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The A-List 2006: The High Ground

Wednesday, July 05, 2006

  • By: Brenda Sandburg
  • Organization: New York Lawyer

Hogan & Hartson was on a roll as it marked its one-hundredth anniversary in November 2004. The firm was in the middle of an international expansion, was seeing a big jump in corporate work, and remained-in spite of greater competition inside the Beltway-the largest firm in Washington, D.C.

Partners were in the mood to celebrate and retreated for a weekend to Miami's Doral Golf Resort & Spa - a place where the motto is "pampered indulgence," and where they could get in a few rounds on the Greg Norman-designed Great White Course or a $65 tropical body scrub arranged by one of the resort's so-called spa connoisseurs.

All rewards earned, certainly, but the firm's chairman, J. Warren Gorrell, Jr., had something else on his mind that weekend. During his speech to the firm at the retreat, he pointed out that the firm, in spite of its success, was falling behind on its pro bono commitment. In any other market, Hogan's pro bono numbers would have been respectable, even enviable. In D.C., ground zero for pro bono work, they were merely adequate. "We cannot just rely on a few of our lawyers to do it for all of us," Gorrell told the gathering. "In 2003, only 327 people performed 20 or more hours of [pro bono] work, and the associates did a much better job than the partners and counsel. That is simply not good enough." In 2004, Hogan lawyers averaged 61 fewer pro bono hours per lawyer than their colleagues at Covington & Burling, Arnold & Porter, and Wilmer Cutler Pickering Hale and Dorr. Fewer pro bono hours meant that the firm was not only failing to capitalize on the opportunities for community service that D.C. provided, but was missing out on important business benefits as well: positive media attention, training for associates, a boost in lawyer morale.

Gorrell pitched a simple, yet specific, solution: Every lawyer at the firm should do more than 20 hours of pro bono work per year. And although Gorrell presented it as a request, partners knew that he would keep tabs on them. That's not to say most of the partners, even the tropically scrubbed ones, didn't think it was a good idea. Within minutes of Gorrell's speech, lawyers were reaching out to Patricia Brannan, the head of Hogan's Community Services Department, and pitching pro bono ideas. "There was this buzz about it," Brannan says.

Gorrell's pitch worked. The percentage of lawyers doing more than 20 hours of pro bono last year jumped from 50.5 percent to 88.7 percent. Hogan leaped from number 26 to number four on our annual pro bono rankings. And largely because of that increase, it scored one other laurel: a place on The A-List, The American Lawyer's ranking of the top tier among the largest firms in the country.

Hogan was one of seven firms to enter The A-List this year, and it made the cut by doing well on each of the four measures that the magazine uses to determine its rankings-revenue per lawyer, pro bono, diversity, and associate satisfaction. The firm isn't perfect: It is struggling with associate satisfaction, it faces even more competition in the Washington market, and its recent efforts to bring on top-tier laterals in New York have been a bust.

That said, the firm has held its own on revenue per lawyer and diversity scores. The X-factor in its score is pro bono. Whether the firm becomes a permanent resident of The A-List may depend on its ability to maintain its newfound pro bono strength.

It's a spring afternoon in Washington, and Hogan's I.M. Pei-designed power address in downtown D.C. is drenched in sunlight. Clearly, with its dramatic 148-foot atrium, ubiquitous marble, and sweeping staircases, this is an office building for Washington's elite, and Hogan occupies 75 percent of it. Gorrell greets visitors on the top floor. A lanky Kentuckian with a soft drawl, the 52-year-old Gorrell is in his fifth year as chairman. He's careful and measured as he describes Hogan and its financial objectives, but grows more animated as he holds forth on the pro bono campaign and on the firm's history.

The firm set up a department devoted to community service (read pro bono) in 1970. And it designated a partner to oversee the work full-time. It wasn't a backwater post. John Ferren, the first lawyer to head the department, later held the firm's top post of administrative partner. Over the years, it has worked on everything from civil rights cases to AIDS-related issues. Three years ago, the firm served as lead counsel in a highly publicized case in which African American residents of Tulia, Texas, were wrongfully convicted of dealing drugs. Partner John Roberts, Jr., who left the firm in 2003 for a slot on the U.S. Court of Appeals for the D.C. Circuit before becoming chief justice, took on a high-profile role advising a group battling a Colorado antigay initiative that went before the U.S. Supreme Court in 1996. (Roberts's side won.)

