DALLAS’ FAT CAT LAW FIRMS

Today, as always, the big corporate law firms of downtown Dallas spell out their character in the most unambiguous of symbols. The antiques, Persian rugs, areca palms and brass doorknobs mean “solid,” “respectable” and “discreet.” Everyone uses the same code.

Of course, there are some variations. One firm may use less wood, opting for clean surfaces and well-chosen colors that speak of a decorator’s work. Johnson & Swanson sports a melange of styles, while Strasburger & Price hasn’t seen the hand of a decorator in years and has the bare, unpretentious look of a gentleman’s club.

But despite these variations, Dallas firms represent themselves just as American lawyers have for generations, suggesting that they’re as old and stable as the Constitution and decently – not gaudily-prosperous.

But while the symbols have remained constant, the reality behind them has changed dramatically. For years, the major Dallas law firms were clubby little enclaves of SMU- and UT-trained gentlemen pursuing a leisurely practice in wills and trusts, an occasional insurance case and a few banking transactions. Today, the important Dallas law firms are beehives of furious activity populated by Harvard- as well as Texas-trained men and women boasting a far-flung practice in real estate, tax law, securities, oil and gas-even entertainment.

The most obvious change in Dallas law firms is their size. Firms once made up of 20 lawyers now house more than 100. In the past, firms expanded almost imperceptibly-like the waistlines of middle-age bankers-until they reached a certain point and stopped. Or they would grow to 40 or 50 lawyers and be struck by the “amoeba complex,” in which a few partners would take stock, review their client lists and decide to split off on their own. Call it ambition or mitosis, but that phenomenon kept Dallas firms topped off at near 50 heads while many Houston firms ballooned past 200.

Today, Dallas firms still split up, but a split is no longer considered inevitable. Thompson & Knight, the cream of the old-line prestige firms, currently has 115 attorneys and plans to hire 20 more this summer. Johnson & Swan-son has 170; Akin, Gump, Strauss, Hauer & Feld has 100 in its Dallas office; Locke, Purnell, Boren, Laney & Neely has 85, with more coming this summer; Strasburger & Price has 110; Jenkens & Gilchrist has 120; and Gardere & Wynne has 116.

This belated burgeoning of Dallas law firms was triggered by the growth of local corporations and the transfer of several national corporations to Dallas. The firms were forced to broaden their range of services and add new armies of foot soldiers or risk losing valued clients to attorneys in New York or Washington, D.C. Had they kept up the amoeba act, it might have been goodbye RepublicBank, InterFirst, American Airlines, et al. And along with the business boom came a proliferation of state and federal regulations that, in effect, constituted a jobs program for attorneys. As everyone knows, business today can hardly be conducted without the aid of lawyers.



CONSPICUOUS among the many prospering Dallas law firms are some relative newcomers: Johnson & Swanson (established in 1970); Haynes and Boone (1970); Hughes & Hill (1973); and Jones, Day, Reavis & Pogue, a branch of a Cleveland-based firm that opened its doors in Dallas in 1981. Johnson & Swanson has clearly arrived as a major force in the Dallas legal establishment; the other three are smaller and are fighting hard to accomplish the same thing.

Because these firms are so young and so aggressive, they have a special aura about them. Each has a slightly different philosophy, but they share the belief that merely being good at law is not good enough; to succeed in a competitive market requires some kind of edge.

For Johnson & Swanson, that edge lies in being faster, more responsive and more aggressive in seeking out emerging fields of law practice. For Jones, Day, it is in providing the extensive resources of a mammoth national firm (with offices in Cleveland, Columbus, Washington, D.C., and Los Angeles) and keeping costs trimmed. Hughes & Hill attracts and rewards “heavy-hitters.” Haynes and Boone stresses community service.

John Johnson, 42, of Johnson & Swan-son knew what he was after when he joined forces with Arthur Hewett and Lin-ton Barbee in 1970. Johnson was determined that the firm would become an “institution” on the model of the big Houston firms. “Our goal was to be able to serve any client on any matter anywhere in the world,” Johnson says. Today, Johnson & Swanson has 170 lawyers and a dazzling client roster headed by the likes of Cadillac Fairview, Docutel Corp., Frito-Lay Inc. and the Texas Society of CPAs.

