Paul Hastings Hiring Surge Pays Dividends as Lawyer Demand Grows

Paul Hastings saw demand spike in the first half of the year in what the law firm’s leader says is proof that his aggressive hiring push is paying off.

Total hours billed rose 12% to more than 1 million in the first half of the firm’s fiscal year, according to data provided by Paul Hastings. That’s four times the uptick seen on average across the country’s 50 largest firms during the first six months of the calendar year, a slightly different period.

Paul Hastings Chair Frank Lopez is steering one of the most aggressive growth strategies in recent years, plucking partners from major rivals to build up a bevy of practice groups. A hands-on leader who’s personally involved in virtually every recruiting effort, he’s guided by a straightforward understanding of the high-end legal market: It’s not a growth industry. To leap your competitors, you have to hire their partners.

“We’re trying to create an exponential impact where we’re really driving demand growth every year,” Lopez said in an interview. “And in a flat or contracting market, the only way to grow demand is to take market share from your competitors at the top.”

The firm hired 44 US-based partners this year through July, the second-most among the country’s 50 largest firms by revenue, according to Leopard Solutions, which tracks law firm moves. At just over 1,000 lawyers, it’s adding partners at a rate more like a firm twice or triple its headcount.

Even as more and more firms embrace aggressive lateral hiring, a surge in partner additions carries risk. The highly paid recruits might not deliver the anticipated business results or a firm’s culture can become unglued, with legacy partners feeling overlooked.

“They have gotten everybody’s attention,” said Mark Jungers, a recruiter who has worked with the firm. “They are doing a better job of effectively adding lateral partners to their platform than almost any other firm. They are aggressive, efficient, and the process is driven by Frank.”

The firm projects its year-end billable hours will grow by 10% from a year ago to 2.1 million. Its revenue growth will likely eclipse that rate. Hourly billing rates at the 50 largest firms surged to record levels during the first half, up 10% from the year-ago period, according to Wells Fargo’s Legal Specialty Group.

The first half of the year was one of the strongest recent periods of demand growth across Big Law, but the top 50 firms still only registered an uptick of about 3% on average, according to Citibank’s Law Firm Group. Longer-term, the legal industry has grown demand by about 1% or less per year since the financial crisis.

With firms enjoying a successful year, lateral hiring is expected to become even more competitive, said Gretta Rusanow, head of advisory services for Citi’s law firm group.

“When you’re in an industry where demand growth is somewhere hovering in the mid-one-percent rate on average over a longer-term period, a very rational growth strategy is to acquire more growth through lateral acquisition from other firms,” Rusanow said.

Fast Rise, Fast Impact

Lopez took the reins of Paul Hastings in late 2022, a swift rise to the top for a partner who joined the firm in 2019 from Proskauer Rose, where he’d been a longtime capital markets and leverage finance partner. Sherrese Smith, who works closely with Lopez, was named the firm’s managing partner at the same time.

The firm’s hiring surge began even before Lopez and Smith’s official ascendancy. Paul Hastings made a splash in March 2022 by poaching a 40-plus lawyer group of restructuring attorneys from Stroock & Stroock & Lavan, a firm that eventually shuttered.

Paul Hastings in June 2022 lured a four-partner group of financial services partners from Buckley, a midsized Washington firm. Buckley merged later merged with Orrick, Herrington & Sutcliffe.

The group hiring has ramped up this year. The firm added 11 private credit and restructuring partners from King & Spalding, an eight-partner finance team from Vinson & Elkins, and a pair of partners from Sidley Austin that included the firm’s former co-leader of private equity.

Over the past three years, Paul Hastings has hired partners from 14 of the 25 most profitable firms. The haul includes three partners or more from Kirkland & Ellis, Gibson Dunn, Latham & Watkins, King & Spalding, Weil Gotshal, and Cahill Gordon & Reindel.

The firm added 44 partners through July, but it also saw 25 partners exit, according to Leopard Solutions data. Virtually every Top 50 firm saw departures in that time. Paul Hastings’ “net” addition of 19 partners was tied for the most with DLA Piper. The next closest firm, Sheppard Mullin, added 10 more partners than it lost.

Diversified Strategy

Lopez talks about the firm’s 17 practice groups as a “portfolio” of businesses, and he wants diversified success.

He views the practices as existing on a “lifecycle” of maturity, ranging from one to 10. He believes 14 of the practices are somewhere between a two and a five on that scale, which he sees as an opportunity for growth.

The strategy is reflected in a month’s worth of the firm’s lateral hiring. In August, Paul Hastings announced it had hired partners in practices including: environmental, tax, structured credit, finance, M&A and shareholder activism, banking and private credit, transactional tax, and executive compensation.

The firm’s largest practice when measured by its share of the value of time worked—a rough proxy for revenue—accounts for only 11% of the firm’s total, according to a presentation Lopez showed partners this year.

That diversification helped the firm avoid the financial dip most firms suffered in 2022 when transactional practices plunged from their busiest levels on record, Lopez said. And that has helped the firm gain financial momentum.

Frank Lopez

By year end, Paul Hastings projects the value of a single partnership share to have grown 75% over four years. Profits per equity partner at Paul Hastings grew more than 11% on average since 2020, outpacing the roughly 8% growth accomplished by an average of the 15 most profitable corporate firms, according to data from The American Lawyer.

“We want every one of our practices to be leading practices,” Lopez said. “We think ultimately that will translate back into the financial success we’re looking for.”

Still, seeking market leadership across the board is a departure from many of the largest firms. They often focus on establishing brand names in a small group of practices, helping them to attract the best talent and clients in those areas.

“Law firms commonly see benefits to dominating given areas they choose to focus on,” said Kent Zimmermann, a partner at law firm consultancy Zeughauser Group. “And they also typically recognize that it won’t be credible with talent or clients to claim dominance in too many areas. That said, nobody has a lock on the best law firm strategy. And it will be interesting to see how this plays out.”

Increased Competition

Paul Hastings has focused much of its hiring on New York and London. The firm expects its New York headcount to be up nearly 50% since 2022 to more than 400 lawyers by year-end. London has seen similar growth, with the firm anticipating headcount north of 200 by 2025.

Those are two of the most expensive markets for lateral partners, and they’re only expected to get pricier. Highly profitable New York firms have been adjusting their compensation bands or adding non-equity partner tiers to become more aggressive in hiring from rivals.

Paul Hastings ranked 13th in overall profits per equity partner last year, at about $5.4 million, according to AmLaw.

Lopez declined to provide details on the firm’s compensation packages for lateral hires. He acknowledged the market is “incredibly competitive.”

“You have to have the financial strength to pay people what they’re worth in the market,” he said. “And we’re grateful to be well-positioned in that regard.”

Still, he said successfully attracting new partners isn’t about paying them. Most are joining because they want to help the firm build its young practices into the next market leader, he said.

Asked whether he runs the risk of having legacy partners feel left behind while adding all these new partners, and how he gets those partners on board with the hiring plans, Lopez said the firm’s partners shared his ambition.

“I don’t think I’m getting people on board,” Lopez said. “I’m lucky enough to be at a firm that has a DNA that is incredibly ambitious. And when we talk about our culture we talk about collective ambition. That means ambition is not a bad word as long as it’s done in a very collaborative way.”