Beat them or join them?

Commercial litigation boutiques mull their relationship with Big Law

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By Paul Dailing
Editor

No one said David or Goliath.

No one talked about the little guy versus Big Law.

The conflict between commercial litigation boutiques and large firms’ litigation departments isn’t how one can topple the other, but how the firms and lawyers can use each other to refer cases, tackle conflicts of interest and patch gaps in the legal market. It’s freedom v. resources. Light and nimble v. large and powerful. Conflict-laden v. understaffed.

And it’s which one is going to snatch up the others’ legal teams.

“For a while, the smaller firms were disappearing into the bigger firms. I’m starting to see the ebb and flow go the other way,” said Bradley Riley Jacobs partner Todd Jacobs.

Jacobs has seen both Big and boutique from within.

Before joining his current boutique in May — the firm still operates as Bradley & Riley in Iowa, but as Bradley Riley Jacobs in Illinois — Jacobs was the Chicago managing partner of Am Law 100 firm Shook, Hardy & Bacon. Before that, he was the managing principal of mainstay Chicago boutique Grippo & Elden, which joined Shook in 2015.

“I think it’s an interesting market,” Jacobs said. “I think there’s a lot of different platforms that can be successful.”

Others aren’t as optimistic about every business models having a future.

“I think what you’re seeing in the Chicago market is that the middle firms are getting squeezed out, not the small ones,” said Gene Murphy, partner at Murphy & Hourihane. “The large firms truly are going to the big box superstores. They’re gobbling up law firms and it’s tough for the midsized firms.”

But for boutiques like Robinson Curley & Clayton, Big Law expansion has created cracks small shops can fill.

“The more that the national firms gobble up the small offices and create conflicts when they do it, that creates a market for us,” Robinson Curley & Clayton shareholder Alan F. Curley said.

Conflicts

Murphy said the potential conflicts of interest at a large, multioffice, multimarket firm were a constant frustration when he was at Bryan Cave.

“I was getting my brains conflicted out,” Murphy said. “You would come in with a nice piece of litigation and you’d find a Phoenix partner was representing [the other side] in Phoenix.”

A smaller firm can be more nimble in avoiding such conflicts, said Holly Harrison of Harrison Law. Harrison left Sidley Austin, where she had worked since 1985, to form her own practice last year. She intended to be a solo practitioner, but found enough of a workload she had to bring on staff. The firm currently has six other attorneys.

“It’s obviously no secret that at the very large Big Law firms, conflicts are a constant problem,” Harrison said. “I do think that a number of our clients do see a distinct advantage in that we’re also not representing their competitors.”

That said, Harrison recognizes that there will be work her boutique has to turn down in order to court long-term relationships with “institutional clients.”

“We are very loyal to them and they are very loyal to us and obviously we are going to be very protective of that relationship,” Harrison said.

These conflicts have been a boon to firms like Curley’s, which does a strong business in handling professional liability litigation for the plaintiffs’ side.

“The big firms, they don’t want to sue an accounting firm, they don’t want to sue a law firm,” Curley said.

Part of the attraction of referring litigation work to a boutique practice is that the boutique won’t turn around and try to poach the client for transactional work — the small firm simply doesn’t have the capability to handle that business.

“I see that as something that’s going to help smaller firms like mine,” Jacobs said. “We can do the case and give the client back to the firm that referred them to us.”

Also, a firm that turns referrals into clients soon finds itself without referrals.

“I don’t try to poach people in general,” Jacobs said. “I think your reputation follows you around.”

Steven Weiss, Honigman partner and former chairman of boutique firm Schopf & Weiss, said larger firms have gotten savvier about losing business through conflicts, increasingly asking clients to waive future conflict claims as part of the firm’s retention agreement.

“I think law firms have gotten smarter about that and there’s a greater use of conflict waivers, particularly advanced waivers,” Weiss said.

Murphy said the issue isn’t conflict so much as the perception of conflict, one where clients might err on the side of caution when seeking counsel.

“The bigger your firm gets and the more transactional work you do, the more conflicts you’re going to see,” Murphy said. “While you and I may probably agree that a conflict can be waived or it may not technically be a conflict, clients don’t see it that way.”

To Murphy, a bigger — and often unspoken — issue is not actual conflicts, but what he calls “business conflicts.” That’s his term for when a big firm refuses a case not because the other side in a piece of potential litigation is a client, but because the firm wants them to become one.

It’s, as Murphy put it, “when you get the phone call from one of the managing partners that the West Coast office has been pitching these guys for three years.”

“The business conflict issue is probably the biggest unnamed issue out there,” Murphy said.

Business models

One of the most seismic years for Chicago’s commercial litigation boutiques was 2015. That’s the year Grippo & Elden joined Kansas City, Mo.-based Shook; Ungaretti & Harris joined Boston-based Nixon Peabody; and Schopf & Weiss joined Detroit-based Honigman.

“It was pretty amazing,” Weiss said. “There was an 18-month period there where there was a lot of activity.”

