I-5 Law -- Seattle's Megafirms Make West Coast A Strategic Target

Los Angeles: economic epicenter of the West Coast. A city on the cutting edge of the big-time, high-stakes practice of law.

Seattle: quaint second-tier market. A place where a brilliant lawyer can make good money, but not great money. Terrific view of Mount Rainier, though.

L.A. Law vs. Seattle Law.

The former defines law as big business; the latter, in national legal circles, still brings to mind a legal backwater somewhat mired in provincialism.

But that image is about to be shattered. Seattle's top law firms are no longer playing it safe.

In the high-rise conference rooms of Seattle's five largest law firms - Perkins Coie, Bogle &

Gates, Davis Wright Tremaine, Preston Thorgrimson Shidler Gates & Ellis, and Lane Powell Spears Lubersky - bold strategies are being laid to gain a highly visible prominence in a region from Anchorage to San Diego.

``Our focus is on what I call the I-5 strategy,'' said Mark Hutcheson, Davis Wright managing partner. ``We want to position ourselves to be the preeminent law firm on the West Coast.''

Hutcheson could very well have been speaking for each of his competitors. But the matter has moved beyond talk. In recent months, there has been an unprecedented upheaval in the Seattle legal community, including major mergers, talent raiding, reshuffling of top executives, diversification into consulting services and opening of branches in out-of-state cities.

And there is more on the drawing board. If plans in the works materialize, Seattle law firms soon could turn up in San Diego, Newport Beach, San Francisco and Vancouver, B.C.

Thus far, the brashest forays have been into Los Angeles, the land of the ever-growing supply of deep-pocketed clients, but also stiff competition.

Three law firms - Perkins Coie, Davis Wright and Lane Powell - have stormed Tinsel Town, establishing branch offices in L.A.

Perkins led the way two years ago, merging with a small Los Angeles litigation firm with which it had worked on an informal basis for 10 years. Since then, Perkin Coie's L.A. office has doubled in size to 30 lawyers and no one at Perkins expects the rate of growth there to taper off anytime soon.

``Are we done on the West Coast? I don't think so,'' said Margaret McKeown, Perkins Coie managing partner in charge of strategic planning. ``I think it's likely we'll expand in another part of California. . . . what we're looking for is opportunities that make sense.''

Not to be outdone, Davis Wright last October opened a three-lawyer office in Los Angeles, which

Hutcheson predicts could grow to as many as 60 within five years.

The new-found aggressiveness seems to be contagious.

``What we're trying to do now is transfer our experience representing clients in the Pacific Northwest to representing them elsewhere,'' said David Lycette, managing partner of Lane Powell.

Last month, Lane Powell Moss & Miller's 160 lawyers combined with Portland-based Spears Lubersky Bledsoe Anderson Young & Hilliard to form a megafirm with 230 attorneys called Lane Powell Spears & Lubersky. A couple of weeks later, the firm opened a Los Angeles branch office staffed by three partners and three associates.

It wasn't too long ago that mergers and branching were anathema to Lane Powell; Lycette, as recently as 1988, spoke cautiously of expanding through affiliations with firms in other cities that would be limited to cross-referencing of clients.

But in recent months, merger action has been fast and furious. Last fall, Spears Lubersky had come close to merging with Davis Wright & Jones, but an insurmountable conflict derailed the deal.

Davis Wright represents clients in Anchorage suing Exxon Corp. for losses associated with the Exxon Valdez oil spill, while the Portland firm represents the oil company on other matters.

So, representatives of Spears Lubersky shot over from Davis Wright's offices in the Century Square tower to Pacific First Centre, home of Lane Powell, and started talking.

Meanwhile, Hutcheson at Davis Wright wasn't sitting still. By Dec. 30, he had put together a merger with the 58-member Portland firm Ragen Tremaine Krieger Schmeer & Neill.

The expansion fever gripping Seattle's law firms shouldn't come as a surprise.

