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For decades, the only way to become a partner at an elite law firm was to become an associate at that firm first, preferably straight out of a top law school. That is no longer the case at most of the nation’s major firms, who now poach partners from each other with remarkable frequency. But top New York firms such as Cravath, Swaine & Moore; Sullivan & Cromwell; Davis Polk & Wardwell; and Simpson Thacher & Bartlett have largely resisted the trend, continuing to regard lateral hiring as anathema to firm “culture.” “There’s a level of trust that develops,” explains one Cravath Swaine partner who asked to remain unnamed. “It’s hard to have someone come in, no matter what their reputation, and have people see them as interchangeable with people who’ve been there for 20 years.” Top firms have generally regarded such continuity as the cornerstone of their success. Given their position among the nation’s most-profitable firms and their dominance of high-end corporate practices, few would argue. But in an increasingly competitive environment, in which both overseas markets and lucrative new practice areas beckon, even New York’s top firms are feeling pressure to bring aboard lateral partners. In December, Simpson Thacher announced that it had hired two Clifford Chance antitrust partners, Kevin Arquit and Aimee Goldstein, both of whom will become Simpson Thacher partners this month. “It’s the first time we’ve had more than one,” says Richard Beattie, the chairman of Simpson Thacher. The firm had been planning to bolster its antitrust practice for more than a year, Beattie says, and decided that a lateral partner would be the best way to accomplish that. Arquit and Goldstein, who will work closely with the firm’s mergers-and-acquisitions lawyers, were accepted only after extensive interviews with other Simpson Thacher partners, Beattie says. Beattie is adamant, however, that the Clifford Chance laterals do not represent a break with the firm’s traditional reluctance to hire partners laterally. “We have a very good and a very strong culture,” he says. “I don’t see one or two carefully selected lateral partners as changing our culture.” ‘YOU JUST NEVER KNOW’ At a time when most firms routinely bring aboard lateral partners and associates, the aversion of New York’s elite firms to lateral hiring and their insistence on culture can seem anachronistic, even paranoid, with partners recounting tales of woe and misery that befell firms that went the lateral route. “No matter what your due diligence, you just never know,” says one Sullivan & Cromwell partner, referring to the recent flap involving Pillsbury Winthrop partner Frode Jensen, whose abortive departure to Latham & Watkins triggered a press release alleging sexual harassment, followed by a $45 million lawsuit. A partner at another elite New York firm cites the experience of Donovan Leisure Newton & Irvine, the now-defunct law firm that was hit by a major scandal in the late 1970s when a senior partner working on a major antitrust trial was found to have withheld a suitcase of documents he claimed were destroyed. The Donovan Leisure partner later faced disbarment and criminal charges. “One of the things that emerged in the postmortem . . . was that that partner [who was supervising the disbarred lawyer] had been a lateral hire who had not been fully integrated into the team,” says the partner, who asked that he and his firm remain unnamed. THE COMPENSATION ISSUE The Cravath Swaine partner also points out that top New York firms have lockstep pay — or something close to it — by which partners are compensated according to seniority, unlike most firms that pay many partners according to the amount of business they originate. “It’s hard to integrate people into the lockstep in a way that other people see as fair,” the partner says. But the unified partnership that results from a lateral-free lockstep system can also hamper firms’ efforts to expand into new practice areas or strategically bolster their strength in other areas. Other firms, on the other hand, have freely resorted to lateral hiring to effect rapid expansions. “Whenever possible, homegrown talent is the best,” says Steven Pesner, a partner and executive committee member in the New York office of D.C.’s Akin Gump Strauss Hauer & Feld, which has expanded rapidly in recent years. “But sometimes you turn to the outside to expand the scope of your services and increase both the quality and quantity of your people.” NEEDS AND DESIRES Referring to Simpson Thacher’s recent hire, Pesner says, “There’s a realization that, in a changing environment for the profession, even a firm as established as Simpson Thacher may have to look to the outside to fill certain needs.” Indeed, Arquit and Goldstein are not the first outsiders Simpson Thacher has turned to. In recent years, the firm has hired lateral partners to boost practice areas that have proved enormously profitable to other firms. In October 2001, the firm brought aboard bankruptcy partner Peter Pantaleo, who had previously headed O’Melveny & Myers’ bankruptcy practice. In 1996, the firm hired intellectual property partner Henry Gutman from the New York office of Baker Botts. While Simpson Thacher already possessed strong bankruptcy and antitrust practices, intellectual property was a wholly new practice area for the firm, Beattie says, one that was judged important enough to merit the hiring of a lateral partner. “Sometimes you have to be entrepreneurial about these things,” he says. COMPETING IN EUROPE The Sullivan & Cromwell partner notes that his firm faced similar decisions in confronting overseas markets, where a no-lateral policy would have effectively closed the door on direct competition with firms like Shearman & Sterling or London’s Magic Circle. These firms have pursued widespread lateral hiring and, in many cases, firm mergers to build local practices around the world. Over a year ago, Sullivan & Cromwell decided to hire lateral partners from Freshfields Bruckhaus Deringer, German firm N�rr Stiefenhofer Lutz, and French firm Jeantet & Associe to spearhead or expand operations in Frankfurt and Paris. “In Europe, there is no other way to start a local law practice,” the Sullivan & Cromwell partner says. “We had to make a decision that we were either going to forgo that practice or make the lateral move.” The partner says there might also be situations where a domestic lateral partner might be welcome at Sullivan. “If the next seven years are like the last two, I think we’ll seriously consider building a bankruptcy practice,” he says. This article was distributed by the American Lawyer Media News Service. Anthony Lin is a staff reporter at the New York Law Journal.

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