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Fox Rothschild's Growth Spurt Breaks All the Rules
Firm seeks to be one-stop shop for the middle market, providing clients with a range of legal services at a reasonable price
The American Lawyer
June 08, 2007
Nic Miller / Digital Vision
When Robert Goldman, a former U.S. Attorney and adviser to the Federal Bureau of Investigation's Art Crime Team, approached two large Philadelphia law firms about starting an art law practice 18 months ago, he had no takers. "They didn't have room for this practice," says Goldman, who spent 29 years with the government and assisted in the recovery of more than $150 million worth of stolen art. Then Goldman was introduced to Fox Rothschild, a 395-lawyer firm rapidly expanding from its Philadelphia base. There he met with a different response. "We're always thinking: 'What differentiates Fox Rothschild from our competitors?' " says co-chair Abraham Reich.
A lot, actually. Fox Rothschild is on a quiet march across the country with a business model that defies conventional wisdom. The firm wants to be a one-stop shop for the middle market, providing clients with a range of legal services at a reasonable price. So while other Am Law 200 firms frantically cull practice areas to increase profitability, Fox is collecting them. In the last four years, Fox has added seven new practice areas -- including gaming, franchising, biotech and premises security -- to bring its total to 40. It has picked up big-firm refugees practicing in such areas as immigration, environmental law and real estate; and it has gambled on opportunities, like Goldman's fledgling art recovery practice, that may be outside the typical definition of "full-service." Over the past five years the firm has almost doubled in gross revenue and head count, growing from 201 to 395 lawyers, and has improved its revenue per lawyer by almost 20 percent, to $483,000. It's opened seven new offices, three of which are out West -- a big move for a 100-year-old firm that a mere six years ago had a "one-hour drive" rule when adding an office. "What [we] have tried to do," says co-chair Phillip Griffin, a corporate partner, "is to make it so that there is nothing that you should have to go somewhere else to find." Adds litigator Reich: "To stand still is to move backward."
To be sure, serving middle market clients isn't the most lucrative way to practice law. Fox's partner rates peak at $495 an hour, and its average annual client fees are under $14,000. Partner compensation isn't at the top of the pay scale, either. Profits per partner in the last fiscal year were $515,000, and compensation for all partners was $415,000. But if Fox partners are only taking home half a million dollars, at least they see those homes during the daylight hours. "Revenue per lawyer and profits per partner are not the end-all, be-all for us," says Reich. "There is more to practicing law -- more to life -- than making sure that you're at top of the pay scale." The firm's increasing ranks suggest that Reich's message is resonating.
Co-chairs Reich and Griffin say that Fox's recent expansion is more the result of an evolutionary process than a specific strategy. Much of the growth has come from acquisitions of small boutiques, ranging in size from the four-lawyer Geron & Associates in New York in 2005 to the 53-lawyer Grotta, Glassman & Hoffman in Roseland, N.J., last October. "We're always interested in a new marketplace where we don't have an office with a good base of [local] lawyers with long-standing, well-respected reputations and the potential for future growth," says Griffin.
Chance plays a role in these acquisitions: A conversation with Fox chief operating officer Mark Silow at a Philadelphia Eagles game led to Jerald August, a Florida tax lawyer, joining the firm and establishing a Fox office in West Palm Beach, Fla., in 2005. Yann Geron, name partner of a New York bankruptcy boutique, chatted with two Fox lawyers at an event in the fall of 2004; a few months later he opened Fox's New York office.
The criteria aren't any more specific for lateral hires. The typical litmus test for bringing in a lateral is a $500,000 book of business, says Reich. But Griffin adds that "we're always on the lookout for lawyers who will add to the personal, economic, and legal skill-set mix at each office." Overly rigid plans, he says, mean lost opportunities. "We have to be open to rethinking all of our business premises every day," he says. Real estate lawyer Lloyd Birnbaum, for instance, moved from Reed Smith to Fox Rothschild in March, sensing that Reed Smith wasn't interested in supporting his middle market clientele over the long term; at Fox he was able to cut his rates 15 percent to 20 percent, which made a difference for his rate-sensitive clients.
Griffin attributes Fox's 2 percent drop in RPL last year to a lag in cash flow following the addition of 75 lateral partners, but the firm is generally careful to control the costs associated with expansion. New Yorker Geron stayed in his boutique's "small and eccentric" Garment District office for the first eight months after merging with Fox, even though the building's three-person elevator made it difficult to host business meetings.
The über-inclusive approach advocated by Reich and Griffin fits with the diversity of Fox Rothschild's 10,700-client base. Though clients such as Wachovia Corp., Medtronic and Sun Microsystems generate legal fees in the half-million-dollar range, they typically use the firm in only one or two practice areas, such as intellectual property, real estate or employment matters. The firm's bread-and-butter work comes from a stable of ambitious middle-market clients -- smaller, often privately owned businesses with ties to Pennsylvania or New Jersey.
