In the interest of the client

SPECIAL REPORT
www.sanantoniobusinessjournal.com
LAW & ACCOUNTING
MAY 1, 2009
SAN ANTONIO BUSINESS JOURNAL
MAY 1, 2009
21
In the interest of
High fees
fees leading
leading top
High
top attorneys
attorneys
to
smaller-priced
fi
rms
to smaller-priced firms
The Client
BY CAROL SCHLIESINGER
C
ecil Schenker
spent the bulk of his career — 25
by Carol
Schliesinger
C
years — building up a clientele at the national law
firmSchenker
of Akin Gump
Strauss
ecil
spent
theHauer
bulk &ofFeld
hisLLP.
career
When he started it was a regional Texas-based firm,
—
25
years
—
building
up
a
which he helped expand, opening up an officeclientele
in Los Angelesat
in 1998.
His clientele
came
to include
such Gump
notables
the national
law
firm
of Akin
as GoldieHauer
Hawn, her
Kurt Russell
Strauss
& partner
Feld LLP.
Whenand
hedaughstarted
ter Kate Hudson — as well as Bikram Yoga’s founder
it Bikram
was aChoudhury.
regional Texas-based firm, which he
Despite
his tenure,
last Juneup
Schenker
decided
jump
helped
expand,
opening
an office
intoLos
ship and join
Cox Smith,
regional ficame
rm withtooffi
ces in
Angeles
in 1998.
His aclientele
include
San Antonio, Austin, Dallas, and McAllen.
such
notablesnot
asalone
Goldie
Hawn,
her partner
Kurt
Schenker’s
among
high-powered
lawyers
moving and
to smaller,
regional
firms.
Russell
daughter
Kate
Hudson — as well as
Pressured
by their
clientsBikram
to lower fees
or wanting to
Bikram
Yoga’s
founder
Choudhury.
eliminate the stress associated with national or internaDespite
tenure,
last June
Schenker
decidtional
firms,his
more
San Antonio
lawyers
are following
a
moving
smaller
firms or
ednationwide
to jumptrend
shipofand
jointoCox
Smith,
a opening
regional
their own. More Fortune 500 companies are looking at refirm
with offices in San Antonio, Austin, Dallas,
gional firms for their legal needs, rather than tapping into
and
McAllen.
mega
national law firms to get high-quality expertise, often
saving
as much as
50 percent
outsidehigh-powered
counsel billing.
Schenker’s
not
alone on
among
The volatility of outside counsel fees remains the top
lawyers
moving
to
smaller,
regional
firms.
concern among general counsel, according to a recent
Pressured
by Weil,
theira management
clients to lower
fees
survey
by Altman
consulting
firmor
for legal organizations.
75 percent
of the particiwanting
to eliminateAlmost
the stress
associated
with
pants reported implementing budget cuts in 2009 of 6
national
or
international
firms,
more
San
Antopercent to 35 percent. The report revealed that more
nio
lawyers
arerespondents
followingpropose
a nationwide
trend
than
half of the
to cut back
on of
outside counsel
expenses,
it the toptheir
sourceown.
of
moving
to smaller
firmsmaking
or opening
budget cuts.
More
Fortune
500
companies
are
looking
at
DuPont Company, the third largest chemical maker
regional
firmsisfor
legal needs,
ratherfrom
than
in the country,
the their
latest corporation
to switch
a
handful ofinto
national
firmsnational
to a network
tapping
mega
lawof smaller
firms fitorms,
getto
cut their legal costs and maximize the value of services,
high-quality
expertise, often saving as much as
according to a Bloomberg report on April 6.
50 percent on outside counsel billing.
The volatility
of outside counsel fees remains
Making
the switch
the When
top concern
among general counsel, accordSchenker decided to leave, Akin Gump was
ing
to a recent
bytoAltman
Weil,says.
a manemerging
from itssurvey
best year
date, Schenker
Having expanded
to both coasts,
the legal
firm was
charging what
agement
consulting
firm for
organizations.
