Litigation: Up, up and a wait

While litigation practices for the top 15 firms can boast a 4 per cent average rise in revenue, there is still no sign of the predicted boom, reports Katy Dowell

Litigation revenue improved across the top 15 UK practices last year, but the long predicted litigation boom has still failed to materialise. Nevertheless, total revenue for the top practices rose by 3.9 per cent, from £1.78bn to £1.85bn, with Freshfields Bruckhaus Deringer leading the way, posting a litigation turnover of £250.8m.

Undoubtedly the recession has prompted a rise in dispute ­resolution activity, but clients are now on the hunt for value, which means they are spreading the work around.

That should not detract from those at the top of the pile, which have invested to build up quality global practices capable of ­working at full capacity to meet demand for global legal solutions.

Big country

Having invested heavily in its US practice, Freshfields is beginning to reap the financial rewards. The firm extended its lead over its nearest rivals by posting an 8.1 per cent rise in turnover at the
2009-10 year-end. Freshfields’ litigation practice now accounts for 22 per cent of the firm’s £1.18bn turnover, compared with 18 per cent at the 2008-09 year-end.

Since January 2008 Freshfields has made seven high-level lateral hires in its US litigation practice. These include partners Marshall Fishman from Kramer Levin Naftalis & Frankel and Timothy ­Coleman from Dewey & LeBoeuf in New York, plus Vinson & Elkins partner Walter Stuart, who joined the Washington DC practice.

States slide

This contrasts sharply with Clifford Chance, which suffered a series of exits from its US group last year. These included former global ­litigation chief Mark Kirsch, who quit in May 2009 to join Gibson Dunn & Crutcher along with partners Joel Cohen and Christopher Joralemon. The firm’s US practice is now run from Washington DC by Juan Morillo.

Clifford Chance is now 28 per cent behind Freshfields in terms of litigation turnover, with £179.5m, down 5.1 per cent from £189m. However, overall partner headcount declined by just one to 74, meaning that revenue per litigation partner (RPLP) has fallen by 3.9 per cent, from £2.52m to £2.42m.

Main contenders

The best performance of the year in terms of growth came from Allen & Overy, another firm that has invested heavily in its US ­practice. The firm posted a 24.2 per cent jump in litigation revenue, from £110m to £136.6m. Nevertheless, with partner headcount up by nine to 50, RPLP rose only marginally, from £2.68m to £2.7m, putting it behind Linklaters and Freshfields.

Linklaters may have a smaller litigation partnership at 40, but those partners produced an RPLP of £3.24m, generating a revenue of £129.8m, down from £130m a year earlier.

The firm is eclipsed by Herbert Smith, home to a weighty ­contentious practice, which contributed 38 per cent of the firm’s £449.9m revenue, in terms of turnover.

Herbert Smith reported a 4.8 per cent increase in litigation ­revenue, from £163m to £170.96m, with 81 partners producing an RPLP figure of £2.31m.

Gain sayers

At the end of the next financial year the magic circle will feel the full effect of the Hogan & Hartson-Lovells merger. At the latest year-end Lovells’ 52 legacy litigation partners posted an RPLP of £2.5m, 8.2 per cent ahead of Herbert Smith’s, giving it a turnover of £130.07m.

That said, the firm’s contentious practices in tax, real estate, IP and employment sit outside the dispute resolution revenue stream. If these are taken into consideration, litigation work accounted for 34 per cent of Lovells’ turnover, or £184.2m.

An interesting pattern is beginning to emerge, with those firms that sit just outside the top 15 increasingly stealing a march on their peers.

Addleshaw Goddard, for instance, revealed its litigation group turnover for the first time this year. The firm posted a disputes turnover of £53.6m, up by 14.8 per cent from £46.7m a year earlier. If the upward trend continues the firm is likely to break into the top 15 in 2010-11.

Similarly, Norton Rose saw a 23.6 per cent jump in its litigation revenue, from £34.8m to £43m, and with 70 per cent of the firm’s work deemed contentious, Reynolds Porter Chamberlain posted a litigation turnover of £42m.

Table: TOP 15 LITIGATION PERFORMANCES, 2009-2010 (Click image for full version)