Gorrell says community service is one of the defining characteristics of the firm. "It's part of our DNA," he says. In the early twentieth century, firm founder Frank Hogan gave free counsel to poor veterans referred to him by the War Department. (Hogan, however, is better known as an intimate of President Theodore Roosevelt, and as a prominent trial lawyer who worked on headline-grabbing cases of his day. Time magazine featured him on its cover in 1935, lauding his clever defense of Edward Doheny, one of several oilmen charged with bribery in the Teapot Dome scandal. Hogan lost a civil suit, but won two criminal cases for Doheny.) As he prepared for his speech in Miami, Gorrell says he was struck by the firm's history of community service and felt it was an important issue to highlight for partners. "We're fortunate with all of the resources we have and the lives we live. We have the legal ability to help other people, and we have a professional and social responsibility to be involved," he says.

Saying pro bono is a priority and actually making it one are two different things. Hogan kicked off its effort by giving the community services department more resources. It appointed an associate in the New York office to work half-time with the department's five-lawyer staff, and it designated a lawyer in each of its 23 offices to serve as a liaison to the department. Two transaction lawyers also volunteered to help find corporate projects. And firm managers took on more pro bono assignments, including Gorrell (he helped a battered women's shelter outside Baltimore to purchase its building, and he got tax-exempt status for an acting group for disadvantaged kids).

Brannan, the Community Services Department head, says pro bono issues were placed on the agenda at partner and practice group meetings. Lawyers were told that the 20 hours of pro bono would count toward their billable hours, and that the policy extended to part-time lawyers as well.

A 52-year-old litigator who had previously headed the firm's education group, Brannan took on the pro bono role in April 2004. She'll hold the position for three to five years, and then it will rotate to another partner. As she listened to Gorrell's Miami speech a year and a half ago, she said she was happily surprised that he was giving pro bono so much attention. "I was sure when I was sitting there that it would make a difference," Brannan says.

Even so, the 1,050-lawyer firm is built to make money. In six years gross revenue has grown 167 percent, from $262 million to $700 million, and revenue per lawyer is up 73 percent over the same period. Profits per partner has jumped from $535,000 to $905,000. In the last year, revenue per lawyer, a key A-List measure, jumped 5 percent to $735,000. Gorrell attributes the steady increase in RPL over the past five years to increases in billing rates, productivity, and realization. The firm also focused on practices that are less fee-sensitive-specifically M&A, capital markets, and government investigations-drumming up more work from existing clients and bringing in laterals. The firm has brought in 65 laterals in the last two years. During the same period, however, it lost 43 partners (according to the firm, four of those partners went into government, seven went in-house, 22 went to other law firms, and seven are doing something outside law). Hogan also benefited from being one of the biggest lobbying firms in D.C., grossing $60.3 million in 2005, according to an annual survey by Legal Times, a sibling publication of The American Lawyer.

One of Hogan's key goals, like that of nearly every other major firm, is building in New York. Gorrell opened the firm's Big Apple outpost in 1998 with one associate, commuting three days a week from D.C. to get it off the ground. He primarily handled real estate investment trusts for a clientele of investment banks in New York, which made him the likely candidate to establish the firm's roots. The New York office now has 140 lawyers. Most of the growth in New York has come from mergers: The firm acquired the litigation boutique Davis Weber & Edwards in 2000, and 100-lawyer Squadron, Ellenoff, Plesent & Sheinfeld in 2002.

Gorrell would like to add more through lateral hires, particularly in M&A and capital markets. However, as many firms are finding, it's not an easy task. Last year Hogan hired a corporate transactions associate from Skadden, Alexander Johnson, and made him a partner. Gorrell dismissed the idea that an associate hire from a premier New York corporate firm was in lieu of finding a lateral partner. He notes that Hogan passed on an opportunity to hire a group of high-profile M&A lawyers, fearing they would not be compatible with Hogan's culture. He would not, however, identify the group.

