Michael Allen
Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. Michael Allen is Managing Principal at Lateral Link, focusing exclusively on partner placements with Am Law 200 clients and placements for in-house attorneys.
The lateral partner market in California raced off to its second best start since the recession ended, only to fall off a bit with the announcement of the new Biglaw raises. From January to the end of June, 164 partners lateraled in California (27.3 per month). Since then, just 57 have moved (19 per month).
So why are partners hesitant to move? Since a majority of partners receive a nice portion of their total cash compensation in the form of year-end bonuses, I am not surprised by a year-end reduction in the volume of lateral moves. Historically, partner movement drops off significantly in the fourth quarter, while this year, movement has begun dropping off earlier. Anecdotally, I’ve talked to a number of partners who are waiting to see how their firm passes along the costs incurred with associate salary bumps. Some partners are worried that their bottom line will be the victim of the latest round of raises. Others are simply waiting to see how their firm’s profit sharing shakes out before committing to a move.
The movement we are seeing is somewhat significant outside of this phenomenon. Together, Litigation, Corporate, and IP make up 71% of all lateral partner moves in California. Litigation led the way with 30%, Corporate trailed close behind with 25%, and IP was further back with 16%. The next closest practice was Real Estate with just a 4% share of the total lateral movement.
Los Angeles had by far the most amount of movement. Ninety-five partners have lateraled in the last year to date. However, the Bay Area as a whole put up a strong showing with 110 total moves between San Francisco (73) and Palo Alto (47).
The most active player in the lateral partner market has been Lewis Brisbois, who snatched up 12 California partners in the last year to date. However, 24 partners also left the firm for various reasons. K&L Gates also had a strong showing. The firm picked up 10 lateral partners over the last year in California alone, abating some of the concerns about their impending transfer of leadership.
It seems that mandatory retirement is on the minds of those sitting in California. Over the last year, there was a significant drop in the percentage of laterals for partners over the age of 57, despite the large number of practicing attorneys in that range. Historically lateral movement has gradually declined starting in the mid-50s before dropping precipitously in the 60s. However, it seems this trend is accelerating as firms become more conscious of business succession.
Demand in the partner market is hard to quantify. However, as we’ve shown in the past, associate demand typically follows partner demand, making it a fairly accurate barometer of demand in the partner market. Associate demand tends to tail the partner market by about three months. Theoretically, examining the current associate demand will give us insight into the third quarter’s partner demand.
Currently, the most demand in California for associates is concentrated in Litigation and Labor & Employment. Corporate demand for associates in California is lagging comparatively, accounting for just 9% of total demand. Real Estate is surging at 12%.
Although the partner market is largely difficult to prognosticate, we painstakingly monitor the market so that we can advise our clients to the best of our abilities. If you are a partner looking for more information on the current state of the market, or firm management looking to stay ahead of the curve as opposed to react to others after reading the news, feel free to reach out to me or my colleagues at Lateral Link. We are happy to help. After all, it’s our job!
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