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Why National Law Firms Are Flocking to Texas

They’re finding there’s a right way—and a wrong way—to enter the red-hot legal market.
By John G. Browning |
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In the early 1800s, when Texas was still part of Mexico, thousands of Americans in search of prosperity headed for the fledgling territory, leaving behind cabins and fences with “Gone to Texas” scrawled on them. Fast forward to today, and a new kind of scramble to get here is underway. National law firms are pouring into Dallas and Houston to open or expand outposts, hoping to cash in on the state’s economic boom. 


The National Association for Law Placement’s Buying Power Index listed Dallas as No. 1 for buying power, based on starting salaries at Biglaw (firms with at least 1,000 attorneys, company-wide), making the city even more attractive. In the last five years, nearly 30 national law firms have moved into Texas, while a dozen other national firms have added significantly to their existing Dallas branches. Legal search professionals estimate that more than 100 Dallas-area business lawyers made lateral moves in 2014 from Texas-based firms to those based outside of the state, or saw their firms merge with or get acquired by an out-of-state suitor.


Both Dallas and Houston have been attractive markets for expansion, but some legal search experts say Dallas has the edge. Among them is Mike Ginani, principal with Aspire Legal Search Group in Dallas and a veteran legal recruiter who has advised national law firms expanding into Texas. “Dallas has such a diverse economy, including a busy technology arena, and it’s not as dependent on the energy sector as Houston,” Ginani says. “Plus, the energy boom that spurred much of the expansion into Houston has resulted in a lot of the lateral talent pool being somewhat picked over.” 


Historically, both the Dallas and Houston legal markets were viewed as hostile to out-of-state law firms. Texas-based firms kept interlopers at bay with lower rate structures and close relationships with companies based here. Attempts to open a Dallas or Houston office by parachuting partners in from a national firm’s New York or Washington, D.C., “mothership” were usually short-lived. Those that did thrive usually dipped their toes in the water by showcasing their expertise in a particular practice area. National powerhouse Jones Day, for example, gained its foothold during the savings and loan crisis 30 years ago, and has since grown its Dallas office to over 170 lawyers.


The most impressive “invasions” of the Dallas legal market have involved starting an office with a specific practice group of laterals from another firm or by merging with or acquiring an existing Dallas firm—or a combination of the two. Often a downturn in fortunes for one law firm represents an opportunity for others. For example, lawyers leaving Patton Boggs (both before and after its merger with Squire Sanders) proved integral to the Dallas expansion plans of several nationals. In July 2013, partner James Chadwick led an exodus of 24 laterals from Patton Boggs to open the Dallas office of Holland & Knight, giving the national firm its only presence in Texas. 


In March 2014, Virginia-based McGuire Woods opened its Dallas office with six partners who came from Patton Boggs. Before the end of the year, that office had more than tripled in size to 20 lawyers, adding to the firm’s growing headcount of more than 1,000 lawyers in 20 offices nationwide. Akash Sethi, managing partner of the Dallas office, says the plan is to grow across the board. “We’d love to see the office expand like other McGuire Woods offices and be 80 lawyers,” he says. 


In October 2014, Chicago-based Schiff Hardin opened its Dallas office with a core group of nine finance, corporate, and securities lawyers—the majority of whom came directly from Squire Patton Boggs. The laterals found the firm’s longevity to be a good fit for their practice, says Gina Betts, coordinating partner for Schiff Hardin’s Dallas office: “They have been around for 150 years, so, obviously, they have a proven business model.” 


Like McGuire Woods, plans call for across-the-board growth. “We view Dallas as the biggest growth market in the middle South, and so we wanted to have a significant presence there,” says Ron Safer, Schiff Hardin’s managing partner in Chicago. “We anticipate fully growing out the Dallas office.”


