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Making the case Law firms use location to tap clients and recruit highly educated work force

By , - Last modified: August 27, 2012 at 12:34 PM
Gary Wingens, chairman and CEO at Lowenstein Sandler, says the challenge for law firms in New Jersey is the level of capital formation to sustain growth.
Gary Wingens, chairman and CEO at Lowenstein Sandler, says the challenge for law firms in New Jersey is the level of capital formation to sustain growth. - ()

Gibbons; Lowenstein Sandler; and McElroy, Deutsch, Mulvaney & Carpenter: Three law firms with national clout, clients and offices from California to New York.

And they all call New Jersey home.

With a combined 166 years practicing law in the Garden State, partners from all three firms say their headquarters — in Newark, Roseland and Morristown, respectively — remain here for three reasons: Location, location, location.

"We can be in our New York office in 15 minutes without getting our hair wet," said Gibbons' managing partner, Patrick Dunican Jr., of the trip to Manhattan from the firm's headquarters above Newark Penn Station.

The Newark office also is a manageable train and cab ride to its other locations in Philadelphia, Trenton and Wilmington, Del., and easily accessible to national and global clients flying into Newark Liberty International. Founded in 1926 in Newark by Andrew Crummy, Gibbons employs more than 240 lawyers and had revenue of $111.01 million in 2011.

In addition to being situated at the epicenter of the mid-Atlantic region close to clients and satellite offices, New Jersey also is home to three law schools and a "highly educated, highly motivated" talent base, said Gary Wingens, chairman and CEO at Lowenstein Sandler. The firm's nearly 300 attorneys — spread between three offices in New Jersey; Palo Alto, Calif.; and New York — brought in $225 million in 2011.

"We're able to hire terrific people and give them the ability to do national-level work and let them decide if they want to work in New York or actually want to see their families every once in a while and work from a suburban corporate park," Wingens said.

And while working on the Hudson's more glamorous shore may have more cachet, it requires considerably less cash to operate offices in New Jersey. Lower overhead costs here help these firms maintain more competitive rates than their Wall Street counterparts and woo some of their potential clients, especially during the downturn when outside legal counsel is often among the first cutbacks made by large companies.

"Clients who are tired of paying $800 an hour for somebody in New York — they can pay substantially less than that in New Jersey and get really quality lawyers and, in many cases, far more experienced lawyers," said Edward Deutsch, one of the two lawyers who founded his firm 29 years ago in a Morristown "basement." Today McElroy, Deutsch, Mulvaney & Carpenter has more than 300 lawyers in seven states — New Jersey, Massachusetts, Connecticut, New York, Pennsylvania, Delaware and Colorado — and reported 2011 revenue of $115.28 million.

With the economic downturn, all three practices have experienced shifts in clientele, but said they have been able to maintain — and in some cases, gain — profits and staff size.

"When real estate is down, bankruptcy is up. When mergers and acquisition is down, something else is up," Deutsch said. "I think our business plan has served us well in that regard."

That fluctuation rings true to Wingens, who was closing hundreds of mortgaged-backed securities transactions for Lowenstein Sandler in 2006 and 2007. Since the bottom fell out on that market, "our bankruptcy practice is booming," said Wingens, whose firm represented Borders — among dozens of other clients — when it filed for Chapter 11 protection.

His firm also has experienced recent success tapping into New York's expanding new media market, he said, most notably representing the $800 million Buddy Media acquisition by Salesforce.com.

"The emergence of the New York technology sector has been big. Much of that has its roots in New Jersey," said Wingens, who cited the importance of the state's technology, life sciences and pharmaceutical industries, but lamented an overall backslide among big business here as the law industry's biggest future hurdle.

"The challenge for our growth in New Jersey is the level of capital formation in New Jersey because that's who we largely serve," he said. "While we help clients with downsizing transactions, it's not what's necessarily good for the future of the state's economy and the future of law firms."

Though they acknowledge a definite contraction in certain industries – especially telecommunications – Deutsch and Dunican paint a more vibrant picture of New Jersey's corporate landscape.

"From pharmaceutical to medical to health care to insurance, there are a lot of major industries here and those are great clients for us," Deutsch said.

But, going forward, law firms will have to bend to remain competitive, particularly in times of financial uncertainty, Deutsch said. That includes addressing clients' increasing requests for alternative fee structures, which he said McElroy, Deutsch, Mulvaney & Carpenter have been embracing for several years.

"A lot of general counsel are looking for law firms to partner with them for a lower rate structure, but offer a risk reward. You might have a low hourly rate, but if you have a great result in a case, you get an additional merit-rated fee on top of it," Deutsch said. "We think it's a very good thing. A lot of firms don't like that. I think the progression of alternate fee arrangements is positive for the industry, and positive for the corporate industry."

Gaining an edge in this field also means getting creative with hiring practices. For Gibbons, that has meant recruiting more than 80 former judicial law clerks in the last several years.

"They know the judges. They know how to practice in the courts. They have relationships with the courts," Dunican said. "So we literally have the key to the courthouse in our mind."

And Gibbons has been bringing into its fold more lawyers with backgrounds in the sciences, including former pharmaceutical professionals to handle disputes relating to patents and product liability defense litigation, including Roche and its Accutane suits.

"That's a unique aspect of our firm," said Dunican, of the hiring practice that has "paid immediate dividends."

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