Big law firms are churning out record profits and revenues, and acquiring smaller firms at an accelerating rate. But many still believe the downturn has opened opportunities for boutique firms, especially in middle-market Los Angeles.
Believers include Kenneth A. Linzer and C. Dana Hobart, who opened the doors at four-attorney Hobart Linzer LLP in West Los Angeles last month.
The two knew each other from working as associates at Paul Hastings LLP decades ago. They kept in touch as Linzer went on to found his own West L.A. boutique, Linzer & Associates PC, while Hobart spent 17 years at downtown L.A. boutique Hennigan Dorman LLP, which merged with Dallas-based McKool Smith PC last year.
One day, while discussing a case worth more than $20 million one of them was handling, the two decided they wanted to start a firm that specialized in cases of that size.
“What we were scratching our heads about was there are big firms that handle huge cases, like $100 million on up, and a lot of people are comfortable with the million and less cases,” said Linzer, 61. “What we wanted to do was create this unique entrepreneurial boutique for handling cases between the $1 million and $100 million range.”
The new firm will focus mostly on commercial litigation and corporate counseling, and make heavy use of alternative fee arrangements, such as payment for winning a case and bonuses for finishing cases in a timely manner. It also will make less use of associates to be cost-conscious, said Hobart, 51.
“One of the things I learned in the 17 years I’ve practiced with Hennigan, and which Ken and I are implementing, is not having an overloaded team of lawyers working on cases,” Hobart said.
Leaving Big Law
Peter S. Selvin also believes boutiques are the future.
For 31 years, he was at Century City firm Loeb & Loeb LLP. But after the downturn, he found, along with many of his colleagues, that clients were demanding lower rates. He said it became plain to him that the big law model had to change, especially when it came to midmarket clients.
“For years billable rates have gone up and the amount of money that lawyers have made has gone up, and lawyers thought that those two phenomena were like the laws of physics,” Selvin said. “I didn’t think the model was sustainable.”
He decided to leave for a smaller firm where he could have greater flexibility, not only with rates but also with the kinds of cases he took. He recently joined 20-attorney Beverly Hills firm Raines Feldman LLP as of counsel, but in order to leave, he had to sever ties with his biggest client, which made up a predominant share of his $2 million book of business.
“I’m taking a risk, there’s no question,” said Selvin, 58. “But I think I was taking more of a risk in staying at the big firm than in trying to make something on my own.”
Raines Feldman has roughly doubled its attorney count since the beginning of 2010 and expects to add more attorneys in the coming months.
High-End Changes
There remains high-end attorney
work in Los Angeles and Skadden Arps Slate Meagher & Flom LLP has long
been one of the most successful firms in attracting it.
The prestigious New York firm entered the L.A. market in 1983 and is cited around town as one of the first national law firms to successfully establish a presence here.
“We were labeled as carpetbaggers and just lambasted by local firms,” said Rand S. April, who came to Los Angeles from Skadden’s New York office in 1987. “But we were successful because we did two things. We tried to hire some of the best local talent we could on a one-off basis – not simply what other firms did in absorbing another law firm – and also sent out people from the home office in New York to infuse the new office with firm culture.”
April, 61, has led Skadden’s downtown L.A. office as managing partner for 18 years, but the firm has announced that he’s handing the reins to Brian J. McCarthy, a well-known transactional attorney who came over from New York in 1983.
McCarthy will be taking over the office at a time when it’s bouncing back from the downturn. Its attorney head count dropped from 165 in 2009 to around 130 today, but he said the firm is looking once again at growing.
“Activity levels in corporate levels and litigation have picked up significantly,” he said. “There’s an overall pickup in demand.”
Staff reporter Alfred Lee can be reached at [email protected] or at (323) 549-5225, ext. 221.
