GT Media Coverage

Chicago Lawyer Survey: Fast growth, one lawyer at a time

By Tom McCann
From Chicago Lawyer, June 2004

The Chicago office of Greenberg Traurig is a cherry picker, and proud of it.

Starting out in 1999 with three lawyers who couldn’t find an office lease, the firm has grown to more than 75, all without a merger or acquisition.

“Our entire firm was built on cherry picking. We don’t like mergers,” said Chicago co-managing partner Keith J. Shapiro. “By hiring laterals, you have so much more control. You can set up your culture. “It’s a slow and painful way to grow,” he said, “but lately we’ve been moving real fast.”

Greenberg Traurig added 26 new lawyers last year, a jump of 53 percent and the highest percentage increase of any firm in the Chicago Lawyer 2004 Survey of the Largest Law Firms in Illinois. The Miami-based firm has more than doubled its size in Illinois since 2002. (Please see chart.)

In an era rife with law firm mega-mergers, many of the fastest-growing local firms are still doing it the old-fashioned way: one lawyer at a time, according to survey results.

The fourth annual largest law firm survey was mailed to 169 firms with 20 or more lawyers as listed in Sullivan’s Law Directory. Some 114 firms responded to the survey in whole or in part, reporting their statistics through Jan. 1, 2004.

The year saw two major merger deals, as Seyfarth Shaw acquired D’Ancona & Pflaum and McGuireWoods combined with Ross & Hardies. Seyfarth gained 50 Chicago lawyers while McGuireWoods gained about 150.

However, most of the big firms were relatively quiet on the merger front, and many said they preferred hiring laterals right now because mergers were too unwieldy and unpredictable.

Neal, Gerber & Eisenberg turned exclusively to the lateral market to add 28 new attorneys to its firm, bringing its total to 156. So did Sonnenschein, Nath & Rosenthal, which grew by 25 lawyers. Sidley Austin Brown & Wood added 23 lawyers in Illinois; Jenner & Block added 21 lawyers; and Burroughs, Hepler, Broom, MacDonald, Hebrank & True grew by 17.

“With all the consolidation, there’s a great niche right now for a high-quality firm that’s still medium-sized. They’re a dying breed,” said Neal, Gerber managing partner Jerry Biederman. “We’re trying to grow as much as we can, but we don’t want to lose our smallness. We want to remain informal and collegial, nimble in responding to problems. We’d lose a lot of that if we woke up one morning and suddenly had 500 lawyers.”

The survey recorded modest growth overall among the state’s largest firms, as the economy continued to rebound from recession and firms’ corporate and litigation work began to catch up with their bankruptcy practices. However, the growth has been spotty and for every firm up by 10 lawyers, there seems to be another firm down by 10 lawyers.

The largest 20 firms on the survey increased their ranks by a total of 72 lawyers in Illinois from 2003 to 2004, an increase of 1.3 percent, compared to 1.4 percent from 2002 to 2003. Firmwide, those 20 firms added 388 lawyers, increasing 2.39 percent. That compares to firm-wide growth of 6.1 percent from 2002 to 2003.

Sidley became the second firm in the history of the survey to top 500 lawyers, surpassing Mayer, Brown, Rowe & Maw for the first time as the largest firm in the city. Sidley now has 509 attorneys while Mayer, Brown decreased 17 attorneys to 506.

For the firms that did grow, leaders said they saw the growth across a wide range of practice groups, including class action defense, real estate, government and regulatory law, transactional work and intellectual property.

Greenberg Traurig

“The Midwest is an exceptionally diverse and stable market compared to the two coasts. It has weathered the recession better. That’s why Greenberg came,” Shapiro said. “So it’s the logical place for Greenberg to expand right now. The legal market here is nowhere near tapped.” Shapiro was giving a tour of the newly finished floor Greenberg added to its offices in the R.R. Donnelly building. Lawyers were still unpacking from banker’s boxes and movers were installing furniture.

Keith Shapiro

“We’ve had to add a new floor each of the last two years. This should accommodate us up to 110 lawyers,” Shapiro said. “We really haven’t set any limit right now on how much we want to grow. It might be 150, it might be 250. We’ll see how it goes.”

