Thurman Arnold. Courtesy Arnold & Porter.
Thurman Arnold. Courtesy Arnold & Porter. ()

Arnold & Porter’s merger with fellow Am Law 100 firm Kaye Scholer, announced Thursday, cuts into the traditions of Washington, D.C., as a separated legal outpost, one where the firm has been among the most prestigious for 70 years.

Yet it could help the firm leap over one of the largest challenges among elite legal institutions in the nation: cracking into highly profitable New York corporate work.

“One of the challenges that Washington firms have had is to develop significant corporate practices,” said Roger Warin, the former longtime chairman of Steptoe & Johnson LLP, another major Washington, D.C.-based firm. “This will really put [Arnold & Porter] on the map with the major New York money-centered firms in a way that smaller transactions wouldn’t have done.”

James Sandman, who was Arnold & Porter’s managing partner from 1995 to 2005 and is now president of Legal Services Corp., said a large firm merger “wasn’t something the firm was affirmatively looking to do” when he was there. But he said the combination didn’t surprise him.

“It’s difficult for a firm not based in New York to build a strong presence there without a combination like this,” Sandman said.

R. Bruce McLean, a former chairman of Akin Gump Strauss Hauer & Feld and now a law firm consultant with The Zeughauser Group, said Arnold & Porter’s play in the combination is “a very bold move that changes the identity of the firm.” (McLean noted that his shop did not consult with the firms on the combination.)

The merger move could help the firm pursue more aggressive profit growth, McLean said, in the same way such first-tier national firms as Gibson, Dunn & Crutcher, Kirkland & Ellis and Latham & Watkins have expanded out of their founding cities into New York, where Kaye Scholer has primarily operated since 1917.

WASHINGTON DOMINANCE

Arnold & Porter’s merger news takes on extra significance because the firm has long been one of Washington, D.C.’s “Big Four” firms in both reputation and size.

“It’s surprising in one sense: They’re at the very top of the Washington market,” McLean said of Arnold & Porter. “In some ways, changing their identity has some risk to it. What is admirable is they’re taking that risk.”

Michael Solow, Kaye Scholer’s managing partner, and Richard Alexander, Arnold & Porter’s chairman, told The American Lawyer on Thursday that Arnold & Porter Kaye Scholer would be a “new firm,” formed via a true merger.

“In the past when we’ve had these coffee conversations with law firms, if we didn’t see a commitment to the shared values,” Alexander said that Arnold & Porter wouldn’t entertain the idea of a combination.

Last year, the firm counted about 390 lawyers in Washington, D.C., with only Covington & Burling and Hogan Lovells, two other Am Law 100 firms with deep inside-the-Beltway roots and in regulatory law, larger in the city.

HISTORICAL PRESENCE

Arnold & Porter was founded in 1946, when Thurman Arnold, Franklin Roosevelt’s former assistant attorney general of U.S. Department of Justice’s antitrust division, teamed up with Abe Fortas, who later became an associate justice on the U.S. Supreme Court.

One of Arnold’s first major clients was Coca-Cola, which needed help with lobbying to extend its original formula patent, according to Bruce Allen Murphy in his 1988 biography “Fortas.” The firm, which added Paul Porter and used the name Arnold, Fortas & Porter at the time, also worked for Puerto Rico in those early days.

One of its most significant moments came when Fortas successfully defended inmate Clarence Earl Gideon before the U.S. Supreme Court. The landmark case Gideon v. Wainwright gave criminal defendants the right to an attorney even if they can’t afford one.

Fortas left the firm on his appointment to the high court in 1965 by President Lyndon Johnson. He later earned the president’s backing to be elevated to chief justice, but then resigned from the court in 1969 in an ethics scandal. He did not return to the firm.

To this day, Arnold & Porter maintains a dedication to its traditions and history, with a large museum-like wall displaying historic moments, including Gideon’s original petition, just off its main lobby.

The firm basked in the rare honor of a U.S. Supreme Court nod once again this year. President Barack Obama nominated former Arnold & Porter partner Merrick Garland, now a federal appellate judge, to fill the seat left by the late Justice Antonin Scalia. It’s unlikely Garland will take the seat, given the recent election results that put Republicans in power.

