Biglaw

Struggling Biglaw Firm At Crossroads. Again.

Bye-bye transactional work.

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Things are changing in a big way over at Irell & Manella. According to an in-depth report at Law.com looking at the future of the firm, Irell is pivoting to focus on its intellectual property litigation practice, with most of the rainmaking falling on partner Morgan Chu and eschewing their transactional practice.

It seems the firm’s back was against the proverbial wall. Since 2014, the firm has lost 48 percent of its attorneys, down to just 82 lawyers from 159. That change has coincided with plummeting gross revenue from $247.5 million in 2014 to just $151.6 million last year. So yeah, some sort of change is needed.

“The writing was on the wall,” as one former Irell partner put it, when Jonathan Kagan, a member of Irell’s executive committee and chair of its hiring committee, wrote in an internal memo in early February that the firm would now focus solely on high-end IP and commercial litigation, abandoning most of its transactional practices.

It wasn’t an entirely deliberate pivot, as interviews with former partners, legal consultants and Kagan himself indicate. These sources describe a firm that has been struggling for years to define itself and trying to rebuild after a devastating spinoff that has led some partners to explore potential merger opportunities.

The struggle to define what is next for the firm is real. Kagan notes:

“For years we’ve been trying to evaluate what the options are for us,” he says. “There is a difference between exploring options and making actual decisions.”

He adds, “We’ve been gradually moving in this direction, then people figured out what we were doing.”

This isn’t the first time in fairly recent memory that the firm has had to switch up its strategic vision. In 2015, the firm lost ~1/6th of its attorneys over a two-day period when the litigation boutique of Hueston Hennigan was born.

The spinoff put Irell at a crossroads of sorts, with three paths emerging: It could have grown its transactional and commodity litigation practices, merged with another firm or retrenched. At the time, [former Irell executive committee member David Siegel] hinted to The American Lawyer that there was disagreement among the firm’s partners about the right approach: “Some of us would prefer to focus now on growing but doing it in a careful way,” he said. “Most of us—but not all of us—have that mindset.”

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Since then, the firm’s strategy toward lateral partners is described by Law.com as “piecemeal” and that’s resulted in a partnership revolving door, with whatever attempts the firm made to build its transactional practice being thwarted. There’s been downward pressure on the firm’s revenue (though their profitability has remained stable at around 65 percent) and so, a change in direction and focus is needed.

Firm leaders remain optimistic about the new and improved focus, particularly in light of COVID-19:

The recent changes may leave the firm in a better position to weather the economic storm caused by the COVID-19 pandemic, sources say. As of early May, Irell had avoided cutting pay or staff like many larger, higher-grossing law firms have done. The pandemic has affected some of Irell’s cases—Kagan says one of his trials was postponed—but every attorney at the firm is busy, which might not have been the case had Irell kept its transactional practice, Kagan says.

“In light of the coronavirus and the dislocation of the economy, Irell might have the last laugh on this whole thing,” one former partner says.

Best of luck to the firm as they try to weather the latest changes.

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headshotKathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

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