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For most of the country’s leading law firms, Chicago has never been the Second City. The highest-grossing firms on the coasts have expanded into each other’s cities, but few have settled in Chicago. It’s as if the city’s landmark steel-and-stone skyscrapers contain law firms that are as unshakable as the buildings themselves: Kirkland & Ellis; Winston & Strawn; Sidley Austin Brown & Wood. “Historically, the perception was that this was a closed community that was very well served by very good firms,” says Neal Wolf, a partner at Winston & Strawn during the ’90s. Wolf is back in the city after six years in San Francisco, where he moved to LeBoeuf, Lamb, Greene & MacRae. In February he opened a Chicago office for LeBoeuf. “I have Lake Michigan behind me right now,” says Wolf from his desk. “I’m a Chicago-boy man. The city, it runs in my blood.” As it happens, Wolf’s own business plan relies on the decline of such nativist sentiment. LeBoeuf and other newcomers are betting that Chicago firms no longer hold a lock on the city’s legal work. “The community is opening up,” Wolf says. “Clients are diversifying in the legal providers they hire. And there’s a huge amount of mobility within the legal community.” LeBoeuf is just one of 13 Am Law 200 firms to open or greatly expand offices in the city since the start of 2001. These include (in reverse chronological order) Drinker Biddle & Reath; Dykema Gossett; Morgan, Lewis & Bockius; Perkins Coie; McGuireWoods; Barnes & Thornburg; Greenberg Traurig; Holland & Knight; Bryan Cave; Howrey; Kaye Scholer; and Foley & Lardner. Expect more arrivals. “You’re going to see some major Boston and Washington firms coming to Chicago in the next year or two,” says Joel Henning, a Chicago-based consultant for Hildebrandt International Inc. Many of the newcomers see Chicago as a strategic necessity. As clients consolidate their work and slim their rosters of outside counsel, firms hope to be seen as genuinely national. “We want to be in the major business markets,” says Wolf. Given that thinking, Chicago — the Midwest’s economic capital, with the nation’s second-largest metropolitan work force — has been a glaring omission. The newcomers hold high hopes for Chicago because so few competitors have preceded them. Eighty-four Am Law 100 firms keep offices in New York. But only 27 have offices in Chicago — including 10 native firms and the 13 newcomers. Clearly, it’s possible to become a player in the city. Skadden, Arps, Slate, Meagher & Flom; Latham & Watkins; and Jones Day each moved into the Loop in the ’80s, and each has managed to surmount the supposed local preference for the homegrown. It’s been the more litigation-focused Am Law 100 firms, such as Kaye Scholer, that have recently seen opportunity in Chicago’s $350 billion economy. The firm’s transactional practice has been modest compared to many of its New York competitors, and accordingly, its partner compensation is in the lower third of the Big Apple pack. Kaye Scholer’s 2001 pickup of bankruptcy lawyers from Hopkins & Sutter (which was merging into Foley & Lardner) allowed Kaye Scholer to sell its presence in both cities. The only other New York Am Law 100 firms with offices in Chicago are Skadden; Wilson, Elser, Moskowitz, Edelman & Dicker; and now LeBoeuf . Kaye Scholer’s Chicago office of 19 lawyers has earned some encouraging payoffs. The bankruptcy group represented the committee of unsecured creditors in the bankruptcies of PG&E National Energy Group Inc. and Aladdin Gaming LLC, matters that brought in $12 million in fees from 2002 to 2005, plus some work for New York litigators. Overall, in 2004, the office’s 19 lawyers collected more than $20 million, says Michael Solow, the office’s managing partner. That doesn’t include billable hours generated for Kaye Scholer lawyers elsewhere, he adds. It also means that the office’s revenue-generation matches the rest of the firm. Even in an age of teleconferencing, clients value attorneys who are physically nearby, says Todd McLawhorn, a partner at Howrey, which has had an office in Chicago since 2001. He notes that the Chicago-based board of a Fortune 500 company hired Howrey to investigate accounting practices because Howrey had litigators there. Speed was crucial. If the probe had not been completed in a week, the client would have been forced to delay an earnings release. “We could look the officers in the eye in Chicago,” McLawhorn says. “There was someone who could meet with accountants, who were here, and then be here to report findings to the board.” Clients also value local ties. In April 2004 private equity practitioner Gary Silverman left a Kirkland & Ellis partnership and one of the country’s top P.E. departments to come to Kaye Scholer. “Oh, my God, it was one of the hardest things I’ve ever done,” says Silverman, 43, a fourth-generation Chicagoan. “There’s a very hometown attitude [among clients] here. They don’t want New Yorkers. They want their lawyers to be in the heartland, and that goes to a style and an attitude and an approach to negotiating, as well as a perception that New York firms are really aggressive on billing.” Silverman’s Midwestern private equity clients have not been repelled by his joining a New York firm, he says. After all, they might not want to live in New York, but they still have deals there. “For some of my relationships previously at Kirkland, my having affiliated with a New York firm helped generate New York business from them,” he says. Rather than simply expanding the franchise, many firms coming to Chicago are trying to trade up from a smaller-market base. They hope the city leads them to larger clients and higher rates. Perhaps predictably, firms with big dreams think that size matters. “Many out-of-town firms think you should be ‘relevant’ if you’re here,” says Mark Jungers, a managing director at recruiter Major, Lindsey & Africa. “Relevant equals 100 lawyers. There aren’t all that many examples of people who are.” As a result, piecemeal growth can be perceived as lack of momentum. “If I don’t have 20 more people in there in a couple of years, my managing partner will say we have not succeeded,” says Alan Grimaldi, a Howrey partner (in Washington, D.C.) who serves as liaison between Howrey’s management committee and its 22-lawyer Chicago office. Because of such concerns, says Alan Rubenstein, executive vice president of Chicago Legal Search Ltd., “firms interested in moving into Chicago are better off looking for an acquisition of a well-established [local] firm.” At least four such firms, with between 50 and 150 lawyers, have been swallowed up in the past few years. Other good candidates still exist. Seven local Am Law 200 firms have not expanded much outside of Chicago. As more firms in the city have offices in several other locations, these and several other native firms (all of which have 100 to 300 lawyers) face fresh questions about their capabilities. For out-of-town firms that decide they must move into Chicago, opportunity costs likely will rise. Competition for clients and lawyers will increase. Such expansion-minded firms as Morgan Lewis are busy wooing talented laterals or leading firms, and others, like Kirkpatrick & Lockhart Nicholson Graham and Reed Smith, are watching closely (although both declined to comment on any goals for Chicago). And it will only be harder to get noticed. Elite coastal firms should be able to find a practice-area fit. It’s not just consultants saying that; Moody’s Investor Service has ranked Chicago as the U.S. city with the most diverse economy. Boston firms could expand their private equity practices, for instance. Washington, D.C., firms might expand their litigation practices. Firms from both those cities, too, should match up well financially with many top-notch lawyers. “They have more freedom to add people who aren’t bringing in $3 million a person,” says Jungers. Wherever they are headquartered, internationally minded firms not yet in Chicago are missing out, says Wayne Whalen, managing partner of Skadden’s Chicago office. The city is a key route to the rest of the globe. “It’s got a window to the world that’s quite a bit different than either New York or the West Coast,” Whalen says. “Many of our transactions have a non-U.S. player in them.” Firms fly over at their peril.

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