Hughes & Hill was founded by four young lawyers – Tom Luce, John Castle, Dan Hennessy and Phil Smith – who were willing to give up the security of partnerships in older firms for a chance to move up faster on their own. Their hustle and enterprise almost immediately gained them an impressive client, Ross Perot’s Electronic Data Systems (EDS). Hughes & Hill grew up with EDS, which was a $120 million company in 1975 and now is a $510 million company. (A critical point in this association was the crisis in Iran, when Luce helped EDS recover $20 million owed to the company by the Iranian governmerit.) Early on, they also captured another comer, Mercantile Texas Corp., which is now a holding company for 27 banks.

From the beginning, Hughes & Hill made it policy to recruit the best talent possible (all three clerks hired in 1973 were Harvard heavyweights) and made numerous “lateral” hires, most notably tax expert Vester Hughes and former Texas Attorney General John Hill.

Jones, Day represents a new phenomenon for Dallas: an outside firm entering the city and taking hold. To establish a base quickly, the firm merged with the Dallas firm of Meyers, Miller, Middleton, Weiner & Warren in 1981. Besides staking out new territory in a thriving Sunbelt city, there were other compelling reasons for Jones, Day’s move to Dallas: Two of the firm’s major clients (Diamond Shamrock and National Gypsum) had just transferred their headquarters here, and Tram-mell Crow had retained the firm as corporate counsel.

The precursor to Haynes and Boone was a one-man office run by Dick Haynes, now managing partner of the firm. Haynes operated on his own for three years during the mid-Sixties, then was joined by Mike Boone in 1967. They built their reputation on a flourishing securities practice. “It was a hot issue market in the late Sixties and early Seventies, with lots of companies going public,” says Boone. “This provided our client base, the springboard for our growth.”



HIRING NEW talent has become an obsession with Dallas law firms. No longer content to fish mostly in Texas waters, they cast their nets across the country and scour the same top schools for the students sought by major firms nationwide.

Ten years ago, Ivy League law school graduates snubbed Dallas; today, this city is as in as BMWs. Not only has Dallas managed to escape the worst of the recession, it also can offer young attorneys something that many firms in New York, Washington, D.C., and even Houston can’t: the likelihood that associates will make partner and the promise of doing important work from the start.

Waging recruiting wars in the elegant trenches of law firms is expensive. The battle involves lawyers’ time as well as up-front charges. First, there’s the matter of salaries. When every firm wants the same bodies, the asking price goes up. This year, the starting salary in the average Dallas law firm is $35,000-that’s for a freshly minted lawyer about 25 years old.

The case of Alan Loewinsohn, a fourth-year associate with Johnson & Swanson, illustrates why J&S has a very high acceptance rate among clerks offered associate positions. On the same floor as John Johnson but in a modest office cluttered with a Lexis terminal, exhibits for a pro bono publico police brutality case and the usual fat folders, Loewinsohn recalls what persuaded him to choose a Dallas firm over a San Francisco firm. “The difference between the two was [like] the difference between night and day,” he recalls. The San Francisco firm left him to his own devices. He became quite familiar with the firm’s library, but not with the lawyers and only slightly with the city.

In contrast, Johnson & Swanson saw to it that Loewinsohn met most of the members of the firm, was introduced to the city and was supervised in his work. More specifically, he was housed in the same apartment complex as the other clerks, taken out to lunch and dinner regularly (members of the firm are assigned this duty) and escorted to plays, ball games, parties and barbecues. On the work front, his supervising lawyers made sure he didn’t spend too much time in the library and was fed some interesting work. Naturally, when the summer was over, he had no trouble making his choice.

But not all recruiting is done at the entry level. When firms expand rapidly (especially when they expand into new fields), they need seasoned stock, which is usually obtainable by raiding their competitors. Genteelly called “lateral hiring,” it’s the latest weapon in the battle to build bigger law firms. Tax expert Richard Freling recently left Jenkens & Gilchrist for the greener pastures of Johnson & Swanson; he was soon followed by two colleagues. Haynes and Boone swallowed up almost an entire firm of 12 lawyers last year; Gardere & Wynne did the same in acquiring five patent lawyers. In February, four from Crutcher, Hull, Jordan and Duffy joined the ranks of Hughes & Hill. Not all gains are due to cannibalism, though; firms also raid the government when they can. Johnson & Swanson lured David Glickman to Dallas from his position as deputy assistant secretary of the Treasury for tax policy; and Locke, Purnell coaxed David Bickel away from his post as an assistant U.S. attorney.