Take University Radiology Group PC, a 66-doctor practice in central New Jersey with revenues in excess of $50 million. Fox first represented the radiologists on a building lease 12 years ago, but has since worked on a merger (the group acquired another radiology practice in 1998) and a range of assignments from licensing and regulatory issues to governance and contracts. None are million-dollar matters. But in recent years, University Radiology has generated legal fees as high as about $400,000, says CEO S. Thomas Dunlap.
For other Fox clients, full service includes areas now eschewed by many Am Law 100 firms, such as trust and estates or family law. "Clients will come to us for real estate or litigation and then the daughter needs a prenup or the wife needs a will, and it's attractive because they deal with one person [and one firm]," says Patricia Ferrari, co-chair of the firm's family law group. Other partners say the cross-marketing opportunities between Fox's various offices are just as real. "When I was at Dechert partner meetings, they would talk about an office in Luxembourg or Frankfurt opening," says M. Joel Bolstein, an environmental partner in Fox's Warrington, Pa., office. "[I wondered], 'How would my clients need work in that office?' Here they have opened offices in Pittsburgh, New York and Palm Beach, and I could realistically see lots of my clients needing work in those areas. The synergy is realistic, not forced."
With such a large client base, business is well distributed among partners. According to firm COO Silow, the highest-producing partner at Fox Rothschild has an almost $5 million book of business -- but more than 30 partners have books that exceed $1 million. This economic reality, combined with Fox's penchant for transparency and its diversity of clients and practice areas, has created a small-firm atmosphere in which everyone is treated as an equal.
Partners largely determine the direction of their practice. The executive committee, which meets every two weeks and approves everything from lateral hiring to new offices to partnership pay, is a zealously democratic body. It's led by six "at-large" partners who are popularly elected for three-year terms, often after conducting mini-campaigns at the various offices. These at-large partners appoint the remaining 13 committee members, the office managing partners. The two co-chairs and the COO are appointed to three-year terms by the executive committee -- and, to avoid any hint of power-mongering, do not have a vote. "There are no gods or kings here," says Reich. "We're heads of the firm, but I encourage people to tell me to go fuck myself." Partners are apprised monthly of one another's hours, realization and collectibles. And everyone's compensation is disclosed to all partners.
Compensation calculations include community service, which has a long and proud history at the firm. Co-founder Charles Fox founded the Big Brother Association. "We believe that that's an important role a lawyer should have," says executive committee member David Snyder. "[And it] serves a dual function of getting [the] Fox Rothschild [name] out into the community."
The result is a large number of partners who work hundreds of hours outside the office. "When people ask who I am, I don't say 'a lawyer' first, I say 'civic leader,' " says immigration partner Min Suh. Suh bills about 1,800 hours each year, but she spends another 500 working with organizations ranging from the Philadelphia Orchestra to The Empowerment Group, a nonprofit that teaches business skills to aspiring entrepreneurs.
Beyond civic involvement, a reasonable work-life balance isn't a hopeless fantasy. BlackBerrys aren't mandatory. The partner billable hour requirement is 1,675, and the firm doesn't just give lip service to flexible work arrangements and family time. Susan Smith, the managing partner of Fox's Warrington, Pa., office, works on a 60 percent schedule, which translates into about 1,000 billable hours each year. Reich says he rarely missed a sports event for his two sons, now 24 and 26 -- a feat, considering that one played lacrosse for the University of Pennsylvania. Gerard Norton, head of the IP practice, gets to the office every morning around 9:45 a.m. after putting his 5-year-old on the school bus. He leaves the office at 6:30 p.m. Though he sometimes works from home late in the evening, he says: "This is a job -- what happens outside the office is important too."
Of course it's hard to know whether this easygoing atmosphere will hold up in the face of Fox's recent growth. As the ranks of lawyers and clients swell, the firm might need to exercise greater control. "We've been opportunistic, but I think that's going to be changing over time," says labor and employment partner Howard Flaxman. "We can't be suing a big client that we have an opportunity to get. As we get bigger and able to get that type of client, we will have to make some sacrifices as to kinds of people and practices [we bring in]." There is some evidence that the firm is already starting to make these choices. This winter the executive committee appointed a subcommittee to discuss the business conflicts policy. "We can't have this Wild West mentality anymore that 'Hey, if a client can pay the fees and there is no current conflict, then bring them in,'" says Silow. "We need to have a more strategic rationale."
Don't expect overnight changes. "We try to be flexible, to adapt," says Reich. "But we also want people to enjoy being here."
They do.
