It turns out a book of business isn’t mandatory to getting a new firm off the ground. Southern California lawyers William “Chris” Manderson, John Schafer and Lance McKinlay say a reputation, contacts and a good deal on a lease gave them a jump start. The rest is a hustling attitude and a bit of luck.
The three former Paul, Hastings, Janofsky & Walker associates reassembled in November to open Manderson, Schafer & McKinlay in Newport Beach. The firm, which has since added a fourth lawyer, focuses on corporate work and investor-side bankruptcy work. One of their biggest clients is investment group Signature Group Holdings, which in late April got creditor and shareholder approval to acquire bankrupt subprime mortgage lender Fremont General Corp.
Co-founder Manderson said he didn’t have any clients he could call his own when he left Paul Hastings in early 2009. He had spent five years as a corporate associate at the firm’s Orange County office. Manderson said that office was primarily driven by private equity M&A work, which had slowed with the recession. Layoffs seemed imminent: “I was nine years out of law school in an office that wasn’t growing,” Manderson said. “It was pretty clear that sitting around wasn’t going to lead to anything good.”
He said that after he left, Paul Hastings laid off some Orange County senior associates.
Manderson said the trio has been able to drum up new business through a combination of taking referrals from Paul Hastings and tapping the network of contacts they’d built during their respective years at various big firms. Schafer knew the principles at Signature Group from his days at Irell & Manella. Schafer, who specializes in bankruptcy, said the benefit of building a transactional boutique that focuses on investors like Signature is that Signature can continue on as a client. Manderson can handle general corporate and securities matters, while Schafer does its lending work.
Manderson also landed work for jeans maker Rock & Republic in the past year, because as a Paul Hastings associate he had helped sell clothing company Mossimo. He said during that transaction, he’d developed a good working relationship with Mossimo’s chief financial officer, who later introduced him to Rock & Republic.
The firm also managed to talk down its sublease terms to $18 per square foot, he said, which directly affects rates. Manderson said he charges between $395 and $495 per hour.
Paul, Hastings tax partner Douglas Schaaf said his ex-colleagues Manderson and Schafer were fine lawyers whose primary role at the firm was to service Paul Hastings’ institutional clients. “I think their new situation suits them well because my impression is that they’re both quite entrepreneurial,” Schaaf said. He added that the Orange County marketplace, with its closely held businesses with rate billing sensitivity, is a fertile ground for smaller firms. Schaaf said he sends real estate and smaller corporate matters to the Manderson firm.
Manderson said he hoped to add another two or three associates in the next nine months and pick up another 3,000 square feet to expand on the firm’s 3,400-square-foot space. “The space had been empty on the market for a long time, at the time,” he said. “We made a low offer and they accepted it. … It was extremely helpful to start off.”