Ken Cedeno/Bloomberg News, via Getty Images
For over a half-century, the Washington law firm Patton Boggs has been a significant player
in the nation’s legal, lobbying and business worlds.
The firm has represented corporations like the Mars candy company and Exxon Mobil, as
well as an alphabet of foreign governments. Its chairman, Thomas Hale Boggs Jr., helped
design and win approval for the bailout of Chrysler in 1979. A partner, Benjamin L.
Ginsberg, was George W. Bush’s chief legal strategist during the 2000 Florida vote recount.
One of its lawyers, Jack Evans, is a member of the District of Columbia Council and is
running for mayor.
Yet even this august firm is not immune to the broader forces sweeping the legal field, where
law firms long accustomed to operating like exclusive clubs are finding that they have to be
nimble business strategists as well. Last year, Patton Boggs joined the swell of firms looking
Despite its $317.5 million in revenue for 2012, the firm
slipped 12 places to 95th in the country, according to
annual firm rankings from The American Lawyer, a legal
Like other firms, Patton Boggs has felt the pinch of static
or even declining legal fees. Cost-conscious corporate
clients are handling routine legal work in house or sending it offshore, which is eating away
at once-assured law firm profits. Patton Boggs’ revenue fell 6.5 percent from 2011 to 2012,
according to The American Lawyer, and its per-partner profits dropped 15 percent, to
$735,000, in that period.
One bright spot has been its advocacy work. The firm earned more from its lobbying than its
K Street rivals, according to July 2013 data from the Justice Department. Lobbying,
however, represents only 12.5 percent of its income, according to the firm’s managing
partner, Edward J. Newberry.
Patton Boggs is far from alone in seeking a rapid way to bolster its revenue and expand its
practice areas through a merger. In 2013, there were 87 such combinations, of varying sizes,
according to the consulting firm Altman Weil, up from 60 the year before and more the
double the 39 in 2010. “Firms merge to expand their geographic reach and add new
business areas to their client offerings,” said Dan DiPietro, chairman of the law firm group
at Citi Private Bank.
Peter Zeughauser, a consultant to Patton Boggs and other major law firms, said mergers
made sense because the legal field was “highly fragmented.”
“Even among the highest-grossing firms,” Mr. Zeughauser said, “no one has more than a 2
percent market share.”
But mergers are complex and delicate, as Patton Boggs found when months of negotiations
with Locke Lord, a Texas firm, foundered when conflicts over representing clients could not
be resolved. That followed the failure in recent weeks of two other expected mergers of
major firms for similar reasons. The largest, involving Orrick, Herrington & Sutcliffe and
Pillsbury Winthrop Shaw Pittman, would have created one of the nation’s 10 biggest firms,
with 1,700 lawyers.
Patton Boggs, founded in 1962, initially specialized in international and trade law. But
through the years, it became a major force in national and international legal circles. It is
particularly well connected in Washington, where it recruited Trent Lott, the former
Republican senator from Mississippi who had served as majority leader, and John Breaux,
the former Democratic senator from Louisiana. As the firm notes on its website, “We’ve
been able to draw upon the deep experience of many senior policy makers.”
The firm is led by the name partner Mr. Boggs, the 72-year-old son of Representative Lindy
Boggs, a Louisiana Democrat. Mrs. Boggs
Boggs, after his death in a plane crash in 1972, and went on to serve nine terms.
The younger Mr. Boggs, who joined the fledgling firm 47 years ago, mingles easily with
Washington’s top echelons. The National Portrait Gallery has a permanent exhibit, “The
Network,” that features the views of a select number of Beltway power brokers, including
Mr. Boggs. With his courtly manner, Louisiana drawl and wafting cigar smoke, Mr. Boggs
personifies the firm’s decades of storied legal and lobbying victories.
“Lawyers — sometimes people don’t think we’re businesspeople,” Mr. Boggs wryly observed a
year ago while accepting a local business leadership award. “Until they get the bills.”
Mr. Boggs, through his spokesman, declined to comment.
The firm downsized twice in 2013, laying off lawyers and support staff members, including
food servers who had worked there more than 20 years. It is now down to 430 lawyers in the
United States and the Middle East, from a high of 511 in 2010. Unusually for an upper-crust
law firm, Patton Boggs has filed some legal actions against clients to recover $2 million in
“The industry is undergoing a fundamental shift,” Mr. Newberry said of the estimated $20
million in cost-cutting. “When demand is declining, it is difficult to raise rates, so
profitability takes a hit.”
Mr. DiPietro, of Citi Private Bank, said law firm revenue nationally had “been almost flat in
the last four years.”
Like other firms, even as it was trimming back its own lawyers, Patton Boggs has hired
lawyers from other firms who come with profit-generating clients.
To recover revenue, many firms are also getting in line to merge, despite the spectacular
collapse in 2012 of the top-tier New York law firm Dewey & LeBoeuf, which underlined the
hard business choices for law firms. Hundreds of legal jobs were lost in Dewey’s failure, and
a web of litigation followed.
“Firms which want to merge may have to choose whether to jettison a practice area or a
large group of lawyers as a result of combining,” Mr. DiPietro said.
Even casting about for a merger partner can open up a firm to speculation in the current
ravenously competitive landscape, in which lawyers with established clients keep (or at least
think of keeping) client files boxed and stashed behind office doors, ready for a move for
another firm’s better offer. That is why most firms conduct searches and negotiations very
quietly. Patton Boggs, for example, says it is considering a merger with a New York law
firm, but has declined to name the firm.
Some experts who keep tabs on merger activity questioned whether potential suitors were
concerned about the firm’s pay policies, which have greatly rewarded those who originate
business, or even by its lobbying and legal mix. The firm also had to contend with a lawsuit
filed in 2012, claiming harassment during what was described as alcohol-laced fraternizing
at its offices. That lawsuit, filed against the firm and an employee, was later dropped against
the firm and settled with the employee. Details are not public.
But possibly more consequential is a threat of fraud action against the firm by the Chevron
Corporation. The oil company wants to sue Patton Boggs for its role in a multibillion-dollar
judgment for drilling damage to Amazon rain forests that was won by a group of
Ecuadorians, who were clients.
Whether or not it finds a merger partner, Patton Boggs is having to rethink one of the
fundamental tenets of law firms — the partnership, in which partners divide up profits at
the end of the year and, equally, assume any liabilities. Mr. Newberry said Patton Boggs was
shifting its management structure away from the traditional partnership model, in which
earnings depend largely on business brought through the door and hours of billable work.
Under the new model, the firm is moving more toward compensation based on a broader
array of factors, including firm-wide benefits from donating free legal counsel to various
causes or impoverished clients.
“Many, many mergers do not work out,” Mr. Newberry conceded. “Our brand is an extra-
powerful tool in this environment, but we have to be well configured in size, expenses and
service offerings to be able to take advantage of that.”
By STACI ZARETSKY
As reported in Morning Docket, the year is quickly drawing to a close, and two large law firms may be getting ready to celebrate their future together in 2014. Sources say that Blank Rome and Nixon Peabody have the urge to merge, and they’ve supposedly been in talks for two months or more.
The last three proposed Biglaw mergers we reported on — McKenna/Dentons, Pillsbury/Orrick,Patton Boggs/Locke Lord — fell apart, but if the Blank Rome/Nixon Peabody combination comes to fruition, their union would create one of the top 50 largest firms in the U.S. (number 33, to be exact).
Will they or won’t they? Let’s discus the details…