Greenberg Traurig's Doug Atnipp




Law Firms Ride a Boom Built on Energy in Houston



The National Law Journal
May 28, 2008

Doug Atnipp had spent his entire career as a Houston lawyer, happily doing energy transactional work at Porter & Hedges.

And then Greenberg Traurig came calling.

Atnipp, like most Houston lawyers -- especially those in the red-hot energy field -- had gotten feelers from legal headhunters before. But when Atnipp met the then-managing partner of Greenberg's Dallas office, 35-year-old Scott Olson, he was intrigued by the possibilities for younger partners to advance at that firm.

Without a salary raise, he accepted a job at Greenberg to help open its Houston office. Three years later, the 48-year-old is the managing partner in Houston and co-chairman of the firm's national energy and natural resources practice group.

Atnipp is one of a growing number of home-grown lawyers to jump firms in recent years, leaving an established Houston firm for a national firm opening an outpost in Space City.

In the booming Houston legal market, where two national firms opened offices this year and several others in the past few years, it's a buyer's market for lawyers -- particularly those who practice in the energy field.

Competition is so fierce that firms have started the practice of offering lucrative and rare three-year compensation guarantees and are getting into bidding wars over partners with energy practices.

THE 'GATEWAY'

Lawyers in other cities may be experiencing layoffs, but in Houston, where oil is king and folks celebrate when the price of oil skyrockets, the legal market is exploding.

"Law firms want to come here because we have a strong energy base plus the city is doing pretty well economically, and Houston is the gateway to the world's energy market," said Peggy A. Heeg, a Houston partner at Fulbright & Jaworski, a firm with a large energy practice. "Our energy lawyers get calls from headhunters every single day, and we're flattered about that."

Stacy Humphries, principal at MS Legal Search, a Houston legal headhunter, said, "It's certainly been a very hot market, and it hasn't showed any signs of slowing down. National firms continue to want to expand to Texas or add a Houston office. It's very much the case that the energy industry is driving a lot of that."

Within the past three years, McDermott, Will & Emery; DLA Piper; Hunton & Williams of Richmond, Va.; Morgan, Lewis & Bockius; Sutherland Asbill & Brennan of Atlanta; and Greenberg all opened Houston offices.

"With 800 lawyers in our New York, London and Middle East offices and with our strong relationships in the energy sector, it was only a matter of time before we entered the Houston market in order to support our efforts to build a leading global energy practice," said Francis B. Burch Jr., joint chief executive officer of DLA Piper, in a statement.

Some credit Greenberg Traurig with formulating the model by coming to Houston and, instead of importing its attorneys from other offices, hiring away local lawyers with books of business.

The business boom has trickled down to legal headhunters, who have also been prospering and expanding in Houston in recent years.

Several legal headhunters have moved to Houston during the past couple of years or splintered off and opened individual offices. Susan Pye left Prescott Legal to form Pye Legal Group, with offices in Houston and Dallas, while Morgan Warren left Kinney Recruiting in Austin, Texas, to form Warren Recruiting in Houston. And Update Legal has added one person a year in its Dallas and Houston offices since opening in 1996.

Just 10 years ago it was almost unheard of for partners, particularly in the energy field, to leave their firms for national firm newcomers.

That's no longer the case.

"They were too well-treated and comfortable," Humphries said. "We're surprised at the number of names we've seen move. They see it as a ground-floor opportunity. The old loyalty doesn't hold much sway."

Some lawyers get wooed away with promises of more money or opportunities to start their own office.

Some, according to several headhunters, are so much in demand they're getting promises of three-year salary guarantees, risky arrangements that involve salaries of about $1 million a year in exchange for a certain level of business generation and collection.

According to one headhunter interviewed, Akin Gump Strauss Hauer & Feld pioneered the three-year guarantees several years ago to be able to expand its Houston practice, with limited success. Christine LaFollette, managing partner in Akin Gump's Houston office, declined to say whether the firm offers three-year compensation guarantees. "We have a firm policy of not discussing partner compensation," she said. She added that "we are going to be competitive on all fronts."

In many cases, say headhunters, those recruited can't make the grade after three years, failing to reach their numbers, and wind up departing.

"Firms will throw obnoxious amounts of money at some partners just to get them over there -- like 60 percent of their book of business, which can be [a salary of] more than $1.5 million a year," said Bob Shanley, Houston sales manager for Update Legal, a national legal headhunter.

