law firm giant Jenner & Block is losing top-tier status - Crain's Chicago Business

When Craig Martin quit last year as chair of Jenner & Block and then bolted the law firm less than a month later to set up shop for a competitor, it wasn't Jenner's first in-house row. A power struggle two decades ago triggered the lawyered-up departure of a big-shot attorney.

But Martin's (likewise lawyered-up) exit was unlike any other, measured against the piece it carved out of Jenner's hide. So far, 22 attorneys have fled Jenner to join Martin at Willkie Farr & Gallagher. With them went 10 to 15 percent of Jenner's billings, or at least $45 million, according to former insiders.

Jenner's local attorney headcount has declined by 30 percent since the mid-2000s as the legal industry, like others, divides into a top tier of super-players and the rest.

Jenner risks being left behind. Its profit ratios have flatlined since 2010, as other Chicago law firms have doubled theirs or come close to doing so. These financial metrics impose market discipline on law firms because they're crucial to attracting partners who bring the kind of high-end business that in a virtuous cycle spurs the numbers ever upward.

Counting the Crown family, United Airlines, Northern Trust and Ulta Beauty as clients, Martin corralled choice opportunities for himself and his crew, creating friction inside Jenner that whittled his clout.

Martin, 57, wouldn't comment on what happened at Jenner. In a statement, he said Willkie Farr, a Wall Street law firm, "presented a once-in-a-lifetime opportunity to provide a full panoply of A-plus legal services."

For decades, Jenner has been trying to balance its litigation-heavy portfolio with higher-margin, more-repeatable transaction work but has been frustrated by the fact it sues banks and other would-be corporate clients.

Jenner has a do-gooder reputation of taking on headline-producing and sometimes thankless causes, successfully challenging anti-sodomy laws in Lawrence v. Texas, for example, and jury-selection bias in a death penalty case as far back as 1960. Albert Jenner advised both the Warren Commission and House Republicans during the Nixon impeachment proceedings.

"Our strategy is not to be the biggest or to even be the most profitable," says co-managing partner Randy Mehrberg. But talent flows with the dough. Willkie Farr's profits per equity partner in 2019 were double Jenner's, Kirkland's more than triple.

Mehrberg says Jenner for 2020 will report 10 percent higher profits per equity partner, though not enough to surpass 2016's high-water mark in the wake of a lucrative General Motors investigation. He says Martin's team accounted for less than 10 percent of revenue, which has been recouped elsewhere.

"There's a lot of couples who have been married many, many years, and then go in a different direction," Mehrberg says of the split. In Martin's wake, Jenner is emphasizing teamwork and narrowing pay ranges for lawyers. Mentioning Martin's Washington-based successor, Mehrberg adds, "Tom Perrelli is always about supporting others."

In general, law firms are doing better than feared at the pandemic's onset (Jenner hasn't laid off or furloughed employees, though it has been sued for unpaid rent). Expenses melted away as meetings were canceled and travel curtailed, and with Zoom more business got done—and billed—than expected.

Winston & Strawn mounted only two trials in the last six months (versus the customary dozen), but revenue dipped only slightly, says chairman Tom Fitzgerald. Profits per equity partner rose 5 or 6 percent.

The Financial Times reported Kirkland's revenue could soar as much as $850 million, to $5 billion, for 2020. That increment would be almost double Jenner's overall 2019 revenue of $448 million. Kirkland didn't comment.

Joseph Gromacki, a Kirkland alum who chairs Jenner's corporate practice, says its chief client, defense contractor General Dynamics, last year relied on Jenner more than ever. Assignments included a $4 billion debt offering. After Martin left and the pandemic took hold, "the firm really realigned itself around its values," Gromacki says. "The firm came together."

Exelon is another long-standing client offering repeat business. The firms recently swapped high-level legal personnel after Exelon reached a settlement in a federal probe of the state lobbying practices of its subsidiary, Commonwealth Edison. (Mehrberg is a former Exelon general counsel and says Jenner started an energy practice in 2016 that now has more than 20 lawyers.)

Still, Jenner hired 29 attorneys from other firms but lost 80 in the 12 months ended in early February, according to industry consultant Leopard Solutions. As it concentrates on New York and Washington matters, Jenner has seen its Chicago attorney headcount wither to a bare majority of the firm's total, compared with 84 percent in 2006.

Jenner isn't unique. Excepting Kirkland, Chicago's 10 largest law offices in the mid-2000s are nearly 25 percent smaller today. Better-performing immigrants like Willkie Farr have poached lawyers, and local firms are applying more rigorous productivity requirements even to their once-cozy home offices.

Jenner has continued to land prestigious assignments, representing Apple during congressional antitrust hearings and serving as an independent monitor for the Trump-embroiled Deutsche Bank. It also has snagged government stars, such as a former acting solicitor general and an aide to special counsel Robert Mueller, each of whom returned to Jenner.

The firm expects to gain as a result of increased antitrust scrutiny from a "reanimated" Justice Department under a new administration, says Katya Jestin, Jenner's New York-based co-managing partner.

Closer to home, Jenner has another reliable pipeline in Chicago politics.

Former chair Anton Valukas, who brought in the bacon as the examiner in the Lehman Brothers bankruptcy case—allowing Jenner to apply 130 attorneys and another 70 contract lawyers—says at 77 he isn't working as hard as he used to.

Even so, in addition to advising corporate boards, the former U.S. attorney has been retained by an indicted target of his old office: Ald. Ed Burke.

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