Dorsey & Whitney saw its profits drop for the fifth straight year in 2012 amid a slight decline in gross revenue, according to The American Lawyer's reporting.
Minneapolis-based Dorsey's profits slid 8 percent last year to $515,000, their lowest mark since 2006. While the firm's gross revenue was down a more modest 3.1 percent, to $313.5 million, the falloff nonetheless erased the slight topline gains Dorsey enjoyed in 2011. At $605,000, the firm's revenue per lawyer was essentially flat.
While offering an optimistic take on the results, Dorsey managing partner Kenneth Cutler acknowledges that the firm is in need of a rebound.
"It was a disappointing year overall, but we were pleased with the fact that we continue to generate, for a middle-market firm like ours, a good RPL," says Cutler, describing RPL as the financial metric that is both least subject to manipulation and the best indicator of a law firm's ability to generate business. "But there is no question that we would like to improve all of our numbers, revenue, RPL, PPP, and that's what our [new management] group is focused on."
That effort is just getting started. Cutler, a 39-year Dorsey veteran, began his tenure in the firm's top leadership post just six weeks ago following former managing partner Marianne Short's departure in November to become the chief legal officer at longtime client UnitedHealth Group. In conjunction with taking over as managing partner, Cutler appointed five new members to Dorsey's eight-person management committee. The group is now working with outside consultants and firm lawyers to address everything from business development and cross-selling initiatives to putting new systems for time entry, billing, and collections in place. Late last year, the firm also hired a new CFO—the first financial chief with prior law firm experience Dorsey has ever had, according to Cutler.
"We had pretty much the same management committee for the last six years, and I'm not saying that [this] is better, but it's new blood and it's the next generation of leaders of the firm, and they bring new thoughts and ideas," says Cutler, adding that the revamped group's effort will give Dorsey "a significant shot in the arm in the second of half of 2013 and going on into 2014."
Cutler cites a slump in transactional work as the biggest drag on Dorsey's revenue in 2012. Though the firm did see an uptick in deal work toward the end of the year, the second half was not as strong as expected. On the corporate front, Dorsey advised Park Nicollet Health Services on its merger with HealthPartners in a deal announced in August. By combining, the two companies—which had total operating revenues of approximately $4.8 billion between them in 2011—created Minnesota's second-largest hospital system (behind the Mayo Clinic). Dorsey also handled multiple M&A transactions for longtime clients U.S. Bank and UnitedHealthcare Group last year, Cutler says.
Litigation work, meanwhile, was consistently strong throughout the year. Dorsey obtained a unanimous U.S. Supreme Court decision last January for client National Meat Association in a case involving federal preemption of a California law. The firm also won summary judgment for client Geistlich Pharma in the Southern District of New York in a massive case that pulled in 120 Dorsey lawyers.
The firm's total head count decreased 2.6 percent to 517, a drop that Cutler attributes primarily to associate attrition and smaller incoming associate classes in recent years. The firm's equity partner ranks declined by 1.8 percent, to 218, while its nonequity partner class increased 7.1 percent, to 45. Cutler says the shift is due to the firm's decision a few years ago to require all ascending associates to spend time as income partners.
This report is part of The Am Law Daily's early coverage of 2012 financial results of The Am Law 100/200. Final rankings and full results for The Am Law 100 will be published in The American Lawyer's May 2013 issue and on AmericanLawyer.com. The Am Law Second Hundred will be published in the June issue.
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The Am Law 100, the Early Numbers: At Dorsey, Profits Drop for Fifth Straight Year
The Am Law Daily
February 13, 2013
