he is earning more than $31,000 monthly in annually adjusted fixed retirement benefits from one of his prior law firms, Kirkland & Ellis, where he spent more than 25 years before his departure in 2018.

Landau's $372,000 annual retirement compensation from Kirkland is more than the $242,000 salary he disclosed from his current law firm, Ellis George, which he joined after his stint as U.S. ambassador to Mexico ended in 2021.

Landau did not respond to a request for comment. He can be expected to earn up to $225,700 annually if confirmed to the State Department, according to federal pay guidelines.

There are a wide variety of pension and retirement plans used by the U.S. legal industry, said law firm consultant Jeffrey Lowe. Some firms offer a "true pension" while others have moved to some kind of 401K or defined contribution plan, he said.

Jeffrey Kessler, a WilmerHale partner who is up for a key export controls post at the U.S. Commerce Department, said in a disclosure that he would earn about $2,200 a month from his firm starting at age 62. He has been a partner at the firm continually since 2021, having first joined in 2011. Kessler did not immediately respond to a request for comment.

Retirement benefits can be a sticking point in lateral recruitment, said Washington-based legal recruiter Dan Binstock. Law firms are not "just competing on compensation, but compensation and retirement," Binstock said.

Covering retirement obligations can be a big burden for law firms. Stroock & Stroock & Lavan's pension liabilities played a role in the firm's inability to find a merger partner before it ultimately dissolved in October 2023.

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