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Litigators stay busy in any market
The 50-50 mix
Gibson Dunn splits its work roughly 50-50 between litigation and transactions, which includes real estate. Corporate deals carry premium billing, and almost all of the other top ten firms, excluding Quinn Emanuel, lean 70-30 or 65-35 toward that side.
Why it stays steady
The mix makes the firm's results steady year over year, because litigation is acyclical. In a bear market there is a lot of litigation and bankruptcy, and Gibson Dunn has a market-leading bankruptcy practice on the creditor side. It stays busy in good times and bad, hedged against market risk, and a firm that covers deals, regulation, and litigation can serve a client across the whole field.
The risk debate
Firms that scale down litigation take on risk, as this view has it. Paul Weiss, a litigation powerhouse for 50 years or more, is moving toward a corporate-dominant practice. Profit numbers over the past five years point the other way: firms without a dominant litigation group are doing very well.
Why does litigation rise when markets fall?
Falling prices produce losses, and losses send investors, lenders, and companies looking for someone to blame or recover from. Cornerstone Research, which tracks securities class actions, has reported filing surges after the dot-com crash and again around the 2008 financial crisis. Companies in trouble also breach contracts and default, which creates disputes with partners and creditors. Annual U.S. bankruptcy filings peaked in 2010 at more than 1.5 million, according to the U.S. Courts.
Why do deal lawyers earn premium rates?
Mergers and acquisitions put billions of dollars at stake and run on tight timelines, so clients pay for speed and certainty. The work is tied to a single closing, and an error can delay or sink a transaction. Deal volume rises and falls with stock prices and credit conditions. Global M&A volume fell sharply in 2009 after the financial crisis, according to Dealogic and other deal trackers.
How do creditor-side bankruptcy lawyers get paid?
In a U.S. Chapter 11 case, the Bankruptcy Code lets a committee of unsecured creditors hire its own lawyers and advisers. Their fees are paid out of the bankrupt company's estate rather than by the creditors directly. Lenders and bondholders often hire their own counsel as well. Bankruptcy judges review the fee requests and can reduce them.
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