Greenberg is still trying to establish its reputation in Chicago versus better-known firms, and it is doing it primarily through high-profile lateral hires. The biggest beneficiary has been its government affairs practice, Shapiro said.

In 2000, Greenberg hired Victor Reyes, Chicago Mayor Richard M. Daley’s former chief lobbyist. In 2003, it added David Bonoma, former chief of staff for Cook County State’s Atty. Richard Devine, and MayeBeth Hadfield, former parliamentarian for the Illinois Senate.

The newest addition to the firm will be Samuel K. Skinner, former secretary of transportation and chief of staff for President George H.W. Bush and former chairman of Hopkins & Sutter, who will join the firm sometime in the summer, Shapiro said.

“You can really boost your reputation with just one well known hire. You get instant recognition,” Shapiro said. “We’re trying to pluck the best quality lawyers from every place we can. We’re looking for the star of a firm, where there’s something specifically we can do for their career.”

In 2003, Greenberg hired Paul Quinn and Dan Gordon, two partners from Kirkland & Ellis, to bolster its private equity practice. It also hired a total of 24 lawyers from the now dissolved Altheimer & Gray, including the majority of its real estate practice group. Most joined Greenberg before the firm showed any outward signs of trouble. “Altheimer, in particular, has been very good to us,” said Greenberg’s other Chicago co-managing partner, Paul T. Fox.

Former Altheimer partner Corey E. Light is now head of Greenberg’s Chicago real estate practice. He said he joined Greenberg because of the firm’s large national presence.

“Altheimer had a strong international presence, but its offices inside the United States weren’t very well established. Greenberg has a great New York presence that’s very good for me,” Light said. “Obviously, Greenberg still needs to gain a stronger foothold in Chicago, but we’re moving in the right direction.”

Shapiro said the firm also encountered substantial growth in class-action litigation in 2003, where Greenberg defends companies like Sony, Qualcomm and Lockheed Martin against mass tort suits. Greenberg also is growing its intellectual property practice, where the firm has 16 lawyers and recently hired Janice L. Block, former Midwest regional counsel for Microsoft Corp.

“Now that we’ve hired enough laterals to establish ourselves, we’re putting together our first formal summer program this year,” Shapiro said. “It’s the next step. We’re going to start developing more of our lawyers in-house.”

Neal, Gerber & Eisenberg

Neal, Gerber also met with success in the lateral market in 2003.

When Altheimer dissolved, Neal, Gerber absorbed the firm’s entire intellectual property practice, said managing partner Biederman. The firm hired seven bankruptcy lawyers from Freeborn & Peters, which helped add PepsiCo as a major client and added depth to its asbestos defense practice. Jack Rovner, a health care lawyer from Michael, Best & Friedrich, also joined Neal, Gerber in 2003 to co-chair the firm’s health law group.

“The past year was very good for us in almost all our practice areas. IP, bankruptcy, creditor’s rights, health law each expanded their business,” Biederman said. “The most rapid growth continues to be in class-action defense, involving both customer and employee suits, and securities litigation. We represent investment banking houses exclusively, and brokers and analysts have come under a lot of scrutiny since Enron and Worldcom.”

Neal, Gerber hired so many lawyers in 2003 that they ran out of office space by Nov. 1, forcing the firm to turn some conference rooms into offices and to move non-lawyer personnel into what are normally closets.

“We made contingency plans. We were able to accommodate everybody, though not in ways everyone liked,” Biederman said in late April. “We just added a new floor and had our first move-ins last weekend.”

Neal, Gerber grew by 28 lawyers since the beginning of 2003 and by 34 lawyers since 2002, Biederman said. The firm has undertaken only one merger in its history, he said, acquiring a smaller firm in 1991.

“Achieving steady growth through laterals is safer. When you acquire a whole firm, you acquire their problems. It’s also harder to integrate a whole firm. You get a lot of resistance and bruised egos,” Biederman said. “We’ve never believed in just adding bodies. We grow when the growth can be seamless and we can add new clients and new services to make our existing clients happy. We’re always looking for a 2 plus 2 equals 5 situation.”

