Lawyer Fees in State Hit $16 Billion in ’92 : Economy: Almost $7 billion was earned in L.A. County. The figure adds fuel to debate on whether the attorney explosion is an economic boon or drain.

California lawyers made $16.3 billion in legal fees in 1992, tops in the nation, according to a Census Bureau survey that once again raises questions about the economic impact--for good or ill--of attorneys.

In 1992, according to the survey, more was spent on legal fees in California than on auto repairs, funerals, tanning salons, one-hour photo finishing, videotape rentals, detectives and armored car guards, bug exterminators, laundry, haircuts, day care, shoe repairs and septic tank cleaning--combined.

Only hospitals, doctors, the movie-making industry and the computer industry took in more money, the bureau’s Census of Service Industries indicated.

And, it revealed, L.A. law remains a hot property. Attorneys in the city of Los Angeles accounted for $5.3 billion, one-third of the state total. The total for Los Angeles County was just under $7 billion.

“If it is true, as is widely believed, that lawyers are killing the economy, then California is setting the standard for patient-assisted suicide,” said Kenneth S. Klein, formerly a San Diego attorney and now a professor at the New England School of Law.

Countered Margaret Morrow, a Los Angeles lawyer and last year’s president of the State Bar of California: “In absolute terms, ($16.3 billion) is a lot of money . . . but I’ll put up the social contribution of the legal profession any day against that of the motion picture industry.”

The $16.3-billion figure adds new fuel to an ongoing debate--whether the lawyer explosion in the United States, led by the boom in the California lawyer population, is an economic boon or drain. The government conducts the economic census every five years and the survey forms the major source of facts and figures about U.S. commerce.

It also reveals the stunning disparity between dollars spent by those who can afford lawyers and those who cannot. Revenues in 1992 for Legal Aid societies and similar services for the poor in California were $160 million--or 1% of $16.3 billion.

Though lawyers often speak of serving the poor, that 1% figure “tells you all you need to know between posturing and commitment,” said State Bar of California watchdog Robert Fellmeth, a University of San Diego law professor.

The $16.3 billion that California lawyers took in is more than the gross domestic product of any of three dozen Third World nations, according to the Economist, a respected British magazine.

It is more than 10 times the $1.4 billion that U.S. Sen. Barbara Boxer (D-Calif.) estimates is the annual net cost to California of illegal immigration. It is eight times the estimate of $2 billion lost in the Orange County bond disaster.

It is enough to buy every one of the 10.1 million people in the Los Angeles Basin a 46-inch big-screen TV--with enough left over for three months of cable.

None of the other 49 states is even close. New York at $14.3 billion is nearest.

What’s more, $16.3 billion marks a significant increase from the $10.4 billion that California lawyers made in 1987, up 57%.

The bureau produces a report for each of the states, tracking the revenues of what it calls law “establishments,” meaning those with at least a single paid employee.

Lumped together are law firms of all sizes, solo practitioners with at least one employee and what the bureau labels “associations of lawyers for expense sharing,” meaning attorneys who share office space but not cases, a fairly routine arrangement.

In 1992, the bureau reported, there were 20,756 such “establishments” in California. Five years earlier, there were 19,307.

The bureau knows those numbers because its database is linked to the ubiquitous federal employee identification number, which every employer must use in filing tax forms. Every five years--as required by law, in years ending in 2 and 7--the bureau mails a questionnaire to employers and adds up the returns to produce the census.

“This is a very accurate survey,” said Jack Drago, the bureau’s supervisory statistician.

There were 106,932 lawyers in California in 1987, according to the State Bar. By the end of 1992, there were 134,983--an increase of 26%.

The total entering 1995 was higher still: 143,109.

“It just goes to show you that the more lawyers there are, the more money lawyers make,” Fellmeth said. “It’s just the opposite of every other service industry, where as you increase supply, profit goes down. With lawyers, you increase supply and revenues actually go up, too.”

However, experts cautioned, what should be obvious is that not all California lawyers shared equally in 1992 in the $16.3-billion pie.

If that $16.3 billion--to be precise, $16,311,492,000--is divided by the number of lawyers in the state that year, per capita income would equal $120,841.

But the RAND Corp., in a survey of the state’s lawyers, found that almost half had an annual income under $75,000 in 1993. Only 27% earned $125,000 or more.

Of the $16.3 billion, $6.97 billion was generated in Los Angeles County and $2.36 billion in San Francisco, the census reported. Added together, Los Angeles and San Francisco accounted for $6 of every $10 spent on lawyers in the state.

In recent years, said John Heinz, a Northwestern University law professor and a pioneer in the study of legal economics, demand “has not gone up for the services of lawyers who are working in small firms . . . or dealing with the kinds of regulation that affect the ordinary individual.”

“Instead, the demand for legal services has gone up at the largest law firms,” he said, “and that demand is coming from corporations who want those legal services, primarily to deal with transactions,” meaning the securities regulations, tax implications and endless paperwork of big deals.

As an example, the biggest law firm in California, Los Angeles-based Gibson, Dunn & Crutcher, recorded gross revenues in 1987 of $156 million, according to the American Lawyer, a trade magazine. In 1992, the firm’s gross revenues were $277 million, the magazine reported.

“Despite the unfortunate reputation lawyers have gotten, which I think is attributable to a very small number of people, most lawyers and most major firms try to be responsible citizens, to provide value,” said Ronald S. Beard, the managing partner of Gibson, Dunn & Crutcher.

“Look, if we don’t provide value, we don’t get hired,” Beard added. “It’s very unfortunate the way we appear in the public eye.”

If only, concurred Rex Perschbacher, a professor of legal ethics at UC Davis, lawyers were seen for what they truly are, “the lubricant of the economic system.”

That is not likely, said Klein, the New England School of Law professor, noting that $16.3 billion is so very much lubrication--and therein lies the profession’s persistent public relations dilemma.

“Much like a shark, some lawyers thrive on motion, not caring if the markets are going up or down,” Klein said.