Schenker terms “New-York-based fees.” For Schenker,
Almost
75 percent of the participants reported
who likes to represent emerging growth companies,
implementing
cutsrates
in resulted
2009 ofin6a loss
percent
having to chargebudget
East Coast
of
over who
he could
represent
whilethat
hovering
toflexibility
35 percent.
The
report
revealed
more
within the firm’s rate structure, he says.
than
half of the respondents propose to cut back
One month prior to Schenker’s move, David Kinder,
onWill
outside
counsel
expenses,
making
the top
Liebmann
and Thomas
Sanders
— threeitother
Akin Gump
attorneys
— moved to Cox Smith for similar
source
of budget
cuts.
reasons. For Kinder, the decision to move proved to be a
DuPont Company, the third largest chemical
positive experience, reducing his costs by 30 percent.
maker
in my
theclients
country,
is the
latest
corporation
“I think
are really
happy.
We’re
able to dereallyfrom
good services
at a cost
effective price,”
toliver
switch
a handful
of national
firmsKinder
to a
says. “I haven’t looked back and my clients haven’t
network
of
smaller
firms,
to
cut
their
legal
costs
looked back.”
andInmaximize
the
ofjoined
services,
according
the past year,
12 value
attorneys
Cox Smith
from
firms, says
Jamie on
Smith,
managing
director of
tonational
a Bloomberg
report
April
6.
Cox Smith, adding that he has seen the same pattern in
other markets. The movement has meant more clients
for Cox Smith.
THE LISTS — 22 & 29
TORENCE WHITE
SAN ANTONIO
BUSINESS
TORENCE/ WHITE
/ SAN ANTONIO
BUSINESSJOURNAL
JOURNAL
David Kinder (L) and Cecil Schenker left Akin Gump last year to join Cox Smith, which is headed by managing partner Jamie Smith (R).
David
Kinder (L) and Cecil Schenker left Akin Gump last year to join Cox Smith, which is headed
by managing partner Jamie Smith (R).
“When clients get comfortable with a lawyer, it’s natural that the client would want to follow them,” Smith adds.
For it’s the
part,switch
“Akin Gump is sensitive to the fact that its
Making
clients are operating under reduced legal budgets,” says
When
Schenker
decided to leave, Akin Gump
Sheila Turner, spokewoman for the firm, adding that in
was
its fees.
best year to date, Schen2009,emerging
the firm didfrom
not raise
ker says. Having expanded to both coasts, the
‘...wasM
ANY BUSINESSES
CAN’terms
T JUSTIFY
firm
charging
what Schenker
“NewYork-based
fees.”
For
Schenker,
who
likes
THEIR DECISION TO GO WITH A NATIONAL to
represent emerging growth companies, having
FIRM.’
‘...
MANY BUSINESSES CAN’T
Cecil Schenker
Cox Smith
JUSTIFY THEIR DECISION TO GO
“Akin Gump’s partner headcount in San Antonio has
WITH
AforNATIONAL
FIRM.’
held steady
nearly a year,” she
says. “In the first half
of 2008 five partners departed, deciding to either start
their own firms (Schmoyer Reinhard LLP) or move their
Cecil
Schenker
practices
to a regional or local firm that they feel better fit
their Smith
practice, and we are happy to then share appropriCox
ate opportunities.” Shannon Schmoyer and Christine Reinhard started their firm in February 2008, just months
to
charge
East
Coast
rates
resulted
a loss
after
two other
local
women
lawyers
openedin
their
own of
firm. Despiteover
losingwho
partners,
reportedwhile
an
flexibility
he Akin
couldGump
represent
increase in profits of more than 16 percent for 2008.
hovering within the firm’s rate structure, he
says.
Boutique attraction
One month prior to Schenker’s move, David
When Jan King decided to leave the Texas-based JackKinder,
Will
and fiThomas
Sanders
—
son Walker
LLPLiebmann
to start her own
rm in August
2007, the
three
other
Akin was
Gump
— wanted
movedtoto
economic
recession
not aattorneys
factor. She just
do it. Smith for similar reasons. For Kinder, the
Cox
“When you have your own firm you set your own rates
and control your costs...I could make decisions on the
spot,” King says.