Biederman said he sees the firm’s strong growth continuing over the next two to three years.

“We’ve got no magic number. Maybe five years down the line, 500 lawyers will be a medium-sized firm,” he said. “To remain vibrant, you have to grow. Chicago is one of the few places where the legal market is growing. It’s not Hong Kong and it’s not New York, but business is doing well here, and there’s a tremendous amount of private wealth. It’s a great environment for lawyers.”

Sidley Austin

Sidley Austin leapfrogged Mayer, Brown to become the largest firm in Illinois this year, but the feat doesn’t mean much to Sidley executive committee chairman Thomas A. Cole.

“Having three more lawyers than another firm tells you nothing about your relative strengths and weaknesses,” Cole said. “We focus more on quality and client service.”

However, Cole said the firm has had a good year. Sidley added 23 Illinois lawyers in 2003 and is up 48 lawyers since 2002, according to the survey.

“We’re gaining business healthily across most of our practice groups; our balance sheet is better than ever. We’re a significantly stronger firm from a year ago,” Cole said.

Sidley achieved much of its growth in the last few years due to its merger with New York-based Brown & Wood in 2001, gaining more than 400 attorneys firmwide.

However, Sidley also bought more than it bargained for in the deal, inheriting a tax-shelter practice from Brown & Wood that has prompted an investigation by the U.S. Justice Department and the Internal Revenue Service. It has led to a federal court battle over releasing the names of Sidley clients who took part in the tax shelters.

Cole said the firm has largely benefited from the Brown & Wood merger, though, and the firm spent 2003 focused on strengthening itself through lateral hires.

Sidley witnessed significant growth in its class-action practice, hiring a group of four lawyers from Sachnoff & Weaver led by Joel S. Feldman, Cole said. The firm also hired several new lawyers for its bankruptcy, employment law, insurance and financial services practices.

“Our entering class of associates has been relatively steady at 50 each year, but our lateral acquisitions are growing,” Cole said. “We try to do it strategically. We have a pretty rigorous process for partner candidates. There are lots of laterals where they might be very appealing, but if there is no strategic need, we won’t go for it.”

Firmwide, Chicago was one of Sidley’s fastest-growing markets in 2003, Cole said, accounting for 23 of the 30 additional lawyers in the firm.

“Some of our other offices have been a little less robust. But Chicago has been very good, as well as London and Washington, D.C. Those three are making up for the other offices,” Cole said. “Internationally, we’ve also had pronounced growth in international and cross-border arbitration among businesses. Over the next year, we’d like to expand the London office, both in capital markets and new practice areas.”

Sonnenschein

Sonnenschein, Nath & Rosenthal experienced substantial growth in lawyers and revenue in 2003. It added 25 new lawyers in Illinois and 65 lawyers firmwide in 2003. In the previous year’s largest law firm survey, Sonnenschein had grown by only one lawyer. The firm increased its revenues from $295 million in 2002 to $366 million firmwide in 2003, according to Sonnenschein co-managing partner Jim Klenk.

“Our game plan is to attract lawyers with quality books of business in the lateral market and pursue mergers when the intangibles are right and the opportunity arises,” Klenk said. “We added a merger in 2003 with a mid-sized New York firm, adding 50 lawyers to our New York office, but there are not that many mid-sized firms in Chicago. We’re not seeing that kind of activity here.”

Klenk said the Chicago office added eight lawyers to its intellectual property practice, four to its litigation practice, five to the corporate group, five to real estate, two to its labor group and two to the bankruptcy group.

“Our greatest growth area, by far, has been litigation. Class-action defense has been huge. We’re doing a lot of work down in Madison County right now. National real estate work has also really picked up,” Klenk said. “We can feel the economy is turning around. Our bankruptcy group has been strong for several years now, but hours in our corporate group are now up for the first time in a long while. It’s a sign of renewed activity, like classified ads in the newspaper.”

Klenk said the firm has grown significantly in New York, Washington, San Francisco and Los Angeles. “Some of the other offices have grown more than Chicago in terms of number of lawyers, but Chicago is keeping pace.”