However, Shanley noted, some lawyers "flame out" after a couple years or find their clients don't appreciate having to pay New York rates in other locations. "Some don't make the transition well," he said.

Among some of the notables to change shops recently include Rachel Clingman, who left Fulbright & Jaworski, where she was a junior partner, to become managing partner of the Houston office of Sutherland Asbill last year.

Clingman was president of the Women's Energy Network in Houston and on the advisory board of the 2005 and 2006 World Oil Women's Global Leadership Conference in Energy and Technology.

Additionally, Washington's Howrey, another firm with a long-established Houston office, was dealt a blow when it lost Jack O'Neill, former head of global litigation, and Mark White, to DLA Piper in March.

Akin Gump, which has 100 lawyers in Houston, got a double whammy this year when Jack Langlois, head of its energy projects practice, and John Cogan, head of the global projects practice, left in March -- Langlois to DLA Piper and Cogan to McDermott, Will & Emery.

'POACHING' GOES BOTH WAYS

While the established law firms that are being poached aren't thrilled, there are not too many hard feelings -- especially since they themselves have expanded to London, the Middle East and other energy markets and did some poaching of their own there.

"Yes, we've had a couple partners leave, but in turn we've recruited some," said Akin Gump's LaFollette. "I respect [Langlois and Cogan] individually; they had irresistible opportunities to start an office here. They are at [that stage] of their careers and want to try and help build something. And I'm sure it was financially frothy."

LaFollette said she would not "participate in a bidding war," and doesn't know if the two men received three-year guarantees.

Stephen Cagle, managing partner in Howrey's Houston office, which has 70 lawyers specializing in energy intellectual property, acknowledged that "the headhunters are circling at all times. It's difficult for some people to resist.

"Sure, I'd rather not have other firms opening offices here," Cagle said. "The reality is it has been going on in Houston for awhile. Everyone wants a piece of the energy business, which is very robust now. I know I can't make everyone happy. But we don't lose a lot of people. They talk to headhunters, but they wind up staying."

Fulbright & Jaworski internally stresses to its lawyers that it has a global, well-balanced platform and that the national law firms that start practices in Houston may not offer that platform to clients.

"We have the strongest energy platform out there," said Heeg. "It's not just energy transactions -- it's pipeline energy lawyers, exploratory energy lawyers, marketing energy lawyers, environmental and regulatory energy lawyers. The clients don't want just two or three energy lawyers at a firm -- they want the whole gamut."

While some national firms have been successful in starting Houston offices with litigators, few have a wide array of energy lawyers -- the golden ticket in Houston, she said.

WARY OF RISK

But not everyone is willing to make a move. One lawyer from Fulbright & Jaworski who did not want to be identified said he meets with headhunters but views leaving his established firm as "risky. "

"You have to start all over with a new firm," he said. "Maybe they'll develop conflicts. Maybe they won't be here for long. There's a certainty with the law firm you've been at."

In fact, not all law firms that have opened Houston offices have been successful, although most have. Dewey Ballantine is one example of a firm that closed its doors in Houston.

Dewey Ballantine, which merged to become Dewey & LeBoeuf last year, closed its Houston office in 2005.

Although sources said the predecessor firm was unsuccessful in Houston because it charged New York rates, Sean Gorman, partner at Dewey & LeBoeuf in Houston, said that is not the case.

He said Dewey Ballantine closed its doors in Houston simply because the managing partner chose to relocate to New York. He said Dewey & LeBoeuf, too, charges New York rates, and "we have more work than you can imagine."

Dewey & LeBoeuf has 15 lawyers in Houston doing complex litigation and energy transactional work. The office was inherited from the other predecessor firm, LeBoeuf, Lamb, Greene & MacRae.

Not all breaks are clean. Lawyers who bad-mouth their former firm or raid it for other lawyers and associates can burn their bridges rapidly.

Atnipp said his former employer was not happy with him when headhunters got wind that Greenberg Traurig was coming to town and started calling his former firm en masse.

His former boss assumed that Atnipp had tipped them off, which Atnipp insists was not the case.

"When I left the firm there was a lot of ill will," he said. "It was not pleasant."

Still, all in all, Atnipp said he feels he made the right move.

"It took me 20 years to find a firm that fit what my expectations were about the legal practice," he said. "I have no regrets."