In 1902, two attorneys opened a small law firm called Andrews & Ball in Houston. Its goal, in the words of co-founder Frank Andrews: “That the firm would have always the full confidence of clients and the trust of all people.”
The firm began representing railroads, including the new Gulf Coast Lines, which was reorganized in 1917 with Andrews as receiver and later as chairman. They represented banks, including newly formed Bankers Trust Co., creating long lasting ties with financier Jesse H. Jones, as well as Hughes Tool Co., formed by wildcatter Howard Hughes—the inventor of the rotary drill bit—in 1914.
That same firm, now called Andrews Kurth Kenyon, is now up to 400 lawyers with 12 offices around the world. But it has continued to follow Andrews’ mantra along with trying to create an amiable place to work.
Chairman Tom Perich said in an interview with The Texas Lawbook that he joined the firm after graduating from University of Texas’ law school in 1976 because of its reputation for excellence as well as being a “kinder, gentler” place to work compared with some of the big law firms of the day. “They still did well and still made money, but they were more laid back,” he said.
Today the firm is well known for its corporate practice, counseling companies on a wide range of matters – most notably capital markets and mergers and acquisitions – in industries ranging from automotive to energy to technology. AKK also is known for its banking/finance and real estate groups.
Standing left to right: Lee Larkin, James A Baker III, Larry Phillips [decd], Doug Bech, Bill Miller, Clay Lillienstern, Ed Turley, Mark Thompson, Dexter Peacock, Fred Knapp, Larry Bellatti, David Graham, Dale Hortenstine
Seated left to right: Bob Weatherall, Will Lummis [decd], John Cabaniss, David Elkins
“We have an incredible business practice, in the broad sense,” Perich said. “Big corporate securities, big energy, big finance and big real estate have always been our core expertise. But now we have litigation, bankruptcy and intellectual property lawyers, which make up 45 percent of the firm. The firm is very balanced. We try to hit on at least seven cylinders.”
According to data from Mergermarket, AKK has advised 207 Texas businesses on mergers and acquisitions and joint ventures since 2011 for a combined value of $207 billion.
AKK also is ranked among the top-five law firms in Texas by Acritas, which publishes its annual U.S. Law Firm Brand Index based on responses from 100 general counsel. The firm is in the top 75 country-wide, not moving much over the last few years given increasing competitiveness among ever-expanding law firms. But it’s doubled its brand strength since the index began in 2012, Acritas notes.
“The firm has been around for a long time,” says Bill Cobb, a law firm consultant based in Houston. “I’ve seen it grow and mature but hold its culture together while continuing to do well.”
Nepotism presents a big time bonus
The firm has had some famous partners over the years. AKK’s other co-founder, Thomas Ball – a personal friend of Howard Hughes – was a U.S. congressman. The town of Peck outside Houston renamed itself Tomball after he helped route a railroad through there. Ball also is responsible for convincing the U.S. government to fund the dredging of the Houston Ship Channel, which made the Bayou City one of the largest shipping ports in the U.S.
Barred by nepotism from working at his father’s firm, Baker Botts, James Baker III started his legal career at Andrews Kurth after graduating from UT’s law school 1957. He stayed there until he became undersecretary of commerce under President Gerald Ford in 1975. Baker later served as chief of staff and treasury secretary for U.S. President Ronald Reagan and chief of staff and secretary of state for President George H.W. Bush.
According to an article in the Washington Post in 1981, the man who hired Baker, Milton “Mickey” West, recalls a senior partner saying of the Princeton-educated legal upstart, “I don’t care much about academics. Just make sure he’ll stand back-to-back with me in a whorehouse fight.” West — who was Howard Hughes’ tax lawyer — called Baker “a businessman’s lawyer” (West died in 2014).
In an interview with The Texas Lawbook, Baker said that Baker Botts was willing to make an exception for him to join the firm, but he joined Andrews Kurth anyway. “It was the best thing that ever happened to me,” he said. “If I had gone to Baker Botts, everyone would have thought that it was only because my dad was a partner.”
Baker thought he wanted to be a trial lawyer and was put on the insurance docket. But after three or four trips to the courthouse, he decided to do general business law instead. “I couldn’t stand it because everyone was lying and there was no penalty for perjury,” he said.
Other notable partners were William R. Lummis, who died this past April. He’s probably best known as administrator of the Hughes estate (he and Hughes were first cousins) and chairman and CEO of Howard Hughes Corp. and other Hughes businesses, including Hughes Corp., Hughes Properties Inc., Hughes Helicopters Inc. and Hughes Airwest. In 1990 he retired as CEO of the remaining Hughes estate companies and moved from Las Vegas back to Houston but continued to serve as chairman of various Hughes enterprises until June 1996, when they were acquired by the Rouse Co.
Besides Hughes Tool, some of the firm’s other notable clients have included Anderson & Clayton, Standard Oil, Kirby Lumber Co. and the Houston Land Corp., developers of the Montrose addition in Houston.
