When the prospect of merging with Arnold & Porter was put to Howard Rice’s partners for a vote, many of them thought the choice to combine was clear — especially when they considered the opportunities it would create for the firm’s youngest lawyers.
“Every law firm has to look to the future and think about the next generation,” explains partner Pamela Phillips. “Management was very focused on making sure that the traditions that Howard Rice had could survive and blossom for the younger people in the firm.”
But many of the firm’s younger lawyers — who learned of the merger the same day it was publicly announced — have voted with their feet. At least a dozen of the approximately 35 associates that Howard Rice brought to Arnold & Porter have left since the merger took effect Jan. 1, 2012, with several landing at firms similar in size to the one they’d initially joined.
Although Arnold & Porter has not held on to all the talent it acquired, the merger did give it the manpower it had long sought in the Bay Area. And the legacy Howard Rice lawyers, who had been through some lean times of layoffs and partner exits, are on more certain footing.
“This allowed us to continue to practice at the level that we had been practicing at,” said Douglas Winthrop, former chairman of Howard Rice.
All of Howard Rice’s clients carried over to Arnold & Porter, and some lawyers reported that the merger has helped their practices. Several partners said they get along so well with their new colleagues that the office already has the feeling of one firm.
Howard Rice’s financial statistics are not publicly available, but the two firms’ revenue per lawyer and profits per partner were also comparable, according to a source with direct knowledge of the matter.
The pair of blue-blooded, academically minded, litigation-focused firms were so compatible before the merger that they shared some of the same flaws, legal watchers say. Over the years, Arnold & Porter has sought to beef up its corporate practice. Although the acquisition of Howard Rice did not further that strategy, legal recruiter Avery Ellis thinks it did much to improve Arnold & Porter’s standing in California.
“You have your strategies, and then you have to look at the marketplace and take the best talent available,” said Ellis, who is executive managing director of Mestel & Co. “There are very few law firms of the caliber and standing of Howard Rice to acquire. That’s the kind of deal you work hard to make work.”
voting with their feet
Big Law was not the future that many associates wanted, interviews with about a dozen former Howard Rice lawyers reveal. Having decided to join a midsize firm out of law school, several Howard Rice associates chose that experience again, moving to Hanson Bridgett and Keker & Van Nest.
Most of those who left were senior and midlevel associates whom the firm had invested years in training. On the cusp of making partner at Howard Rice, some of those associates wondered whether the merger hurt their chances, former Howard Rice lawyers said. Arnold & Porter’s track to partnership is slightly longer than Howard Rice’s was, and some felt they would have fared better under deliberations made in a one-office firm.
They were also concerned that at a big firm they wouldn’t get the same type of substantive work they’d been entrusted with at Howard Rice, where associates often had active stand-up roles, arguing motions in court and taking critical depositions.
“There definitely was a fear that that would change once you became a part of the eight-lawyer-staffed cases and you were somebody on the bottom of a long totem pole who never got to see the podium,” a former Howard Rice lawyer said.
Partner Trenton Norris, who leads Arnold & Porter’s San Francisco and Silicon Valley offices with Winthrop, acknowledged in an interview this past week that the shift to Big Law was a concern for some associates and said the firm’s leaders “spent some time explaining that bigger didn’t mean nameless, faceless, impersonal and bureaucratic.” He also attributed the departures to recent improvements in the job market for senior and midlevel associates.
So far, the firm has lost only a handful of partners, including most notably appellate heavyweight Jerome Falk Jr., who announced he was moving to JAMS earlier this month. But some were given two-year guarantees at the time of the merger, according to several people with direct knowledge of the matter, who say more departures are possible when the guarantees run out.
Norris said Arnold & Porter now has 58 partners or counsel and 40 associates in Silicon Valley and San Francisco — a drop from the 64 partners or counsel and 45 associates in place when the merger took effect. That leverage is about right, Norris said. The firm currently has five job postings for associates in the Bay Area.