Despite the difficulty, Hogan does have an advantage in the lateral market: a compensation spread that is one of the highest among Am Law 100 firms. The difference between the highest- and lowest-paid is greater than 15:1. "We can talk to M&A lawyers in New York and can show [by our] compensation system that they can do extremely well," Gorrell says. (And who sits at the top of the compensation ladder? Current and former partners say it's Gorrell. Gorrell declined to say what his compensation is.)

While it has its eye on New York, Hogan has been capitalizing on its strengths in regulatory work, and leveraging it to expand overseas. Fourteen of its offices are based overseas, six of which opened in the last two years. London is the largest international office, with 48 lawyers. The five-year-old Berlin office is second in head count, with 41 lawyers. Gorrell says Hogan wants to continue to grow in London, China, and New York. Additionally, the firm would like to set up shop in the San Francisco Bay Area, and has also looked at Texas, but would only enter these regions if it could bring in a number of top-tier laterals.

Hogan's domestic and international growth, however, comes at a time when it faces increasing competition on its home turf. Skadden, Arps, Slate, Meagher & Flom and Latham & Watkins are both among the ten highest-grossing law offices in D.C., according to figures from Legal Times. Other out-of-town players have snapped up local shops: Pillsbury Winthrop merged in 2005 with Shaw Pittman, and Bingham McCutchen picked up Swidler Berlin. And Wilmer Cutler Pickering's merger with Hale and Dorr has made the new firm, Wilmer Cutler Pickering Hale and Dorr, a contender for Hogan's crown as the firm with the highest-grossing D.C. office.

Gorrell acknowledges that there is more competition, but says that Hogan's practice mixture gives it an edge. In addition to its historic regulatory and litigation practices, he says, Hogan has a stronger corporate and business focus than other leading Washington firms.

Inevitably, talk of growth turns to queries about a future merger. That's especially true in a market where combinations have been a way of life in the last few years. Gorrell does not rule out a union. Aside from the mergers in New York, Hogan was once in talks with the now defunct Brobeck, Phleger & Harrison. But it pulled out because of Brobeck's $80 million-plus debt, its real estate obligations, and client conflicts. Gorrell says Hogan has a bias against large mergers, since such combinations are hard to pull off. "That's not to say, however, we don't look at those things from time to time and wouldn't be opportunistic if it would help us and was embraced by partners," Gorrell adds. "I'd definitely keep the door open and the light on."

Growth, even measured growth, has its side effects. Partners and associates are under increasing pressure to boost revenue. While the firm is widely praised by current and former partners for its collegiality, some have seen tears in the fabric. "It's still pretty collegial, but less so," says one former partner. The drive "to recruit partners with large books of business, like in New York, has [put the] focus on numeric metrics with obvious results." Plus, bonuses are tied, in part, to origination credit, and that has created more partner competition over who gets credit for bringing in work, the former partner says. However, partner Lee Alexander, who joined Hogan a year ago from Dickstein Shapiro Morin & Oshinsky, says the opportunity for cross-selling work to clients is impressive. "It's a crazy culture of cooperation," he says.

The tone for the firm is set by Gorrell. He is, to borrow a phrase, "the decider." While Hogan has a five-person executive committee (elected by the partnership) and a five-member senior management committee that set firm policy, current and former partners say Gorrell has the primary say in how the firm is run. The executive committee asked Gorrell to take the helm when Robert Odle, who had led the firm for nearly 20 years, stepped down in 2001. Gorrell agreed to do so if he could retain his practice and get help managing the firm. The senior management committee was formed to take on that support role. There is no term limit set to the chairman post, and no process in place to pick someone else. Gorrell, who generally spends 750-1,200 hours per year on his practice, says he'll continue in the role as long as the partnership wants him to. "It's not a terribly democratic system," says one former partner. In the satellite offices, as well as at headquarters, there is "sort of a single-handed decision-making style." But most partners seem content to have a strong, centralized management. "It's difficult to manage people," says partner Claudette Christian. "You've got egos, different hourly billing, clients with demands, partners that can bring in more money than others, associates that can bill more if they are working on a deal. . . . [Gorrell will] level it out in a way that works for everyone."

Gorrell says the firm is run like a corporation, and while he is the leader, the executive committee has the final vote. His leadership has certainly helped keep Hogan a dominant player inside and outside Washington. Gorrell himself has been helping the bottom line.

