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CHICAGO-Major U.S. law firms looking to muscle up their national networks are eyeing Chicago for expansion, attracted by the city’s corporate clientele and seasoned pool of attorneys. Paul, Hastings, Janofsky & Walker and Reed Smith are among those firms looking to open a Chicago office, while Dykema Gossett; Drinker Biddle & Reath; Morgan, Lewis & Bockius; and LeBoeuf, Lamb, Greene & MacRae want to double the size of their offices in the Windy City. While many U.S. firms tackled expansion on the two coasts first, they’re now realizing the importance of having a presence in Chicago, to be closer to big national clients and potential customers in the Midwest region. The market was once considered difficult to enter because of large, established firms, such as Mayer, Brown, Rowe & Maw. But local attorneys’ increased willingness to join other firms and clients’ new willingness to change firms are helping break down barriers to entry. “Chicago, to us, represents some good opportunities for adding strength to areas where we are strong and, at the same time, enabling us to serve our global clients in the Midwest more easily,” said Seth Zachary, chairman of Paul, Hastings, Janofsky & Walker, which has 1,075 lawyers in 17 offices, including Los Angeles and New York. Paul Hastings is close to securing space in Chicago and hopes to open the new office within two months, Zachary said. The firm is trying to recruit “some leading practitioners,” and would like to have 100 lawyers in Chicago to meet the needs of its national corporate clients, including Citigroup Inc., General Electric Co. and JPMorgan Chase & Co., and to seek new business, he said. “As that market is maturing and becoming global, it’s becoming more attractive,” Zachary said. Law firms are wooing some of the 54 Fortune 500 companies that call the Chicago area home. Those companies include Allstate Insurance Co., Sara Lee Corp., Boeing Co., McDonald’s Corp. and Equity Office Properties Trust. The city’s financial institutions, including the Chicago Board of Trade, and rising, new enterprises, such as the hedge fund Citadel Investment Group LLC, also drive the city’s business potential. Pressure is building “There’s more pressure on the big firms that don’t have a branch office here to get one,” said Chris Percival, a consultant at Chicago Legal Search who helps firms recruit attorneys. “There’s been a lot more aggressiveness to try to build the firms here.” Skadden, Arps, Slate, Meagher & Flom of New York; Jones Day; and Latham & Watkins led the way in opening Chicago offices in the 1980s, and Percival said that today there are 55 firms with branch offices in the city. Dykema Gossett’s chairman, Rex Schlaybaugh Jr., points to the city’s growing legal revenue and its robust financial industry to explain his Detroit-based firm’s interest in doubling its Chicago attorney headcount to 200 over the next two years. Schlaybaugh cited Citigroup statistics that show Chicago law firm revenue rose 11.5%, on average, last year from 2004, compared with 8.9% nationwide, and 8.2% in New York and Southern California. “Chicago was one of the higher growth pockets,” said Dan Bishop, a Citigroup Private Bank director who helps the bank manage lending to law firms. “The firms are growing, they’re building up the number of lawyers and their hours are growing. So that means it’s a healthy environment for the firms.” As the competition grows, Dykema Gossett sees an opportunity to undercut some of its larger, international rivals’ billing rates to win new clients and attract lawyers from bigger firms who don’t like the pressure of trying to keep customers at the higher rates. “Chicago is very critical to our strategy,” said Schlaybaugh. As far as U.S. expansion is concerned, Morgan, Lewis & Bockius, which has about 1,300 lawyers, is also focused on the Midwest, and that means boosting the size of its 40-lawyer office in Chicago, said Bob Dufek, a managing partner in Washington for litigation and regulatory practices. “We want to be a premium national law firm and to do that we need to strengthen our position in the Midwest,” Dufek said. Proximity is key Not only are firms finding that a bigger national footprint that includes the Midwest is important in attracting clients and attorneys, they’re also realizing that proximity can make the difference in keeping customers or winning new ones. With companies increasingly willing to entertain bids from new law firms, it’s become more important to tend relationships at closer range. Before Neal Wolf moved from San Francisco to open New York-based LeBoeuf, Lamb, Greene & MacRae’s Chicago office in February 2005, he said he was often “geographically inconvenient” for his Midwest clients, not only because he couldn’t meet with them as much, but also because his work day got under way two hours later than theirs. “Those two hours mean a lot-sometimes it’s the difference between having a case and not,” said Wolf, who is managing partner of the Chicago office. Being in Chicago also means attorneys spend less time getting to other Midwest cities such as Minneapolis; Cleveland; and Des Moines, Iowa, than they might from either of the coasts, Wolf and other lawyers said. Last year, LeBoeuf Lamb’s Chicago office, with 25 attorneys, “substantially exceeded” revenue projections and the firm may double or triple in size during the next two to five years, Wolf said. The firm has about 650 lawyers firmwide. Reed Smith is also looking for a foothold in Chicago, after merger talks with local firm Wildman, Harrold, Allen & Dixon broke down last year. With the firm’s lawyers spending a lot of time in the Midwest anyway, it makes sense to consider having an office there, said Gregory Jordan, chairman of the firm. With about 1,000 lawyers nationwide, Reed Smith generally likes to acquire small firms when it moves into a city and it’s willing to wait for a good fit, he said. “We have a number of attractive Chicago firms like Gardner Carton & Douglas; Sachnoff & Weaver; and Wildman, which would produce a significant Midwestern presence for a national firm if they were willing to consider a merger,” said Kaye Hoppe, founder of the Chicago-based legal consulting firm Credentia Inc. If Paul Hastings were to come to Chicago, it would raise compensation levels in the city, and the firm would have Chicago’s fourth- or fifth-highest profit-per-partner ratio, Hoppe said. That would make the city more attractive to lawyers, she said. “There is a universe of lawyers who would only consider a firm that is in that class of profitability,” Hoppe said. Higher pay and the opportunity to work on bigger national or international cases are some of the lures that help new firms attract local lawyers. Changing client needs have also smoothed the way, with customers less intent on hiring well-known local attorneys for a given case and more interested in having the best lawyer in the country in a particular practice. The fact that Chicago attorneys have client connections and expertise throughout the United States makes them an attractive group of professionals to be acquired by some of the larger U.S. firms, said Ralph Savarese, president of the legal consulting firm McMorrow & Savarese and a former chairman of Washington law firm Howrey. A ‘talent-rich market’ The lawyer pool in Chicago hasn’t been as picked over as those in Washington, New York and Los Angeles, he said. “Chicago is a talent-rich market,” said Savarese, who was chairman of Howrey when it opened an office in the city in 2001. The caliber of Chicago’s attorneys has gotten the attention of Drinker Biddle & Reath Chairman Alfred Putnam. He’s also impressed with the city’s law schools, which include Northwestern University School of Law and the University of Chicago Law School. Putnam’s firm could attract more bright law students with a stronger national network that included more U.S. offices, he said. Philadelphia-based Drinker Biddle, which currently has six lawyers in Chicago after opening the office in April 2005, wants to broaden its legal services in the city beyond the products liability practice that it has there now, Putnam said. The firm prefers to grow by absorbing groups of lawyers or other firms, he said. “We have a keen interest in making sure our presence in Chicago is larger,” Putnam said.

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