For some national law firms, the road to Dallas led not to a specific practice, but to an entire firm. Such was the case in the October 2014 merger of 18-lawyer David & Goodman with 600-lawyer Philadelphia-based Fox Rothschild. Although Pennsylvania firms have been eager to enter Texas because of the shale gas and oil market, for Fox Rothschild and David & Goodman, the fit was more about culture. Clinton David had resisted earlier overtures from out-of-state law firms wooing the firm that he grew over 30 years, but Fox Rothschild’s “small-firm attitude” appealed to him and made it “a no-brainer.” The firm now counts Dallas as its 20th office.



Leveraging Healthcare

Sometimes, expansion into the Dallas market has been achieved through luring high-profile talent. Los Angeles-based powerhouse Gibson, Dunn & Crutcher was one of the first national law firms to open a Dallas office in the early 1980s. Lately, it has significantly expanded by adding local talent, including former Dallas mayor and U.S. Trade Ambassador Ron Kirk and former Texas Solicitor General James C. Ho. 


Sometimes, expansion into the Dallas market has been achieved through luring high-profile talent.

For Kansas City-based Polsinelli, an AmLaw 100 firm with more than 740 lawyers in 18 offices across the country, breaking into the Dallas legal market came down to leveraging a hot practice area—healthcare—to the right local talent. The firm found the perfect fit with healthcare specialist Jonathan Henderson, who opened the Dallas office in 2011 along with Bill Swart and Chad Knight. Just three years later, the office has grown tenfold to 30 lawyers. The firm has plans to move to office space in Frost Tower, with room for 125 lawyers and plans to hire additional laterals in areas including intellectual property and IP litigation, corporate law, and real estate, among others.


Of course, not every national law firm has experienced the meteoric success of a Polsinelli. San Francisco-based Gordon Rees Scully Mansukhami may have been recognized recently by The American Lawyer as one of the fastest-growing AmLaw 200 law firms in the country, but the Dallas office of this 600-lawyer, 32 office firm hasn’t helped much. Known for its insurance defense practice, the firm opened its Dallas office in August 2005 with one partner from California. The office enjoyed impressive growth early on, hitting the 20-lawyer mark in late 2008, but lateral departures caused the number of attorneys to plummet. Gordon Rees has since rebounded somewhat in Dallas to 15 lawyers. 


Another West Coast insurance defense firm, Lewis Brisbois Bisgaard & Smith, opened its Dallas office in April 2011 and enjoyed good early growth, hitting the 15-lawyer mark in late 2013. By the end of 2014, however, attorney departures and unsuccessful lateral recruiting efforts left the office with only six partners and four associates.


(Full disclosure: I was a partner in the Dallas office of Gordon Rees from September 2007 through September 2009 and in the Dallas office of Lewis Brisbois Bisgaard & Smith from April 2011 to December 2014.)


In contrast, Wilson Elser Moskowitz Edelman & Dicker, somewhat of an East Coast counterpart to Gordon Rees and Lewis Brisbois, has been more measured and steady in its growth. Its Dallas office, which opened in 1992, now numbers more than 40 attorneys and is a key player in the New York-based firm’s national strategic growth and operations. Under the leadership of Regional Managing Partner Stratton Horres, Wilson Elser’s Dallas office has risen to become one of the firm’s most profitable.


Not every Dallas-based firm is jumping on the national bandwagon. Munsch Hardt Kopf & Harr, for example, has rejected a number of out-of-state suitors over the years, says the firm’s CEO, Phil Appenzeller. By keeping the firm’s rates lower than many national firms and by focusing on Texas-based, middle market companies, Appenzeller says the 125-lawyer firm is doing just fine. “Our clients don’t typically clamor for us to have offices in other jurisdictions,” he explains.


With the strength of the Texas economy and the continuing importance of the energy sector, don’t expect the invasion of out-of-state law firms to slow anytime soon. Experts anticipate national firms to become even more sophisticated, discerning, and strategic in planning a Dallas expansion. As legal recruiter Ginani points out, “Firms are looking at what’s worked and hasn’t worked in terms of other firms’ experience. And they’re paying closer attention to how a firm or a group of laterals fits in with their firm culture, and to how practice areas are consistent with the national firm’s identity and client base. Some firms have struggled to open a Dallas office, or have even closed a Dallas office, because they didn’t resolve these issues early on.”  

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