FIVE MINUTES WITH GEORGE PRENTICE — 23
Together with her business partner Eileen Sommer,
King intentionally lowered her firm’s fees when they
opened
their
to proved
offer clients
a more
affordable
decision
todoors
move
to be
a positive
experialternative
to even the
rm they
had been part
ence, reducing
his statewide
costs byfi30
percent.
of for years. The result: All their clients followed them.
“I think
reallyKing
happy.
“Our
clients my
have clients
been veryare
pleased,”
says. We’re
Increasing
competition
from
boutique
firms, those
able
to deliver
really
good
services
at a with
cost
50 attorneys or less, and the reality of most businesses’
effective
price,”
Kinder
says.
“I
haven’t
looked
reduced legal budgets is compelling
backlarge
and fimy
haven’t
looked back.”
many
rmsclients
to face the
dilemma
of reducing
In the fees.
past year, 12 attor“A good lawyer can provide its serneys
joined Cox Smith from
vices without the large infrastructure
national
firms,
says
of
large firms,”
Sommer
says. Jamie
With lower
overhead costs,
King of
and
Smith,
managing
director
Sommer say they can operate from an
Cox
Smith,
adding
that
he
has
efficient, leaner organization focused
seen
theservice.
same pattern in other King
on
quality
Many
of
the
national
law firms based
markets. The
movement
has
in Texas understand that clients do not need to pay New
meant
more
clients
for Cox
York rates for solid legal services. But national
Kingfirms
Smith.
based
on the East or West Coasts are not as in touch with
the “When
Texas market,
particularly
in Austin and
SanaAntonio,
clients
get comfortable
with
lawyer,
says Pat Tobin, managing partner at the San Antonio
it’s
natural
that
the
client
would
want
to
follow
office of Jackson Walker. While it lost Sommer and King
them,”
Smith Walker
adds. has added attorneys in the last
in
2007, Jackson
year,For
about
percent
of which
have is
come
from national
it’s20part,
“Akin
Gump
sensitive
to the
firms.
fact
that
its
clients
are
operating
under
reduced
“This trend has been accelerated by the recession, but
budgets,”
saysasSheila
spokewoman
Ilegal
believe
it will continue
clientsTurner,
and attorneys
see it as
afor
successful
strategy,”
Tobin
adds.
the firm,
adding
that
in 2009, the firm did
not raise fees.
Big“Akin
players
adjust
Gump’s partner headcount in San
Despite the
national
firms awith
San she
Antonio
haschallenges,
held steady
forlaw
nearly
year,”
Antonio offices are hard at work retooling operations and
retaining relationships with those who have left their firm
See ATTORNEYS, Page 30
PROFILE: SOL SCHWARTZ — 26
ATTORNEYS: National law fi rms forced to rethink the way they are doing business
says. “In the first half of 2008 five partners
departed, deciding to either start their own
firms (Schmoyer Reinhard LLP) or move their
practices to a regional or local firm that they
feel better fit their practice, and we are happy
to then share appropriate opportunities.” Shannon Schmoyer and Christine Reinhard started
their firm in February 2008, just months after
two other local women lawyers opened their
own firm. Despite losing partners, Akin Gump
reported an increase in profits of more than 16
percent for 2008.
Boutique attraction
When Jan King decided to leave the Texasbased Jackson Walker LLP to start her own firm
in August 2007, the economic recession was not
a factor. She just wanted to do it.
“When you have your own firm you set your
own rates and control your costs...I could make
decisions on the spot,” King says.
Together with her business partner Eileen
Sommer, King intentionally lowered her
firm’s fees when they opened their doors to
offer clients a more affordable alternative to
even the statewide firm they had been part of
for years. The result: All their clients followed
them.
“Our clients have been very pleased,” King
says.
Increasing competition from boutique firms,
those with 50 attorneys or less, and the reality of
most businesses’ reduced legal budgets is compelling many large firms to face the dilemma of
reducing fees.
“A good lawyer can provide its services without the large infrastructure of large firms,” Sommer says.
With lower overhead costs, King and Sommer
say they can operate from an efficient, leaner
organization focused on quality service.