``What's happening in Seattle is not unique,'' said Richard Reed, a longtime Seattle business lawyer who is now with Pensa, a Bellevue-based management-consulting company. ``It is symptomatic of the massive changes taking place in the total legal profession.''

Driven by the same forces that dictated the consolidation of the accounting profession, the legal world has seen the emergence of megafirms in New York, Los Angeles, Chicago, Houston and other cities since the mid-1980s.

The consensus among legal experts is that the impetus for change will only intensify over the course of this decade.

The cost of doing business - namely, paying generous salaries to retain promising young associates and rainmaking senior partners, as well as to attract top law school graduates - has risen dramatically in recent years and will continue climbing.

Meanwhile, revenues are harder than ever to come by. Big corporate clients have eschewed the premium billing relationships of old and are doing more legal work in house, while tending to shop around more for outside help.

``It's true that most corporate clients are interested in finding a way of buying legal services more intelligently and less expensively than has been the case in the past,'' said Robert Lane, vice president and general counsel of Weyerhaeuser Co.

The nature and geographic scope of outside legal help sought by top-drawer corporate clients is in a state of flux, as well.

Leading Northwest-based companies such as Nordstrom, Alaska Airlines and Microsoft have steadily increased operations up and down the West Coast and beyond, and up-and-coming businesses are sure to follow. Legal firms are starting to recognize the need to go where the clients are.

And these days, corporate clients need less help with mergers and acquisitions, real estate deals and tax issues and more assistance with environmental issues, intellectual-property matters and asset financing.

These factors have led to a strategic tenet unanimously subscribed to by Seattle's largest law firms: big is best and small is OK, but medium size won't make it.

The thinking goes that the firms destined to prosper in the 1990s are those deep in talent in a wide array of the most-promising legal specialties, with offices strategically dispersed throughout the West to serve clients that sell goods and services, raise capital and sue and get sued in multiple markets.

Small, so-called boutique firms, expertly practicing esoteric specialties should thrive as a complement to full-service megafirms. But medium-sized firms - those with 25 to 100 lawyers - are destined to be either absorbed or steamrolled by the hard-charging megafirms.

Five years ago, a firm with 100 lawyers was considered huge for Seattle. Two years ago, only one firm, Perkins Coie, had more than 200 lawyers. Since last fall, no less than three firms - Davis Wright, Lane Powell and Preston Thorgrimson - have vaulted into the 200-plus club via merger with another large firm.

Meanwhile, Bogle & Gates, primarily through internal growth, will top 250 lawyers this year. Perkins Coie, also through internal growth, has remained king of the hill and should have more than 340 lawyers after this year's crop of law school graduates arrives in the fall.

Throw in San Francisco-based Heller Ehrman White & McAuliffe, with 335 lawyers, including a thriving Seattle office with 55 attorneys, and Portland-based Stoel Rives Boley Jones & Grey, with 220 lawyers, including 57 in Seattle, and the Emerald City now boasts a mother lode of megafirms.

Getting bigger appears to be the strategy of choice at the moment. Yet, precisely because the emergence of megafirms has occurred so recently and rapidly in Seattle, observers of the Seattle legal community, including the active players, agree that the jury is still out as to whether size will, indeed, translate into stability over the long run.

A recession, they say, conceivably could leave these newly formed megafirms unable to cover the huge overhead needed to compensate a deep staff of high-salary lawyers and to keep open expensive branch offices.

Moreover, it remains to be seen whether the recent spate of mergers will pan out as visualized.

Consensus building among partners who, by nature and training tend to be stubborn and argumentative, is difficult enough in a long-established firm, never mind between two firms unused to each others' nuances.

``Getting lawyers to agree on something is like trying to herd cats,'' said John Wunsch, the outgoing executive director at Bogle & Gates. Wunsch, a career manager who is not a lawyer, says ``cats and lawyers don't have an inherent herding instinct by any means.''

