The California Associate Market: Growth, Change, And Opportunity

Three interlocking components – growth, change and opportunity – characterize the California legal market. This article will address their effects on the law firm environment and the resulting impact on opportunities for young associates.

GROWTH

Dramatic law firm growth began in the exuberant 80’s, with the expansion in size and number of offices of California-based firms. Moreover, many national firms from New York City, Washington, D.C. and the Midwest opened California branch offices, a larger number in Los Angeles, to share in the state’s economic boom. Law firms hired both new and lateral associates, as well as partners, at previously unheard of levels.

This seemingly unending upward trajectory came to an abrupt halt in the early ’90’s, when the economy went into a very severe slump – longer and deeper in Southern California than elsewhere. There was a concomitant decline in law firm hiring and considerable “downsizing” within the associate ranks and “rightsizing” at the partnership levels. Some mid-sized and smaller firms completely dissolved and unprofitable branch offices closed.

Today, firms have a more cautionary perspective on growth since no one wants to repeat the hiring binge of the 1980’s; however, as a result of the strong economic recovery over the last few years, two-thirds of California’s largest 50 law firms expanded in 1998, and this trend is continuing in 1999.

The sheer size of today’s legal market is staggering. There are over 140,000 active attorneys in California, and the State Bar’s recent demographic study shows that 45% of them practice in the Los Angeles area, and 29% in the Bay Area. Numbers for each of the state’s six largest legal markets are as follows:

1. San Francisco: 12,000 lawyers, 1,100 law firms, 12 local firms of 100 or more;
2. Silicon Valley (Palo Alto, Menlo Park, San Jose): 6,200 lawyers, 520 law firms;
3. Los Angeles (Downtown, Century City, Beverly Hills, Santa Monica, Westwood, Pasadena): 32,000 lawyers, 3,100 law firms, 14 local firms of 100 or more;
4. Orange County (Costa Mesa, Irvine, Newport Beach): 8,000 lawyers, 1,000 law firms:
5. San Diego: 7,600 lawyers, 840 law firms;
6. Sacramento: 4,000 lawyers, 400 law firms. These figures include firms of all sizes.

The fastest increase statewide has been and continues to be in the Silicon Valley. Even during the recession this area was less affected because there was continued expansion in companies involved in the high-tech, biotech, and communications industries, which fueled the intellectual property and corporate practices of the “Valley” firms. However, Southern California, with its “Tech Coast” extending from Los Angeles through Orange Count and into San Diego, is now actively in on the technology boom. In the first six months of 1999, the deal flow is twice what it was in 1997 and 1998 according to many lawyers and venture capitalists. The Los Angeles market reflects this upsurge in transactions, particularly with new media and internet companies. In fact, the Los Angeles legal market is very strong and offers the widest variety of opportunities in all practice areas.

CHANGE

Change is the second component of this very expansive and fluid market. First, the law firm model has evolved from a professional collegial club to a business entity; the emphasis now is definitely on the bottom line. Whereas “gentlemen” lawyers of old did not disclose revenues, profits, or partner compensation, today this information is displayed publicly in the American Lawyer and other publications.

Another major change is the increase of lawyer mobility. Attorneys no longer spend a career in one firm. Key to their movement is the large array of options–which proliferated as branch offices come into a city. When offered higher compensation, more managerial responsibility, or a chance to head up a practice area as opposed to being lower in the pecking order, many partners shifted firms. In just the last few months, several out-of-state firms have come into Los Angeles, each by acquiring several local partners with very profitable practices. Of course, these same enticements are also used by local firms to acquire partners and practice groups.

Many times associates follow the partner(s) to their new firm. However, the majority of associates move on their own for varying reasons. It is increasingly rare that an attorney’s first job is his/her only job. Thus, in considering your first job the question is less “is this the right job?” and more “will this firm give me the training and experience to enhance my marketability for my next position?”.

OPPORTUNITY

The third component, and undoubtedly the most important to you, is the opportunity that California offers to young attorneys. In a nutshell, it is tremendous! The accompanying table is an overview of the search assignments for lateral associates from our clients. (This is not intended as the complete hiring picture for any market.) California offers a veritable cornucopia of firms: huge national and international firms (e.g., Gibson Dunn, Latham & Watkins, Skadden Arps, and Jones Day); indigenous multi-office California firms (e.g., Heller Ehrman, Cooley Godward, and Sheppard Mullin); mid-size one-office firms (e.g., Landels Ripley, Troop Steuber); boutique firms with one specialized practice (e.g., Quinn Emanuel – litigation, Knobbe Martin – intellectual property); and spin-off firms (e.g., Day Casebeer Madrid & Batchelder which spun off from Cooley Godward a year ago and is growing).

Hiring is up across the board. Hot practice areas include: corporate/securities (including venture capital, public and private offerings, mergers and acquisitions, joint ventures, project finance, and securities litigation), intellectual property, real estate, labor (including employment litigation, executive compensation, and employee benefits), antitrust counseling, international, and various types of litigation. Few areas are truly dead, but the demand for environmental compliance, bankruptcy, and banking lawyers is less active. And for those of you with “stars in your eyes”: although Los Angeles is the entertainment capital, it is virtually impossible to break into that industry unless you know someone!

With all its growth, change, and opportunity, today’s California associate market is a seller’s market, especially for top law school graduates.