Many of the national law firms based in Texas
understand that clients do not need to pay New
York rates for solid legal services. But national
firms based on the East or West Coasts are not as
in touch with the Texas market, particularly in
Austin and San Antonio, says Pat Tobin, managing partner at the San Antonio office of Jackson
Walker. While it lost Sommer and King in 2007,
Jackson Walker has added attorneys in the last
year, about 20 percent of which have come from
national firms.
“This trend has been accelerated by the recession, but I believe it will continue as clients and
attorneys see it as a successful strategy,” Tobin
adds.
Big players adjust
Despite the challenges, national law firms
with San Antonio offices are hard at work
retooling operations and retaining relation-
ships with those who have
left their firm and took
clients with them.
The law firm of Bracewell & Giuliani LLP had
four attorneys leave the
San Antonio office in the
past 12 months, according to managing partner
Tullos Wells. Two of these
attorneys were hired by
their clients and two left
to open their own firms. In
some cases, attorneys continue working with Bracewell on clients they share
in common.
“It’s worked out great
TORENCE WHITE / SAN ANTONIO BUSINESS JOURNAL
to partner together to better serve the client,” Wells Bracewell and Giuliani’s Kelli Borbon and managing partner Tullos
says. “You hate to see peo- Wells. Borbon has become increasingly involved in the health care
ple leave because you have arena.
built relationships, but sometimes it works very Jefferson,
administrative
well.”
partner with Haynes and
In the past year, he says he’s referred as many Boone LLP’s San Antonio
as six clients to some of those smaller firms, office. That concern is more
particularly if he’s believed they will be better pronounced today as comserved by the smaller boutique firm.
petition is heightened and
“It’s not in our clients’ best interest to be clients are aware that they
doing things that some of our friends in and have more options.
around Texas can handle in a very efficient manAlthough he has not seen
ner,” Wells says.
attorneys leave the San Jefferson
Where Bracewell stands out, he says, is with Antonio office, he is aware
the more sophisticated legal issues.
of it happening in other firms that don’t have the
“If you’re in real trouble ..., that’s when you flexibility to accommodate their clients’ budgetcome to Bracewell,” Wells says, adding that ary needs. Haynes and Boone considers flexible
serious cases involving litigation, labor or intel- fees structures on a case-by-case basis, he says,
lectual property clients benefit from the global taking into consideration the hourly rate billed
resources Bracewell has to offer. “It works well and what the overall cost will be to the client.
for Bracewell because we have the resources to
“It’s become more important that we carehandle more sophisticated litigation matters.”
fully examine and that we be receptive to any
The departure of attorneys from Bracewell notion of alternative billing,” Jefferson says.
has not impacted the firm’s bottom line, Wells
Some of the pricing strategies employed by
says, adding that 2008 financials were the sec- Haynes and Boone include flat fees for specific
ond best the firm has seen to date. Nevertheless, projects and using contingency rates based on
Bracewell attorneys are working aggressively to the venture’s outcome.
find other areas of service to balance any potenYet less than 10 percent of most attorneys’
tial loss of income.
legal fees come from alternative-fee arrangeKelli Borbon, an attorney with the firm, serves ments, according to a recent survey by The
several clients in the healthcare field. Tailoring Association of Corporate Counsel.
her work to her clients’ specialized needs, Bor“I think the trend of really qualified lawbon became increasingly involved in the local yers leaving and departing large firms, coming
health care scene, joining the Greater San Anto- to firms like ours, will continue,” Cox Smith’s
nio Chamber’s healthcare and biosciences com- Schenker says. “This is becoming so well pubmittee, among other activities.
licized many businesses can’t justify their deci“It’s important to understand clients’ need sion to go with a national firm.”
beyond case law,” Borbon says.
CAROL SCHLIESINGER is an editorial intern with
Pricing changes
the San Antonio Business Journal and a master’s
There’s always been a high concern on the of journalism candidate at the University of Texas
part of clients about fees structures, says Lamont at Austin.
Reprinted for web use with permission from the San Antonio Business Journal. ©2009, all rights reserved.
Reprinted by Scoop ReprintSource 1-800-767-3263.