Law Practice Management

Law Firms Will Likely ‘Take a Hard Look’ at Nonequity Partners

At least two more law firms are considering following the lead of DLA Piper and requiring nonequity partners to buy into equity status, a law professor says.

William Henderson of Indiana University law school told the National Law Journal that the proposed move is aimed at improving law firm balance sheets. “It’s getting rid of a fixed cost,” he said. “It’s moving to more of an eat-what-you-kill [model].”

Last month, DLA Piper invited 275 nonequity partners to make capital contributions and join the equity ranks. The capital requirement is a percentage of budgeted net income, the NLJ story says, and could reach $150,000 per lawyer. The idea is to supply cash to the firm and motivate the promoted partners to bring in work.

The story says nonequity partners could be in the most precarious position at law firms. The average increase in the number of nonequity partners at the nation’s top law firms has been outpacing that of equity partners. In the past, nonequity lawyers earned about $300,000 a year to handle legal work, but this year there is less work to go around.

Law firm consultant Brad Hildebrandt told the publication that “some firms are going to have to take a hard look” at their nonequity business model. Some firms may look at downsizing if they want to cut nonequity numbers, he said.

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