Patton Boggs’s Washington, D.C. office. (Photo: Diego M. Radzinschi / NLJ)
Patton Boggs is pressing forward on a restructuring strategy, announcing within days last week the closure of the firm’s Newark office and a possible merger with Squire Sanders.
The potential merger, announced on Feb. 26 by both firms, would combine 1,700 lawyers into 45 offices. The new firm would rank among the top 10 firms nationwide based on the most recent NLJ 350 headcount numbers, and boost Patton Boggs’ numbers after years of bloodletting.
The potential merger and the closure of its New Jersey outpost are part of a revitalization strategy following Patton Boggs’ shedding of about 100 attorney positions since 2012.
“There’s certainly no argument we’ve gone through a difficult two years,” Edward Newberry, Patton Boggs managing partner, said in an interview. “What we’ve done is address those problems head on. We now have a strong organization with best practices in place.”
Newberry characterized the strategy as a three-part plan: reduce costs, differentiate the brand and acquire market share. He attributed the need for restructuring to stagnant growth in the legal industry.
Patton Boggs has cut about 20 percent of its lawyer ­positions since 2012, Newberry said. Revenues sank too, by about 6 percent, or $22 million, from 2012 to 2013. About $70 ­million in business, including one client that almost single-handedly bankrolled the New Jersey office, has ended for the firm since 2012, he said.
While Patton Boggs has added partners as well as laid off others, a few major names left recently as laterals. This year, Robert Tompkins, head of the government-contracts practice, joined Holland & Knight, and lobbyist and lawyer Darryl Nirenberg joined Steptoe & Johnson LLP.
Newberry acknowledged the firmwide reorganization may have contributed to the flight of some partners.
“When you introduce substantial change to an organization, which we have done … it works for some people and it doesn’t work for others,” he said. “That’s a natural byproduct of necessary change.”
‘POWERFUL WASHINGTON PRESENCE’
A merger with Squire Sanders would fit into Newberry’s restructuring plan. Although still in “very early stages,” according to a written statement by the firms, the engagement wouldn’t be the first Patton Boggs has entertained recently.
Merger negotiations between Locke Lord and Patton Boggs ended in Decem­ber, partly because of potential liabilities rooted in the firm’s litigation battle with Chevron Corp., NLJ affiliate The American Lawyer reported. Patton Boggs is locked in a bitter fight against Chev­ron’s lawyers at Gibson, Dunn & Crutcher over the energy company’s alleged contamination of rain forest in Ecuador.
A Squire Sanders and Patton Boggs combination would be a union of dissimilar organizations. Squire Sanders would bring 132 equity partners. Patton Boggs would bring the largest lobbying practice in Washington both by headcount and revenues as of 2012, according to the National Law Journal’s 2013 list of top-earning lobbying practices.
“Patton Boggs brings a powerful Washington presence and strong positions in Dallas, Denver and Anchorage, as well as a network of offices in the Middle East, to the strong global platform of Squire Sanders,” the merger announcement said. “Squire Sanders brings a more complete U.S. presence, as well as strong European and Asia-Pacific positions and a highly ranked Latin American practice.”
Squire Sanders, founded in Cleveland, has about 1,250 lawyers spread across 39 offices. Sixty-eight lawyers work in its Northern Virginia and Washington locations. Patton Boggs has about 380 lawyers in nine offices. The firm had wanted to grow its footprint outside the United States and in California. Kent Gardiner, chairman of Washing­ton-based Crowell & Moring, said the combination wouldn’t greatly change the legal business landscape in the capital. “Pure size is only a modest consideration. Law firm scale is only modestly useful to law firms. Scope is more interesting,” he said. “The question for their leadership is: Can they meld themselves into one firm?”
It’s unclear whether Squire Sanders would take the lead in a combined operation or if the talks have even proceeded to that point. John Burlingame, managing partner of Squire Sanders’ Northern Virginia and Washington offices, declined to comment about the talks.
For Patton Boggs, the closure of its Newark office signified a different type of change — one of dismantling a redundant infrastructure that cost the firm $12 million last year. Newberry said the move to close the office was not a symptom of broader financial woes at the firm.
In 2006, Patton Boggs opened the Newark office with a team of lawyers from Latham & Watkins, who brought along a major client, the World Trade Center Captive Insurance Co., which entailed handling insurance claims arising from the Sept. 11, 2001, attacks. At its peak in one year, the account brought in $50 million worth of business for the firm, Newberry said. That represented one-seventh of Patton Boggs’ total revenue of about $335 million in 2010.
But the office was an appendage. The $50 million of business shriveled to $1.8 million in revenue last year, Newberry said, after thousands of tort cases settled around 2010.
The New Jersey managing partner of Patton Boggs, John McGahren, left the firm in August, seven years after founding the Newark office. His departure came amid a downsizing in Newark from 80 lawyers early last year to less than 50 by the fall, according to NLJ affiliate New Jersey Law Journal.
BREAKING THE NEWS
The firm announced the closure to partners during a meeting on Feb. 20.
“Literally, I don’t think there was anyone that was surprised” in the New Jersey office, Newberry said. “It took time to wind down.”
Between 10 and 12 of the 26 employees in the Newark office will move to Patton Boggs’ New York location, while five will stay in New Jersey, moving to Florham Park, a suburb west of Newark, he said. The rest will be laid off. The firm has nine partners, 10 associates, five of counsel and two senior paralegals working in New Jersey as of last week, according to its website.
“These are cuts that should have happened a long time ago,” one Patton Boggs partner said on Feb. 24.
Newberry said the office was the only one firmwide that was losing money. The firm was profitable in 2013 with a $45 million net, he said. Patton Boggs carries a “minuscule amount” of debt, he added.
Contact Katelyn Polantz at firstname.lastname@example.org. National Law Journal reporters Todd Ruger, Andrew Ramonas and Zoe Tillman contributed to this report.