Standing left to right: Harry Jones Jr., David Elkins, Dexter Peacock, Bill Miller, Fred Knapp, Jim Carroll, Ed Turley, Frank Davis, Bob Weatherall, Lee Larkin
Seated: Clint Morse, Bob Bradley, John T Cabaniss
The Five Stages of AKK
AKK had five distinct periods in history, according to a book some of the firm’s partners prepared for the firm’s 100th anniversary (including longtime administrative partner Clinton F. Morse, who died last year).
The first spanned the years between 1902 to 1936, when its focus was on organizing, building and sustaining the firm as an institution. During that time it weathered World War World I, which saw three of its 13 lawyers called into service, including Andrews as draft board chairman (the other two died); and the Great Depression, which saw the death of four of its five senior partners.
One of the highlights during that period came in 1923, when the firm – then known as Andrews, Ball & Streetman (former appellate judge Sam Streetman, who was a college friend of Andrews, joined in 1904) – won a $2 million judgment in a receivership case, one of the largest in Texas at the time.
In 1933, AKK represented two New Deal agencies, including the Reconstruction Finance Corp. (which was chaired by Jesse Jones) and the Federal National Mortgage Corp. The firm also helped organize what would become General Crude Oil Co., which was later bought by International Paper.
Andrews died in 1936 and was succeeded by Melvin Kurth, who had joined the firm in 1913 (he ended up serving as administrative partner for 27 years). Two years later the firm helped launch Southland Paper Mills Inc., the first paper mill in the South, which was purchased by St. Regis Paper 40 years later.
The firm’s second period was from 1937 to 1947, which was all about holding the firm during the turbulence of World War II and its aftermath.
Though 10 of its 23 lawyers were called into service, the firm still managed to do good work for its clients; after securing a win at the U.S. Court of Appeals for the Fifth Circuit, for instance, the firm won a $1.2 million tax refund for Hughes Tool.
When a partner left—taking the railroad business with him—the firm was forced to reorganize in 1946 as Andrews, Kurth, Cambell & Bradley. But it continued to ring up business from the Hughes organization, including representation of Howard Hughes Jr. in 1947 before a congressional committee investigating his expenditure of federal funds on the problematic development of the Hercules H-4, a giant military flying boat made primarily of wood dubbed the “Spruce Goose.”
In the third period, between 1948 and 1971, the firm concentrated on expanding its practice while winning important cases for its clients. In 1951, it secured a record Oklahoma federal court settlement for Hughes Tool in a patent infringement suit against Chicago Pneumatic Tool.
AKK also replaced its railroad business with work on pipelines in the early 1950s, helping to create Pacific Northwest Pipeline Co. and El Paso Natural Gas Co. It later represented El Paso in years of antitrust litigation over its purchase of Pacific Northwest Pipeline, which was eventually divested.
Later in the 1950s the firm represented the founders of Southwest Forest Industries, which in 1987 was acquired by Stone Container Corp. for $411.8 million. The firm also helped organize Southern National Bank, the first federally chartered bank in downtown Houston in 30 years (it went public in 2004 as SNB Bancshares and was acquired by Prosperity Bancshares in 2006).
In the 1960s AKK became nationally known for its bankruptcy practice when it represented the trustee in the reorganization of Westec Corp., a once high-flying Houston conglomerate that imploded in 1966 after disclosure of a massive stock manipulation. Its two top executives, CEO James W. Williams and president Ernest M. Hall Jr., were convicted of securities fraud and sentenced to 15 and 8 years in prison, respectively.
The firm also helped Hughes Jr. acquire casinos, hotels and restaurants in Las Vegas after he sold his 78 percent stake in TransWorld Airlines in 1966, which netted him $546 million.
In its fourth period between 1972 and 1991, AKK worked toward forging a national identity as the practice of law became a national business. AKK expanded geographically and established regional offices in Washington, D.C. and other key financial centers in the country. It also expanded its energy practice with Transcontinental Gas Pipeline Co. retaining it as financing and regulatory counsel in 1977, and handling its litigation over “take or pay” natural gas sales contracts to its industrial customers.
The firm continued to service important clients like Hughes Tool, which launched public offerings of its oil tool division and the rest of its assets under Summa Corp. in the early 1970s. It also took a case for Hughes all the way to the Supreme Court, which reversed a $145 million judgment against Hughes Jr. after long and complicated litigation with TWA.
Dissolving an empire
When Hughes Jr. died in 1976, the firm began what would turn out to be 20 years of work on tax planning, administration, litigation, asset liquidation and inheritance disputes involving his estate.
Perich said one of his earliest jobs at the firm was to try and find a signed will from Hughes. “We prepared 20 wills for him but he never ended up signing any of them,” he said.