By all accounts, he is the firm's top billing partner, in spite of his management duties, with a book of business approaching $40 million. A securities lawyer, Gorrell has helped make Hogan a leading player in real estate investment trusts. (The firm ranked number two as issuer's counsel in REIT equities and number three as issuer's counsel in REIT debt in Am Law's 2006 corporate scorecard.)

"He's the best corporate lawyer I've ever seen, and he was that good as a young associate," says former Hogan partner Arthur Rothkopf, now senior vice president at the U.S. Chamber of Commerce. "We used to call him a franchise player-someone who makes the franchise, the star of stars." Gorrell, however, says he couldn't manage the firm or run his practice without a strong team. "This is not the Warren Gorrell show," he says.

A strong team depends in part on associates. And growth and the pressure to bill are affecting them, as well as partners. In The American Lawyer's 2005 survey, mid-level associates gave Hogan lower marks on how clearly it communicates, on openness about finances, and, to a lesser degree, training and guidelines. Hogan slid from number 29 to number 59 in our rankings. The firm is expected to drop again this year. (The 2006 associate survey will appear in the August issue.) Gorrell is surprised and perplexed as to why the firm has fallen in the rankings. "I honestly believe if you got 100 percent of people responding, we would rank higher," he says. He notes that Hogan was among the first major firms in Washington to raise first-year associate pay to $135,000. In another move to pay closer attention to its young lawyers, the firm in June held its first associate retreat in the United States.

On diversity, too, Hogan is looking to improve. The firm ranked number 55 on the Minority Law Journal's Diversity Scorecard in 2005, up from number 109 the previous year, and number 129 in 2000. In its U.S. offices, 13.3 percent of attorneys-and 6 percent of partners-are minorities. In March, Hogan's executive committee appointed Claudette Christian to the newly created post of chief diversity officer. Christian, who spends 20-40 percent of her time in this role, works with the executive committee to implement retention and recruitment initiatives, mentors associates and partners, and assures that the firm is keeping up with the best practices for recruitment and retention. "We are looking at whether we are doing all we can," Christian says. "There's no question it's a tougher job. Everyone is now focused on diversity."

Still, Gorrell is confident that the firm has the recipe to keep it among the elite: the right practice mix and a culture of teamwork and community service. These ingredients "will continue to make us successful," Gorrell says. Sounds like another reason to celebrate.

Hogan & Hartson

Lawyer Head Count: 1,050
Partners: 487
Associates: 60
U.S. Offices: 10
International Offices: 14
Gross Revenue: $700,000,000
Profits Per Partner: $905,000
Compensation-All Partners: $725,000
Revenue Per Lawyer: $735,000
Number of Lateral Hires Since 5/1/04: 65
Number of Partner Departures Since 5/1/04: 40
Top clients include: News Corp.; IBM; Bristol-Myers Squibb; Amgen; Wellpoint; The Hartford.

Hogan & Hartson took five steps to power up its pro bono program and boost its A-List score. The firm:

Issued a challenge: At a firm retreat, chairman J. Warren Gorrell, Jr., pitched partners on doing at least 20 hours of pro bono work a year. Speaking on the one-hundredth anniversary of the firm, he emphasized that the goal was important to the firm's future.

Added resources: Each of the firm's 24 offices designated a liaison to work with Hogan's Community Services Department, which oversees pro bono projects. CSD expanded its five-lawyer staff, appointing a New York associate to work half-time with the group. Two transaction lawyers volunteered to help find corporate projects.

Promoted the program: The initiative was put on the agenda at partner and practice group meetings, and associate and litigation training programs. More firm managers took on pro bono assignments, setting an example for others.

Reached out to the community: The Community Services Department met with a variety of public interest groups to offer legal help, including the Washington Lawyers' Committee for Civil Rights and Urban Affairs, the NAACP Legal Defense and Educational Fund Inc., the International Senior Lawyers Project, the National Lawyers' Committee for Civil Rights Under Law, the D.C. Appleseed Center for Law and Justice, and Legal Counsel for the Elderly.

Shared ideas: Offices share information about tactics to improve their pro bono efforts. (This year the Miami office held its first open house for judges, law school representatives, and public interest leaders; an open house has been an annual event in the New York office.) The firm posts new pro bono projects on its intranet and sends out memos about its successes, such as its receipt of the D.C. Bar Pro Bono Award.

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