Skadden still staggers as other firms shift to recovery mode.

What's up with Skadden Arps?

The New York-based powerhouse with 1,700 lawyers worldwide has watched its local headcount fall 38 percent since 2001. The firm currently has 109 lawyers in Los Angeles.

"I do not dispute the fact that we have reduced in size over the last several years, and that was the result for the most part from the dot-com bust," said Rand April, managing partner of Skadden Arps Slate Meagher & Flom LLP's Los Angeles office. "We have reduced over the last several years our headcount, mostly through attrition rather than layoffs."

The declines at Skadden contrast with many out-of-state firms with large Los Angeles offices. Kirkland & Ellis, a Chicago firm focused on corporate deals and litigation that is located in the same downtown office tower as Skadden, has jumped 40 percent in the past four years, to about 100 lawyers. Sidley Austin Brown & Wood LLP, a business firm based in New York and Chicago, has 148 lawyers in Los Angeles, up almost 18 percent from 2001.

April said the firm expects to hire 17 associates soon, bringing the total headcount just shy of last year's 131. But he added that corporate dealmaking in L.A. has not revived entirely since the dot-com bust. "The corporate practice, while it shows signs of picking up, is still not as steady as we'd like to see it," he said.

After resurging in 2004, mergers and acquisitions involving Los Angeles companies fell in the first quarter to their lowest levels in two years, according to Factset Mergerstat LLC. Announced deal value involving local companies fell 39 percent in that quarter, to $1.7 billion from the year-ago period.

"They don't have a significant restructuring practice as they do in other places," said Michael Diamond, a partner at Milbank Tweed Hadley & McCloy LLP, who was one of the founding partners of the Los Angeles office of Skadden when it opened in 1983.

The firm also suffered a major defection last year. John Mendez, head of the firm's West Coast banking and institutional investing practice, left for Latham & Watkins.

Still, Skadden continues to be involved in major deals, namely representing Paul Allen during the initial public offering of DreamWorks Animation SKG Inc. and Steve Wynn in his hotel developments in Las Vegas. And earlier this year, the firm gained rainmaker Thomas Nolan, who now heads its West Coast litigation department.