By Mark Curriden, JD
Carol Payne thought she would never leave Vinson & Elkins and all the benefits that came with being a partner in the Dallas office of the 750-lawyer international law firm.
But last month, after 13 years at V&E, Payne decided to jump to Taber Estes Thorne & Carr, a 14-lawyer Dallas boutique created four years ago.
(photo courtesy of
The Dallas Morning News)
Legal recruiters, law firm management experts and even general counsels of large corporations say that Payne is an example of a fundamental shift taking place in the practice of business litigation in Texas.
More than 40 large firm partners and associates in Austin, Dallas and Houston made lateral moves to litigation boutiques during the first four months of 2012, according to research by The Texas Lawbook.
Industry insiders say that big law firm litigation sections are not going away but they have been slowly shrinking during the past decade. Some are half the size they were in 2000.
Meanwhile, litigation boutiques, which often specialize their specific practices in areas such as employment law, intellectual property or securities matters, are booming.
In Dallas, 12-to 30-lawyer firms such as Lynn Tillotson Pinker Cox, Gruber Hurst Johansen Hail Shank, and Sayles Werbner are expanding and experiencing record revenues. The same is true with similar sized litigation boutiques in Houston, such as Yetter Coleman, Schiffer Odom Hicks & Johnson, and Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing.
Nearly every partner at all these boutiques previously practiced at a large, full-service firm.
“This trend is undeniable – and in some cases, it is strategic and by design,” says Altman Weil principal and consultant Ward Bower. “Major corporate firms are seeing clients take their litigation work to litigation boutiques and the lawyers at those major law firms are leaving to follow the work.”
Bower and other legal industry insiders say the reasons are simple: large corporate law firms in Texas are focusing more and more on high-dollar transactional work, which allows lawyers who handle mergers, acquisitions, joint ventures, capital markets, project finance and tax law to significantly increase their rate structures.
The problem is that general counsels at businesses such as AT&T, Dell, and even some of the energy companies, have become increasing sensitive to legal fees, especially in litigation matters.
“Law firms such as Baker Botts and Vinson & Elkins are less concerned these days with headcount and more interested in profitability,” says Bower, who counsels a handful of Texas firms.
The major law firms have strategically decided to focus on transactional projects and corporate clients that are less sensitive to $700 to $900 an hour rates.
By contrast, companies are only willing to pay $400 to $700 an hour for most litigation matters.
“Most large full service law firms have over-priced themselves and most businesses simply cannot afford $800 or $900 an hour,” says Michael Lynn of Lynn Tillotson. “We’ve deliberately priced ourselves at $650 an hour and we clearly are not starving. We are busier than we have ever been.”
Lynn says he receives about 30 resumes a year from lawyers at large law firms who want out.
“The two primary inhibitors to business development for a litigator at a major law firm are inflexible rate structures and client conflicts of interests,” says Sherrard “Butch” Hayes, a partner at Weisbart Springer Hayes in Austin.
Two months ago, Hayes left a prestigious position as managing partner of Fulbright & Jaworski’s Austin office in order to join the new start up litigation boutique.
“I can do things here I could not do at Fulbright or at any major law firm,” says Hayes. “I can be creative in developing alternative fee agreements for clients that simply are not possible at a large firm.”
Houston securities litigator Kenneth Held, who recently joined Schiffer Odom as a partner, says only a few years ago, large corporate clients went to one full-service law firm to handle all their legal needs.
“That day is long gone,” says Held. “Clients are not hesitant to go shopping. And they have come to realize that litigation boutiques offer as much or even more expertise than the traditional large law firm, but without the large law firm price tag.”
“Large law firms will always have significant litigation sections, but I think we will see a lot more of their partners going to boutiques,” he says. “It’s inevitable.”
Legal recruiters and consultants say that very few of these lawyers are pushed out of their large corporate firms, which are increasingly focused on transactional practices, such as mergers, acquisitions, joint ventures, capital markets and tax law.
But these corporate firms aren’t necessarily begging them to stay and they certainly are not replacing them with other litigation laterals.
Charlie Parker, a securities litigator who left 650-lawyer Locke Lord earlier this year for Yetter Coleman, a 32-lawyer litigation boutique based in Houston, made the jump because he wants to try more cases and because he became tired of being shut out of so many matters because other lawyers at his old firm represented clients who posed a conflict.
In March, Sean Gorman quit as managing partner of Dewey & LeBoeuf’s Houston office to be a partner at Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, which has 25 attorneys.
“My decision was solely based on the fact that I want to practice at a smaller firm because I feel I am more in control of my life and my practice here,” says Gorman. “For me, it was entirely about wanting to be at a small firm versus a huge firm.”
Dewey had set Gorman’s hourly billable rate at $900, which he says made him too expensive for most prospective clients.
The reasons why the lawyers are jumping to the smaller specialized firms are, obviously, as specific as the individuals themselves.
“I went to law school to be a trial lawyer, to be in court,” says Payne, a 1993 graduate of Baylor Law School. “But fewer and fewer cases go to trial these days, especially at large firms today.“
“You have a feeling at a large law firm that you have no control or influence,” she says. “But at a smaller firm, I have much more of a voice, as a lawyer and as a woman.”
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