ONE OF THE oddities about law firms is that size does not necessarily mean visibility. Anonymity can be dignified, but it has its disadvantages, particularly when a firm wants to lure new clients. A few Dallas law firms are taking discreet steps to create a higher profile for themselves. Some have even hired marketing consultants and public relations counselors, who have recommended recruitment brochures – discreet, of course, and handsome, but not too slick or expensive-looking.

Since the Supreme Court ruled in 1977 that lawyers can advertise, even the most hidebound corporate law firm has investigated ways to project its name. A member of a charitable board of trustees, for example, can now be identified by law firm membership.

Since corporate attorneys scorn the garish tactics of their hungrier brethren (“Divorce: $75; traffic tickets: $50”), advertising is subtle. Corporate attorneys rely on a certain amount of word-of-mouth. They also know that in the course of business they will meet many corporate executives across a negotiation table – on the other side of the transaction. When a lawyer’s performance is especially noteworthy, that word spreads too.

One of the surest routes to visibility is to sport a well-known name on the corporate letterhead. Among Dallas lawyers, the most famous name is Robert Strauss, but even he acquired his reputation outside legal circles. Akin, Gump, Strauss, Hauer & Feld has benefited from Strauss’ connections (at least in Washington, where the branch office is larger than the home office); and now the firm has hired Ver-non Jordan of the Urban League for his political connections. Hughes & Hill hired former Texas Attorney General John Hill to add to its Austin office. And big names appeal to big egos; many people would like to say, “Bob Strauss is my lawyer.”

The most reliable route to such public prominence is through politics, but Dallas law firms are uneasy about nurturing a budding politician. They don’t know whether they can afford to (in effect, Akin, Gump decided it couldn’t afford former City Councilman Lee Simpson) or whether a politician/lawyer would alienate as many clients as he or she might attract. But Dallas lawyers do tend to catch political fever, even if it’s only to conduct campaigns for other candidates. George Bramblett of Haynes and Boone was co-chairman of Gov. Mark White’s campaign in Dallas County. Ron Kessler of Jones, Day served as Dallas County Democratic Party chairman and ran unsuccessfully for the state Senate, and Sid Stahl of Geary, Stahl & Spencer has just completed two terms on the City Council. In such cases, the firm may neither encourage nor discourage the fledgling politico, but when ambitions get larger, they sometimes disapprove. Thompson & Knight, for example, was less than enthusiastic last year when David McAtee toyed with the idea of running for mayor.

Law firms tend to look more favorably upon attorneys who participate in bar association politics. Morris Harrell of Rain, Harrell, Emery, Young and Doke has spent this year serving as president of the American Bar Association, almost a full-time job. It’s been no problem for the firm, according to Harrell, who calls it “a contribution by the firm to the profession.” His partner, Barney Young, says that “it’s considered to be a benefit to the firm as well as to Harrell.”

A safer, less time-consuming route to public prominence is serving as a trustee or director for an educational, cultural or civic organization. The names of Dallas lawyers are now conspicuously present among the trustees of the Dallas Symphony, the Dallas Opera, the Dallas Ballet, the YMCA, St. Mark’s School, Goodwill Industries, the Boy Scouts and the Dallas Chamber of Commerce.

Significantly, eight lawyers (John Johnson, Henry Gilchrist, Mark Martin, Jack Little, Robert Blumenthal, Tom Luce, Neil O’Brien and James Laney) have been named to the elite Dallas Citizens Council, that cadre of corporate chieftains who once all but ran the city. Until 1982, the Citizens Council purposely excluded lawyers from its ranks, believing that they didn’t get sufficiently involved in community affairs. The change of heart came about for two reasons: Law firms are now so large (the entire staff of Johnson & Swanson consists of more than 300 people) that a senior partner presumably can marshal the money and manpower necessary to contribute to a cause; and lawyers are now among the only rich and powerful people left in Dallas who are permanently tied to the city. The old entrepreneurs who built the city and once formed the backbone of the Citizens Council are giving way now to a new “managerial” type who regard Dallas as simply one stopping place among many in a career. So lawyers, almost by default, have become an important group with a vested interest in the health of the city. As a consequence, they are now welcome in the clubs and assemblies that make civic and cultural decisions. And since attorneys have come to recognize the public relations value of such participation, they are eager to join.