John Cabaniss, a onetime M&A partner at Andrews Kurth who retired in 2013, worked on a lot of Hughes’ asset sales, including Hughes Airwest’s sale to Republic Airlines in 1980 (“a tough deal,” he said, given that he had to deal with the unions). Hughes Helicopter (to McDonnell Douglas in 1984 for $480 million, which was considered a big deal at the time). The Hughes casino and hotels properties required negotiations with Las Vegas powerhouses Steve Winn (“He just wanted the real estate.”) and Kirk Kerkorian, occasionally lasting all night.
Cabaniss said the hardest years at the firm for him were in the mid-1970s, when the firm lost four of its major partners. Leon Payne, 56, died of heart failure. Raymond Cook, an attorney for Hughes Jr., was killed in an automobile accident. James A. Drury, who also did work for Hughes, left the firm, while Baker returned to the firm in 1973, only to return to government two years later. “We were all young partners and had to grow up in a hurry,” Cabaniss said. “We kept the firm together and the clients happy.”
During the tough economic times of the 1980s, the firm — which took the shortened name of Andrews Kurth in 1982 – handled some high-profile bankruptcies, including Braniff, Continental Airways, the Hunt brothers, Global Marine, Republic Bank and Aetna. It also represented the Federal Savings and Loan Insurance Corp., or FSLIC, in closing and liquidating insolvent savings and loans.
The later 1980’s saw law firms merge like crazy and AKK wasn’t immune to such overtures. But rather than follow the trend, the firm set out to become bigger and stronger through the additions of offices in Los Angeles in 1987, New York in 1990, the Woodlands in 1993 and London in 1995. By the end of the 1990s, the firm had grown to more than 300 lawyers.
AKK also tried to innovate, including creating the master limited partnership for energy and other assets. It also was able to settle tax claims with California, Texas and the IRS over Hughes’ estate; played a role in privatizing Argentina’s state-owned oil and natural gas companies; and represented El Paso Energy on its $4.2 billion acquisition of Tenneco’s natural gas assets in 1996.
The years 1992 through 2002 were a time for the firm to restructure for the future. It revised its organizational structure, including the appointment of Howard Ayers as managing partner and CEO.
During that period, the firm advised on the sale of Hughes’ real estate operations in Las Vegas to the Rouse Co., which distributed shares to Hughes’ beneficiaries. The sale thus closed the Hughes estate and the firm’s long representation of the family and its businesses.
The late 1990s also saw several attorney groups leave the firm, which caused it to reflect on its position in the marketplace. “I was very disappointed when eight or nine lawyers in our corporate group left the firm,” retired partner Cabaniss recalls. “I didn’t really understand it, as the firm had been so good for me. But it was a reflection of the environment today: You follow the money.”
In the end, the firm decided to ramp up and expand as a larger, national player.
In 2001, AKK merged with Mayor, Day, Caldwell & Keeton, which combined two top Texas firms with complementary practice strengths and compatible cultures – and brought its lawyer count to 350.
The firm didn’t stop its expansion there. In 2003 it added a large group of technology lawyers from Brobeck’s failed Austin office, a corporate and finance team from Arter & Hadden in Dallas and a patent group in Washington, D.C. from Dorsey & Whitney.
AKK also became known for its diversity and women’s programs. In 2004 it launched a Women’s Initiative Team to recruit, retain and advance female lawyers. And in 2007, under current managing partner Robert Jewell, it hired Elizabeth Campbell as partner and chief diversity officer. For the next two years, the firm was ranked as one of the top law firms for women.
“When I came to work at the firm, there were three women and 60 male Caucasians in one office,” Perich recalls. “Now half of our attorneys are women and we have every race – even a former communist partner – in offices all over the world. We try to change with the times but we’ve managed to stick with our core values.”
The transformation has continued. Between 2005 and 2013, the firm opened new overseas offices in Beijing and Dubai and expanded its London office. And last year the firm boosted its intellectual property practice even further, merging with New York City-based Kenyon & Kenyon.
As word spread this fall of the departure of some of its capital markets/M&A lawyers to Sidley Austin (including star partner David Buck) after defections of other AKK lawyers to Greenberg Traurig, Jackson Walker and King & Spalding, AKK was reported to be considering a merger with Richmond, Va.-based Hunton & Williams.
Neither firm has been willing to comment. But such a combination would create a legal giant with 1,000 lawyers and about $850 million in revenue.
Perich admits that one of the big challenges AKK faces is not just competing with Baker Botts and Vinson & Elkins, but “every law firm everywhere,” including Latham & Watkins and Kirkland & Ellis, which have changed the legal landscape in Houston.
“It’s a problem for all of the Houston firms, with the East Coast and West Coast firms having deep pockets, overpaying people and throwing money around,” he said. “Growth is part of our strategic plan, but we don’t want to sacrifice core values or profitability or culture. If we do a deal with somebody, it will have to check all those boxes.”
If it happens, it would be another transformative move for a Texas law firm that’s proved to be nimble for 115 years.