2019 was a great year for law firms in Chicago, with even the largest firms in the city experiencing large growth. There are 14 Am Law 200 firms that either reside in Chicago or have a long connection with it.

Of these 14, six of them posted growth greater than the average 5%, namely Kirkland & Ellis, Sidley Austin, Mayer Brown, McDermott Will & Emery, Seyfarth Shaw and Katten Muchin Rosenman. These law firms also happen to be in the Top 70 of Am Law 200 too.

In an interview with Law.com, Kent Zimmermann said that "On most of the key metrics, Chicago, on a one-, three- and five-year look, is performing roughly in line with the Am Law 100, if not better than the Am Law 100."

Baker McKenzie, Jenner & Block and Winston & Strawn, the remaining Chicago law firms in the Am Law 100, also saw growth, but only at 0.7%, 1.5% and 2.1%, respectively. 

In the case of Baker McKenzie's, their poor growth can be contributed to DLA Piper replacing it for third spot in Am Law 100. For Winston & Straw, their growth ensured they joined the $1 billion club, while Jenner & Block's numbers halted the reduced revenue they had experienced in the previous four years.

The average 2019 revenue growth for all nine Am Law 100 firms in Chicago averaged to 5.65%.

On the other hand, a handful of law firms in Chicago in the Second Hundred shrunk. The largest drop was felt by Hinshaw & Culbertson, with revenue falling by 7.2%. This has been a recurring theme for the firm, having been suffering from shortages ever since peaking in 2015.

Schiff Hardin experienced the next largest fall in revenue at 3.3%, meaning that their slide continued for the fourth year in a row. Nevertheless, managing partner Marci Eisenstein said the firm was feeling good about the previous year, pointing out their growth per lawyer and profit per equity partner.

2019 also saw Vedder Price slide in revenue by 0.8%.

The average 2019 revenue decline for all five Second Hundred firms in Chicago averaged to 1.16%.

Investments

High-performing firms have attributed their growth to investments in private equity, which, according to Zimmermann, is very important to the overall economy of the Windy City. He said that the success and branching out of firms like Kirkland & Ellis and Sidley Austin shows how strong the market was.

"Kirkland is known for its strengths in many areas, but many would observe that private equity has been essential to its ascent," Zimmermann says. "You've seen many other firms in Chicago and around the country learn from that."

Chicago is a very attractive hub for many law firms, albeit not as popular as destinations like New York and Northern California. The rates in Chicago are typically lower compared to these locations, meaning that firms can be put off and opt for places like New York and even overseas like in London.

Of course, that's not always the case. Zimmermann noted that prominent firm Evershed Sutherland, which has connections in London and Atlanta, Georgia, opened offices in Chicago in 2019. Further, Willkie Farr & Gallagher which is based in New York has made plans to set up shop in Chicago, as has Hilliard Martinez Gonzales.

COVID-19 Impact

Several Am Law 200 firms in Chicago, including those in the top 70, reported that they had to make a series of cuts across multiple departments in order to withstand the impact of the coronavirus pandemic. The pain has been felt across the entire business sector and Kay Hoppe, legal consultant base din Chicago, predicts that firms would be satisfied to see revenue numbers remain similar to those reported in 2019.

"I don't think there's any firm in the city that wouldn't be happy going back to last year's numbers," Hoppe says. "That would be a huge victory."

According to Mckinsey, law firms traditionally are able to cope with economic downturns compared to the overall economy.

They said, "Of the past three downturns, only the global financial crisis of 2008-09 resulted in a decline in aggregate Am Law 100 revenue, in part because of countercyclical practice areas and prices continuing to advance... But the current downturn may turn out to be unprecedented in the postwar era, so law firms must prepare for a wide range of scenarios."

That said, there has been an interesting development in recent times. Jenner & Block, one of the largest firms in the city, is being sued by landlords having skipped paying rent on its riverfront office throughout COVID-19.

It's claimed that the firm failed to pay rent for the period between April 1 and May 1, with the lease having defaulted. The lawsuit is claiming for over $3.8 million.

It's one of the first major instances between landlords and their tenants in Chicago ever since companies and firms have had to make staffing decisions, be it to send them home or put them on furlough.

Jenner & Block has around 330 lawyers in the Chicago office. The lease covers 416,000 square feet and has been a tenant of this particular office for over 10 years. While they concede they did indeed hold back payment on rent, they are allowed to do so as per the terms and conditions of the lease signed back in 2006.

Randy Mehrberg, the co-managing partner at the Chicago law firm, said the following in a statement: 

"Our Chicago office lease includes a negotiated provision for rent abatement in the event of a situation, like the global pandemic, that renders the firm unable to use and occupy the space for its intended purpose. The firm has invoked that provision.

"We have credited the landlord for the limited space we have been able to use for its intended purpose. Jenner & Block has a very strong financial position; this dispute is exclusively about the enforcement of that provision in the lease."

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