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For four decades, Collier Shannon Scott has been part of Washington’s legal firmament. It defended R.J. Reynolds from attacks on its infamous Joe Camel advertising campaign, represented G. Gordon Liddy in a string of libel cases during the 1990s, and served as a bulwark for the steel industry in its numerous international trade disputes. But in recent years the 82-lawyer firm, which is in advanced merger discussions with New York-based Kelley, Drye & Warren, has struggled to keep pace with its rivals, particularly in the arena of big-ticket litigation. If Collier Shannon goes through with the deal, the firm might have a shot at regaining its past prominence, albeit within a new framework. The combined firm would also more than double Kelley, Drye’s Washington presence, to about 125 lawyers, and bring the firm a mix of practices, including Collier Shannon’s advertising, international trade, and antitrust groups. The firms have yet to sign a letter of intent, but both partnerships are expected to make a decision on merging in the coming weeks, says Brad Mutschelknaus, managing partner of Kelley, Drye’s Washington office. “I would describe myself as guardedly optimistic,” Mutschelknaus says. “There are a lot of moving parts, and any one of them could cause it to go south.” How easily the 271-lawyer Kelley, Drye would mesh with Collier Shannon remains a central question. Both firms have a two-tiered partnership, but Kelley, Drye’s $905,000 profits per partner are well above Collier Shannon’s approximately $700,000. And though the merger would give Collier Shannon partners access to the New York legal market, it wouldn’t necessarily offer them an in with major transactional clients, because Kelley, Drye draws the bulk of its business from litigation. The merger would be the latest in a string of acquisitions in the D.C. legal market, which has seen many local midsize firms swallowed up by out-of-town players looking to bolster their presence inside the Beltway. “It really goes to the proposition that this world is moving away from the boutique law firms,” says Avery Ellis, a Washington-based recruiter at Mestel & Co. “Many general-practice firms have advertising and international trade practices like Collier Shannon. So how do they compete?” OUTPACED Collier Shannon was founded more than 40 years ago by former government lawyers specializing in energy and international trade. Over time the firm developed a reputation for its work in the regulatory sphere, lobbying for trade associations and representing companies in antitrust battles and trade disputes. As one of Washington’s last midsize regulatory shops, Collier Shannon has been a favored target for outside law firms looking to break into the D.C. market. Yet the firm, which prides itself on its collegial culture, had guarded its independence and resisted such advances. By the late 1990s, however, many of Collier Shannon’s traditional competitors were moving far ahead of the firm in head count. To many of the firm’s partners, this was a clear signal for change. “I’ve always felt strategically that it would be in the firm’s interests to merge,” says Patrick Coyne, a former intellectual property group partner with Collier Shannon who moved to Finnegan, Henderson, Farabow, Garret & Dunner three years ago. Many wanted a broader base for the firm’s IP and litigation work, says James Rill, a former name partner who left in 2000 for Howrey. So Collier Shannon entertained merger talks with dozens of firms. Discussions with Howrey grew serious in early 2000 but fell through a few months later. Firm partners were not yet ready to give up their independence. Those discussions, however, led to the most significant split in Collier Shannon’s history when Rill, who started just a few years after the firm’s founding, took a group of 30 antitrust attorneys to Howrey that April. “The rest of us felt that the needs that prompted the merger [discussions] justified the move,” Rill says. Although former partners say the firm’s revenues continued at a steady pace even after Rill’s departure, Collier Shannon’s head count never again approached its 1999 peak of 106 lawyers. Today the firm’s marquee practices still garner strong revenues, but with a comparatively short bench, the firm has had difficulty competing for top-end litigation with large general-practice firms that can throw dozens of associates at a case. Indeed, the firm has seen the departure of two top litigators in recent years: first, Coyne to Finnegan, and then, John Williams, former head of the firm’s litigation group, to the Washington office of Jones Day. After the defections, resistance to a merger eased. Paul Rosenthal, chairman of Collier Shannon, declined to elaborate on the partners’ changed outlook, but he said a merger has the “potential to provide greater resources for our clients and would make us able to serve them better.” KELLEY’S WOES Kelley, Drye also has faced numerous challenges since it came to the D.C. area, in the 1980s. The Washington office peaked during the tech boom but almost immediately hit hard times when telecommunications work dried up after the dot-com bust. In 2002 the firm laid off attorneys in its 43-person Northern Virginia office. Then its six-lawyer litigation group in the District jumped ship. The bleeding continued when the firm’s five-person environmental group exited in February 2004. By last spring the firm’s D.C. branch had dwindled to 29 lawyers. Nationally, Kelley, Drye has been trimming, as well. The firm closed its money-losing Miami office in 1999, then shuttered its Hong Kong outpost and Los Angeles office in subsequent years. The firm, however, has continued to bring in high-profile litigation in both the financial services and intellectual property arenas. Recently, it represented J.P. Morgan Chase in litigation stemming from Enron’s collapse. Though the office closures helped boost Kelley, Drye’s profits per partner, they remain well below the $1 million-plus mark set by many other New York firms, such as Simpson Thacher & Bartlett and Skadden, Arps, Slate, Meagher & Flom. The firm has also continued to lose partners in bunches. Earlier this month a four-partner New York bankruptcy group left for Ropes & Gray, and in January the firm saw its eight-lawyer employment practice jump to Heller Ehrman. To offset such losses, Kelley, Drye has been on the lookout for a merger partner to help vault it into the Washington elite. Last November it got an opening when Rosenthal agreed to sit down with Mutschelknaus over lunch at Sam & Harry’s restaurant in Washington. “At some point I said, �We are both talking with all these other folks, perhaps we should talk about each other,’ ” Mutschelknaus says. Since then, the firms have had numerous meetings, but they still have work to do to hammer out a final deal. An initial hurdle is completing a client-conflict check, a daunting obstacle in many firm mergers. Presently, it is unclear which, if any, practice areas could be conflicted out of a merger. The firms are also evaluating their respective real estate commitments. (Collier Shannon has signature office space near the Waterfront; Kelley, Drye is located close to Dupont Circle.) “They are a terrific firm with a wonderful, diverse area of practice. . . . Clearly, we would love to have that [as] part of Kelley, Drye,” Mutschelknaus says.
Emma Schwartz can be contacted at [email protected].

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