Jenner & Block

In 2003, Jenner & Block grew by 21 lawyers in Chicago and by 26 lawyers firmwide, according to the survey. It continues a growth trend that has added 40 lawyers to the firm in the last two years.

“All of our growth has been to accommodate client demand,” said Jenner managing partner Robert L. Graham. “We’ve had growth in bankruptcy; we’ve doubled the size of our corporate practice in the last two years. Working a number of large transactions fueled the need for the additional attorneys.”

The firm added lawyers to its intellectual property group, which does a lot of work for recording industry companies. Jenner also added a lawyer to head its estate planning practice and grew in its securities work and internal investigations for corporate clients.

“We’ve had a lot of partners at other firms calling us. They realize we’re growing significantly, doing well economically, and they want to join,” Graham said. “We try to assess our clients’ needs and grow according to what the demands are. Litigation is always growing here, but we didn’t anticipate just how significant the growth would be.”

Burroughs, Hepler

Class-action work has been an area of growth for several of the state’s biggest firms, and not just for those that file suit on behalf of plaintiffs. Defense firm Burroughs, Hepler, Broom, MacDonald, Hebrank & True in recent years has been growing more than any of them.

The Edwardsville-based firm added 17 new lawyers in 2003 and 40 new lawyers since 2002, more than doubling its size. The firm’s asbestos class-action defense work accounts for much of that growth. The firm headquarters is located in the heart of Madison County.

“The litigation in Madison and the class-action work has just not slowed down. The national attention has only increased the suits and the need for good defense lawyers,” said co-managing partner Gordon R. Broom. “We keep adding lawyers because there is continually more work for them to do. We’re still just really surprised by all our growth. We were always a small firm. We never expected to grow anywhere near this big.”

The lateral game

The intense market for lateral attorneys is prompting many Chicago law firms to pay closer attention to their overall fiscal health and whether they’re keeping their lawyers happy.

“You have to constantly make sure that your firm is the one attracting the talent instead of hemorrhaging it,” said Sidley executive committee chair Cole. “You have to make sure your balance sheet is in order and your lawyers are getting what they need. You have to make sure the firm’s culture and morale are strong, and nip it in the bud when it’s not.”

Shapiro of Greenberg Traurig said law firms are less the cradle-to-grave employer that they used to be and more of a revolving door, with lawyers constantly looking for better places to grow their careers. But even a cherry picker like Greenberg won’t hire a lawyer who jumps ship too often, he said.

“You want to lure a lawyer who will be loyal, and who won’t be just leaving you again a year down the road. If someone has a history of changing jobs too much, we wouldn’t go pursue him,” Shapiro said. “We only hire lawyers who buy into our vision. We also work hard to integrate them into the firm.

“It’s hard when most of our lawyers are new to the firm, but we try to be a supportive place and a fun place to work,” Shapiro said. “Our bowling night lets people blow off a lot of steam, and people are being loyal to us.”

Jenner’s Graham said that profitability and client services help, but the workplace also has to be positive.

“We attract and retain a lot of lawyers with our values and our commitment to pro bono. That breeds a positive image of the firm as a good place to work and breeds loyalty,” Graham said. “With lawyers becoming more like free agents, you have to make sure your culture is healthy. It can change quickly, and negative momentum can build.”

Klenk of Sonnenschein said he had trouble remembering the last time an equity partner left the firm other than to be employed by a client. The firm’s growth the last two years has only increased its track record for attracting and keeping talent, he said.“We’re careful when we hire lateral folks. We do a lot of due diligence. Once we get our lateral partners, we continue to provide opportunities for them to expand their careers,” Klenk said. “When you have that, you have an environment people can grow and flourish in.”

Despite the growth at several firms, Chicago still has less lateral movement than some other regions.

“Call it good Midwestern values, but you just don’t see big chunks of lawyers moving around in Chicago like you do on the coasts. And when you do, its almost always because of financial trouble,” Klenk said.

“However, we are seeing much more mobility among individual attorneys right now, and I believe that’s good,” Klenk said. “It’s like free trade. It incentivizes firms to be successful and rewards the best workplaces. More competition is the American way.”