IN THE LAST analysis, it takes money to buy justice – or even a fighting chance at justice – and Dallas law firms have several ways of dividing up their spoils. All large Dallas firms use some kind of pyramid structure, with the “Indians” earning a fixed salary and having little say in running affairs and the “chiefs” drawing a percentage of the profits and calling the shots. Since firms pay associates wholesale (i.e., a yearly salary) and sell their services retail (i.e., by the hour), it’s not hard to figure out where the profits come from. At some of the younger firms, senior partners do put in their share of billable time, making the firm that much more profitable. At Hughes & Hill, for example, many of the senior partners (most of whom are only in their 40s) bill as many hours as their junior associates.

Since partners collectively are theoretically equal, they all have a say in running the firm. In practice, however, most decisions are made by committee. And the truly critical decisions – such as who gets paid what and whether the firm will move its offices – are made by the lawyers with the most power (except in “democracies” such as Thompson & Knight). Several years ago, for example, Bill Tinsley was representing James Ling, then head of the LTV Company. When Tinsley announced to his colleagues that he was moving his office into Jimmy Ling’s building and invited his cohorts to join him, the rest of the firm took the hint and followed suit.

Whether and where a firm moves is a decision made only once every 10 or 20 years. Who gets paid what is decided yearly. Once some criteria for dividing the firm’s profits are established, that decision should cause little friction.

Roughly speaking, there are two methods of payment: by seniority or by contribution. In New York law firms, where growth leveled off long ago and where only one or two associates out of 30 make partner, the seniority principle works well. Since so few will be elevated, expectations are lower.

In Dallas, however, where four out of five associates can expect to become partners and where firms are constantly expanding, “contribution” is the rule – and even here, some of the older firms still give great weight to seniority. Contribution is defined in four ways: bringing in clients (“them that brings it in takes it out”), doing the most work (hours billed), doing the best work (reputation) and doing firm work (serving as head of the recruitment committee, for example).

Even under the pyramid system, nobody goes home poor. Associates start at $35,000 and may climb to $50,000 or $60,000 before making partner. Junior partners can expect to earn $120,000 and up; senior partners, $200,000. Up in the stratosphere, a few Dallas superlawyers made as much as $600,000 last year.

To generate that kind of money and to fund the enormous overhead, law firms must charge high fees, which in Dallas run from $55 an hour for a new associate to $200 an hour and more for experienced attorneys.

Since corporate firms tend to serve big clients, bills of $500,000 are not uncommon. Along with big bucks and big clients goes cachet. The relative prestige of law firms depends largely on the size and prestige of their principal clients, as well as on the significance of their legal negotiations.

Law firms are better-cushioned from the bumps and jolts of the economy than are most other enterprises. In good years, lawyers do contracts and securities; in bad, they do bankruptcies (after all, the bankruptcy lawyer gets paid first). It is common practice for a law firm to trim its bill when a case does not go to the satisfaction of the client or to add a premium when it does.

Considering the importance of keeping clients happy, it doesn’t take a Harvard graduate to figure out that the pressures – and the stakes – in a large law firm are enormous. Maintaining a firm is extremely expensive, and when a firm loses a client (or, worse, an important partner), the word gets out fast. Too many defectors, whether clients or partners, can mean a slide toward disaster.

The supply of big-league clients and huge bankrolls is not limitless, even in Dallas. Moreover, the number of firms jockeying for position is fairly large, perhaps 10 or 12. In Houston, by contrast, all the shouting was finished 20 years go, and today only four firms claim the lion’s share of the legal action: Vinson & Elkins, with a total of 326 lawyers; Fulbright & Jawor-ski, 311 lawyers; Baker & Botts, 245 lawyers; and Bracewell & Patterson, 112 lawyers. Washington and New York also have their well-entrenched prominent firms.

For now, Dallas is still up for grabs, though a number of observers think the day is coming when three or four firms will dominate. Those firms will be large-200-plus – and full-service (with a national and international practice).

The current growth in Dallas law firms is not just a matter of self-aggrandizement but of survival. Nothing guarantees that a firm that’s prominent in 1983 will even be around in 1993. The old certainties are fading away. Today, even older, established law firms like Thompson & Knight are taking their cues from “emerging” firms like Johnson & Swanson – hiring aggressively, expanding into new fields, luring well-known attorneys from elsewhere, emphasizing speed, streamlining operations and, in general, girding themselves for the coming showdown.