BIGGEST CLIENTS

In recent years, Arnold & Porter’s lobbying presence in Washington, D.C., has dipped up and down. Years ago, the firm founded the consulting subsidiary APCO. That group is now independent. Former White House counsel Jack Quinn revived the practice at Arnold & Porter in the 1990s but spun off his own firm 16 years ago. The firm renewed its presence in the field last year with the acquisition of a lobbying team from Squire Patton Boggs.

Arnold & Porter has developed well-known practices in antitrust, environmental, intellectual property, government contracts, financial regulation and litigation, many of the major areas of most prominence among the top firms in Washington, D.C.

The firm represented BP plc in settlements after the Deepwater Horizon oil spill. It also works often for pharmaceutical companies, including Endo Pharmaceuticals plc over pelvic mesh litigation (though those mass tort partners left the firm to form a boutique last year), and for longtime client AT&T Inc. on its regulatory antitrust needs. Another major litigation client was tobacco company Philip Morris USA Inc., which it defended against wrongful death and personal injury claims.

In white-collar and government investigations, two years ago the firm hired Amy Jeffress, a top former Justice Department appointee, and Arnold & Porter alum William Baer is currently serving as assistant attorney general for the Antitrust Division at the Justice Department.

Last year, the conclusion of AT&T’s $48.5 billion acquisition of DirecTV partly contributed to the firm’s revenue decline. It now is handling antitrust issues for AT&T related to the telecommunications giant’s $85 billion bid for Time Warner Inc.

The massive deal could dissipate under a Republican-controlled Federal Trade Commission and Justice Department, with President-elect Donald Trump having pledged during his campaign that his administration would not approve the deal.

When asked about the future of the AT&T deal and the impact on Arnold & Porter, Alexander declined to comment about firm clients. But he did discuss what may happen to regulatory law firms in Trump’s administration.

“Both Mike and I believe that when you go through change, change presents opportunities for sophisticated multidisciplinary law firms,” Alexander said. “We believe there will be a period of shakeout and opportunities, and the synergies of this transaction will not be undermined by the results of this election.”

Solow, of Kaye Scholer, said that over the years the two firms have worked together several times on confidential client matters. “We had worked together enough that we knew each other,” he said.

A RESHAPED WASHINGTON

Among Washington, D.C.’s “Big Four,” only Covington & Burling remains as a solely Washingtonian institution.

“The mystique of the Washington firm has largely dissipated,” said Stephen Nelson, a headhunter with law and government affairs firm The McCormick Group in Arlington, Virginia.

Hogan Lovells, formerly Hogan & Hartson, used to call Washington, D.C., home before it combined with London-based Lovells to form a Swiss verein in 2010. Wilmer Cutler Pickering Hale and Dorr, formerly Wilmer Cutler & Pickering in the District, has its leadership and a power base in Boston through its Hale and Dorr roots. Those two firms combined in 2004.

Even the classic “Big Four” in the city is changing, with Morgan, Lewis & Bockius counting more lawyers than Wilmer as of last year after it picked up the bulk of Bingham McCutchen, which in 2009 absorbed Washington, D.C.-based McKee Nelson.

Several Washington, D.C.-based firms have pledged in recent years not to merge with others. Those firms include Covington and Williams & Connolly, the latter another Am Law 100 institution that won’t even hire lateral partners and has only one office located in the nation’s capital.

Other firms such as Arent Fox, Crowell & Moring, Steptoe & Johnson LLP and Wiley Rein have not completed a major merger in recent memory. (The New York Law Journal, a sibling publication, reported earlier this year on Crowell & Moring’s tie-up talks with a 60-lawyer firm in the Big Apple.)

Generally, firms in Washington, D.C., have operated differently than in New York. Few hit the $2 million profits per partner mark of New York firms, and the pace of business often depends on the federal government’s whims and revolving door. In-house counsel don’t always see regulatory work as bet-the-company problems, and the practices most prevalent inside-the-Beltway often have less leverage than others, Nelson said.

Arnold & Porter’s leverage is fewer than two associates to every partner, while Kaye Scholer’s is almost three, according to the most recent Am Law 100 data.

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