At noon on Wednesdays, lawyers filter into a Houston conference room for one of the more dramatic regular meetings inside an American law firm.
One at a time, Susman Godfrey partners pitch colleagues on the next big lawsuit the firm should invest in. The colleagues poke holes. They probe the legal theory, question damages, ponder the jurisdiction. Then up to 150 lawyers, including those on Zoom, vote on whether to take the case.
“I wouldn’t call it a murder board,” Vineet Bhatia, one of the firm’s two managing partners, said of the weekly meeting in an interview. “It’s not a cake walk either.”
The unique vetting process plays a central role in the elite boutique litigation firm’s skyrocketing revenue. The firm has a knack for taking on cases that generate intense publicity and eye-popping results. The up-or-down Wednesday votes cost some of America’s best-known businesses billions in collective damages.
The firm’s lawyers were behind the $787 million defamation settlement with Fox News and they’re the ones suing OpenAI on behalf of the New York Times. And it’s this firm that walked the National Football League to the brink, staring down a $4.7 billion verdict before it was recently overturned by a judge.
The weekly Wednesday conference—which involves lunch—is a practice that dates back roughly 45 years to the firm’s founding. Before Covid forced the meetings virtual, the voting was done in the room by hand. Now, it’s over a polling app in Zoom.
There is a lot on the line. By investing its own time and money, the firm takes the risk that it can pick more winners than losers and, in the process, make more money than it otherwise would by billing clients by the hour.
Successfully picking winners has made the firm’s lawyers some of the highest paid in the country. Profits of nearly $7 million per partner in fiscal 2023 ranked Susman Godfrey fourth among the 100 largest law operations by revenue, according to American Lawyer data. The boutique topped the latest bonus scale set by Cravath, Swaine & Moore and doled out bonuses ranging from $140,000 to $360,000 to its associates.
The Houston-founded firm has had back-to-back record-setting years, vaulting its revenue into territory typically occupied by the major defense firms it goes up against. Last year, Susman brought in nearly $750 million in revenue, 69th most, according to the American Lawyer. It ranked 110th the previous year.
Last year’s explosive growth was the result of major contingency wins, including the nine-figure Fox settlement with Dominion Voting Systems Inc. Bhatia said he expects the firm this year will outperform 2022, when revenue was $370 million. The firm’s 2024 performance will depend on whether major cases are finalized in the fourth quarter, he said.
“The dollar amounts in cases are getting bigger,” Bhatia said. “And if you’re taking a model that’s based on success fees and contingent fees, the fees are going to be larger if the cases are bigger.”
Case of the Mondays
Lawyers come into the Wednesday meetings prepped on the decisions they’ll be making. That’s because partners on Mondays send out memos describing the cases they want to raise for a vote.
Those memos generate written questions from the firm’s lawyers, often forcing partners to rethink the case before putting it up for the vote, said managing partner Kalpana Srinivasan.
“There is a lot that doesn’t really even make it into the process either because it’s not the kind of matter we take on or we think the recovery’s too thin for our operation—or it’s just not the right type of case for us,” Srinivasan said.
By Wednesday, lawyers are homing in on the crux of the case. They ponder the motivation of the litigants, Bhatia said. Will the client be reasonable about settlement? Where will the appeals be heard? Does the lawsuit threaten the defendant’s fundamental business model? That might motivate a defendant to “fight you to the death,” he said.
“If they settle with you, can they continue to operate with their fundamental business model that generates all their revenue?” Bhatia said. “That’s how I’ve come to think of these cases.”
The Wednesday meetings are led by rotating panels that include five partners and an associate. Susman partner Stephen Shackelford, a lead lawyer for Dominion case, said a pitch of his was once axed after an associate asked a series of tough questions that swayed the opinion in the room. That associate later became a partner.
Even with the Dominion matter, which turned out to be a big winner, “the firm asked a lot of questions on a lot of aspects of the case,” Shackelford said.
The questioning can be jarring for those presenting cases, according to one partner who requested anonymity to discuss the private sessions. “You meet a lot of big personalities, and sometimes those come through,” the partner said.
However, there are no hard feelings over having cases rejected. “I’ve never walked out of there angry,” the partner said.
People Skills
The meetings require a culture that accepts lawyers’ views will be tested under pressure. That’s developed in part by including its youngest lawyers in the vetting process.
Associates aren’t mere wallflowers in the Wednesday meetings.
Susman hires associates from the country’s top law schools and requires they’ve served at least one federal clerkship before starting at the firm. The firm rarely hires lateral partners and doesn’t have any plans to do so despite its recent explosive growth.
The firm has no non-equity partner position, and it’s promoted roughly 20 associates to partner over the last five years, Srinivasan said. Like many trial firms, it has far fewer associates per partner than major defense firms. The firm had 90 partners last year, according to AmLaw data, which represented nearly 45% of its lawyers.
“If you’re a lawyer who starts here and becomes a partner here, you’ve been looking at how these cases get vetted for years, week after week,” Srinivasan said. “That means the lawyers coming up through our system are better equipped when they meet with the client or they’re looking at a case to say, ‘This is the kind of thing we are willing to gamble on.’”
Jump to Conclusions
While the Wednesday meeting is a way for the firm to allocate its resources as a group, partners determine what their case load looks like. That’s impacted by their own risk tolerance.
The firm’s compensation model is based on the revenue a partner generates, and the work that partner does for cases they didn’t generate, Bhatia said. That number can have big swings since contingent fee cases can take years to pay off. Some partners prefer to work on more contingency fee cases, while others opt for the more risk-averse billable hour matters, he said.
“It’s a risk-based culture,” Bhatia said. “As a partner who’s investing in a major case, you might have leaner years betting on the result that comes later.”
Billable hour matters at the firm in recent years have generated between about 10% and 15% of firm revenue, Bhatia and Srinivasan said. Even when the firm works on defense-side matters, it tries to craft alternative fees that may give it some upside in how much it can reduce the estimated damages in a case or an award for ending the case quickly, the firm leaders said.
“We want to figure out what the client’s trying to achieve, and we want to create some incentive for us to be aligned with what they’re trying to do,” Srinivasan said.
A Million Dollars to Do Nothing
An agreement between litigation funder Longford Capital and Susman became public in a lawsuit last year, showing how the funder had agreed to pay the firm monthly fees up to $6,915,000 to de-risk some of Susman’s intellectual property disputes.
That agreement is an outlier for the firm, Bhatia said. It typically prefers that clients make agreements with funders, often to cover the hard expenses of the case. The firm is comfortable taking on the risk in return for a larger award in most cases, Bhatia said.
At many traditional defense firms, generating a huge contingency fee win can carry risk: partners can see it as a chance to leave the firm to do something new or fund an early retirement.
The firm has seen some partners retire around the age of 60, Bhatia said, but big wins at Susman haven’t typically come with the threat of partner exits. He attributed part of it to the culture developed by founder Steve Susman, who died in 2020 after complications from a bicycle accident.
“He would always be looking to the next case,” Bhatia said. “And people see that and they saw him work.”
Srinivasan had a simpler explanation for why partners don’t leave for something new after winning the case of a lifetime.
“They’re waiting for the next case of their life,” Srinivasan said. “I don’t think it’s just about the money. I do think there’s a kind of a drive here.”
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