The storyline is well-known. The big firm gets an instant, familiar presence in Chicago, the small firm gets access to capabilities, resources and, according to Massey & Gail partner Suyash Agrawal, a bit of freedom from the personal financial risk any litigator knows.

Agrawal joined 14-attorney Massey & Gail in October 2016. He and a former partner disbanded their boutique Agrawal Evans, which they formed 3½ years earlier, so they could join larger firms. Agrawal said commercial litigation provides different challenges than those seen by a similarly sized personal injury or mass torts boutique.

“Those tend to be what I describe as volume businesses,” he said. “A personal-injury lawyer takes X number of cases and the dollar amount of those cases is much smaller.”

The comparatively longer time frame of a commercial case — for example, Curley’s firm argued a case that took 10 years, but had a $200 million payday for the client at the end — makes it difficult for small shops to offer the nonhourly contingency or alternative fee arrangements clients are increasingly requesting, Agrawal said. Lawyers can’t go a decade without a paycheck.

For Zuber Lawler & Del Duca partner Eileen Letts, whose litigation boutique Greene & Letts joined with Los Angeles-based Zuber last year, the problem wasn’t one of capabilities or whether the firm could handle the work, but of the client’s perception of small firms’ capabilities.

“No client with a class action is going to hire a firm of six or eight lawyers,” Letts said. “It’s just not going to happen.”

Weiss said perception is part of the reason big clients sometimes avoid small firms. Another part is minimizing internal blame if a case goes south.

“We also had an issue where we wouldn’t get hired — even from existing clients — for real bet-the-company type litigation,” Weiss said. “If you hire a Kirkland & Ellis, win or lose you can’t be criticized. If they hire a boutique and things don’t go well, they have their bosses going, ‘Who are these people that you hired?’”

For their part, the former Greene & Letts partners were able to offer patent, M&A, IP and class-action services to their clientele when they joined Zuber, in addition to representation on the West Coast. Bringing Letts and partner Martin Greene on board was a way to bring in their “towering reputation in Chicago,” managing partner Tom Zuber said.

It was the first time the firm had brought on more than one person at a time, Zuber said.

When Greene & Letts started in 1990, the marketplace would never allow a 35-attorney firm like Zuber such wide geographic access, Greene said.

“Back then it was mainly the megafirms that had offices in all those different locations rather than the rest of us, the great unwashed,” he said. “Now a lot of law firms have a number of locations.”

One firm that follows that model is The Quinlan Law Firm, which is in Chicago and Phoenix, but has nine lawyers between the two cities. The firm does high-end trial work and is often brought in by local counsel for that role, a model principal William Quinlan compares to a “heart surgeon or specialist.”

“It’s like anything else in life, you start doing that type of work and you do it well, people still recommending you,” Quinlan said.

Curley said niches like that are vital for commercial boutiques to survive. Robinson Curley & Clayton, which Curley’s brother C. Philip Curley co-founded in 1986, works mainly in insurance and solvency-related issues. From there, it’s about forming an effective structure to handle those issues without legions of associates to hurl at a task.

“We’ve always functioned basically like a litigation group within a big firm,” Alan Curley said. “We always tend to have a couple of large cases where the staffing of, the approach to it might be close to how four to five lawyers at Sidley would attack a big case.”

Smaller can also mean lower-cost to clients. Staffing, office space, finding enough work for all the associates to meet their billable hour requirements — they’re all lower-pressure at a smaller-sized firm.

“You don’t want to get so large you’re trying to feed the entity,” Quinlan said.

Personal matters

Even if the business model is there and the conflicts aren’t, there’s still an important factor for commercial litigation attorneys mulling Big Law or small boutique — personal lives.

Harrison left Sidley Austin because she needed a change.

“By the time I was 30½ years out, I had really done everything I had imagined I would do at Sidley and more.”

Weiss went to the larger Honigman because his law partner was looking to retire and Weiss wanted to spend more time lawyering and less administrating.

“At some point, 25 years or so down the road, you get into that situation where the lawyers who started the firm are thinking about retiring or thinking about slowing down or, as in my case, don’t want to spend as much time on management,” Weiss said.

And Jacobs left Shook to found the Chicago office of Bradley Riley Jacobs because working for an Iowa-based firm would allow him and his wife to spend more time with family in their home state. When dealing in the world of boutique law, one partner’s personal decisions can create firm-shaking shifts. After all, each lawyer is a huge percentage of the firm.

But, warns Jacobs, the choice isn’t only between a big national or international firm or a local boutique. Technology has escorted a new player onto the field.

As an increasing amount of legal work can be done anywhere there’s cell reception and Wi-Fi, Jacobs predicts small out-of-town firms that don’t have to pay Loop rents could start undercuting even the boutiques.

“I don’t know if rate pressure is the right word, but there are a lot of smart people who are not in major urban areas where the cost of living is less than in New York, Chicago or San Francisco,” he said.