“There’s no reason to hire another 30 associates,” he said. “They wouldn’t be busy.”
Former Howard Rice partners said the loss of associate talent is the real concern.
The firm had a national reputation for attracting top associates, said law firm consultant Peter Zeughauser, who advised both firms on the deal, including Supreme Court clerks. “Those people are hard to replace,” he said.
the next generation
For years, management at Howard Rice made it clear they weren’t interested in merger overtures from Big Law firms. But planning an alternate future was complicated by the fact that the firm had an aging base of rainmakers — and it was unclear who would succeed them. The firm valued legal prowess so much that it sometimes promoted partners with little business acumen, legal watchers say, and the ranks of midlevel partners were depleted by a series of lateral moves. Howard Rice had a talented corps of younger partners, but they weren’t quite ready to shoulder the responsibility of bringing in business, former lawyers said.
As Howard Rice was drafting its 2010 strategic plan, the partners decided to consider a merger and charged Winthrop with exploring it, he said. Joining forces with a national firm was one way to resolve the question of succession. But Winthrop said market dynamics were the biggest thing conspiring against Howard Rice.
“Over time, there were very few firms that looked like Howard Rice — a midsize, high-end firm with multiple practice areas,” he said. “Howard Rice had bucked that trend for many years. … But a number of us looking down the road thought the trend was not going to work in our direction.”
The first few months after the merger were dominated by systematic changes — new phone numbers, new client matter numbers — as Howard Rice was transformed from a “mom and pop shop” to a branch of a large national operation, in the words of one former employee.
After Arnold & Porter’s San Francisco-based lawyers moved into Howard Rice’s offices at 3 Embarcadero Center, some changed offices to intersperse lawyers from the two firms, Phillips said.
Zeughauser said one mark of the combination’s success is the cross-pollination of work between lawyers who hail from Howard Rice and Arnold & Porter. That can be tough to achieve if lawyers in one firm do not see the colleagues who arrive from the acquired firm as equals, he noted.
The attorneys have discovered some unexpected ways in which the firms’ practice groups complement each other — Howard Rice’s transactional lawyers, for example, have been an asset to Arnold & Porter’s large life sciences team, Norris said. Both are practice groups that he would like to expand.
Falk’s departure marks a new chapter for the appellate practice, which he had distinguished with many high-profile cases over the years. Arnold & Porter inherited several other talented appellate lawyers from Howard Rice, including Steven Mayer and Sean SeLegue, Norris said. But Bobbie Wilson, a former Howard Rice partner who moved to Perkins Coie in 2010, noted that many clients hired Howard Rice for appellate work because of Falk.
“Jerry’s practice was a practice unto itself,” she said. “I don’t think those people will automatically go to Arnold & Porter.”
As appellate practices are not particularly lucrative, Falk’s departure may hurt the firm’s prestige more than its bottom line, legal recruiter Larry Watanabe said.
Norris said Arnold & Porter isn’t done growing in California, where it now has about 150 lawyers, though the acquisition of Howard Rice was a huge step forward. And in addition to expanding its ranks, the firm is working to raise its profile in the state, Norris said.
“We’re one of the largest firms in California now,” he said. “That surprises people when I say it.”
Having landed the coveted role of Howard Rice’s merger partner, it now falls to Arnold & Porter to make the most of the high-powered lawyers it has acquired, said San Francisco recruiter Avis Caravello.
“It would be impossible to replicate that collection of attorneys,” Caravello said. “It remains to be seen if Arnold & Porter can fully integrate and leverage what they have gained from Howard Rice.”
Some former Howard Rice lawyers said they are saddened by what has been lost: an intimate workplace where retired name partners still dropped by and there was an unwritten rule that if an associate invited a partner to lunch, the partner had to accept — and pay.
Each year at the firm retreat, the associates put on a skit spoofing the partners, Wilson said. One year, she noted, featured Falk and former chairman Lawrence Rabkin in a retirement home. No one imagined that the firm they helped build would be gone before their careers were over.