According to a report by Christine Simmons at Law.com, the Biglaw firm of Hughes Hubbard & Reed has been on a “downward trajectory” over the last five years or so, and the numbers back that up. Over that time period, gross revenue is down 27 percent (from $394 million in 2014 to $288.1 million in 2019), attorney head count is also down by more than 80 lawyers, profits per equity partner is down to $1.41 million 2019 (from a high water mark of $2.145 million in 2014), and the firm’s profit margin is now ~18 percent, falling from a high of 42 percent. And as a result, its Am Law 200 ranking plummeted from 72 to 116.
And all that was before COVID-19 hit.
With the additional hardships caused by the pandemic, the firm dealt with more bad news. Hughes Hubbard took a multimillion-dollar Paycheck Protection Program loan, and then laid off more than 30 people in July (insiders say they were “blindsided” by the cuts). Later that month, 11 international trade lawyers left the firm, taking with them a reported book of business of more than $12 million.
Law firm management consultant Kent Zimmermann told Law.com:
“But if a firm’s head count and revenue and profitability are dropping precipitously, particularly if that was all happening in a good economy,” Zimmermann said, “it could cause people to wonder what would happen in an uncertain economy.”
That was about the industry generally, not the specifics of what’s going on at Hughes Hubbard, but the concern remains.
So what is going on? Simmons reports that Hughes Hubbard has long survived on big, like really big, cases:
More than a decade ago, Hughes Hubbard was engaged in multifaceted products liability litigation defending the drug giant Merck over its controversial painkiller, Vioxx, before Merck in 2007 agreed to pay $4.85 billion in a settlement.
Hughes Hubbard also watched its tobacco-related products liability work decline after former client Lorillard was acquired in 2014 by Reynolds American. Reynolds moved much of the Lorillard litigation work to Reynolds’ regular tobacco counsel at Jones Day, The American Lawyer reported in 2015, and Hughes Hubbard cut some of its Kansas City staff as a result.
In the last few years, senior counsel James Giddens’ work as trustee overseeing the liquidation of Lehman Brothers Holdings’ broker-dealer unit has wound down, marking an end to a decade-long odyssey that has generated more than $400 million for the firm. During the case’s heyday, some partners were making several million dollars a year, sources said. Giddens was also trustee in the liquidation of securities broker-dealer MF Global.
More recently, Hughes Hubbard’s work for Airbus has significantly slowed down, sources said.
And as an insider says, “The issue happens when you don’t get another large case. There’s a lot of mouths to feed.”
The firm’s chair is aware of the recent ending of these big matters, but is still optimistic about the firm’s bottom line:
Acknowledging some major matters have ended, chairman Ted Mayer said in an interview the firm “went through a rebuilding” where partners began boosting up their own practices. Now the firm is seeing success, he said, as the number of partners with at least $3 million in business is the highest the firm has had.
Firm leaders also say Hughes Hubbard is seeing an uptick in international legal business, and they hint at expansion to come outside the firm’s usual boundaries.
“We feel very good about meeting our budget and ending the year strong,” Mayer said.
Mayer said he expects revenue to be flat in 2020, but that the firm continues to work on “major new litigation.” He said the process of rebuilding “takes time, and we’re seeing tremendous success.”
And the firm’s culture, along with its commitment to pro bono matters and diversity, continue to make it a robust firm:
“While some of the published metrics don’t appear as robust or positive as people would like,” said New York recruiter Alisa Levin, “the firm still has a strong culture, and many respected practices.” Not everybody has to make $5 million a year, she added.
Hopefully the turnaround Mayer envisions means attorney layoffs will be a thing of the past.
Kathryn 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).