Consultant Reed said the recent breakup on the national scene of the law firm McKenna Connor & Cuneo should serve as a reminder that no one can guarantee success. The firm was created 10 years ago through the merger of a Washington D.C.-based firm specializing in legislative matters and a Los Angeles real estate law firm.

``They worked at it pretty hard for a decade and concluded after all that time that their cultures still didn't mix, so they un-merged,'' said Reed. ``It's too early to tell how these (Seattle) mergers will sort themselves out.''

Is the optimist view that there's room for five thriving Seattle megafirms realistic?

Said Lane Powell's Lycette: ``I think you can assume one of the five will flop and somebody from the second tier will move up. That's just the vicissitudes of business.''

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SEATTLE LAW

Here's a glimpse of what the five largest Seattle-based law firms are doing to keep growing.

Perkins Coie

-- Lawyers: 321

-- Office locations: Seattle, Bellevue, Portland, Anchorage, Los Angeles and Washington, D.C.

-- Recent moves: Chairman Tom Alberg resigned this month to become senior executive at McCaw Cellular Communications. Internal growth continues at a brisk pace, with 40 percent of attorneys now based outside the Seattle office.

-- Strategic outlook: Clients such as Boeing and Puget Sound Power & Light fueled quantum growth leaps. However, efforts to diversify client base have paid off; Boeing still biggest client, but now accounting for less than 10 percent of billings. Priorities: fill in West Coast presence, pursue affiliations with Far East law firms and enter Europe through Eastern Bloc countries with the help of Washington, D.C.-based consulting affiliate, The Bancroft Group. Actively exploring possible affiliations with a Vancouver, B.C., firm. San Diego, Newport Beach and the Bay Area also getting a close look.

Davis Wright Tremaine

-- Lawyers: 238

-- Office locations: Seattle, Bellevue, Richland, Portland, Anchorage, Boise, Los Angeles and Washington, D.C.

-- Recent moves: Recruited Washington Roundtable President Dick Page to fill new position as managing director and chief operating officer. Page starts this week. Raided eight lawyers from Boise branch of Portland firm Lindsey Hart Neil & Weigler to open new Boise office July 1. Merged with 58-member Portland firm Ragen Tremaine Krieger Schmeer & Neill Dec. 30. Opened Los Angeles office in August. Launched four subsidiaries last year to provide consulting services in human resources, legislative affairs, trade relations and real estate.

-- Strategic outlook: Firm would have been approaching 300 lawyers had client conflicts not scuttled proposed merger last year with Portland firm Spears Lubersky. Instead, it hooked up with smaller Ragen Tremaine firm. Focus is on assimilating new Portland and Boise offices and expanding fledgling L.A. branch. ``Southern California, Portland and Boise are all projected to be strong growth areas in the next 10 years,'' said managing partner Mark Hutcheson. May broaden non-legal consulting services in areas such as pension-fund management. Exploring new offices for the Bay Area and Vancouver, B.C.

Bogle & Gates

-- Lawyers: 230

-- Office locations: Seattle, Bellevue, Tacoma, Yakima, Anchorage, Portland and Washington, D.C.

-- Recent moves: Merged with five-member Saltman & Stevens, a Washington, D.C., forest-products boutique, last July. Brought in professional law firm manager John Wunsch 18 months ago to reorganize administrative hierarchy and install state-of-the-art computer systems. Those tasks done, Wunsch is leaving firm ``by mutual agreement.''

-- Strategic outlook: With new administrative structure and computer systems in place, managing partner Jim Tune announced a bold vision at the January annual meeting. ``Our strategy is to be prepared to practice law, not just regionally or nationally, but on a global basis,'' Tune said. Rather the open offices up and down the coast, Tune is concentrating on identifying profitable specialties and developing and recruiting top lawyers in those fields. He believes technology can be relied on to market and deliver services to clients.

Lane Powell Spears Lubersky

-- Lawyers: 230

-- Office locations: Seattle, Mount Vernon, Olympia, Portland, Anchorage, London and Los Angeles.

-- Recent moves: Merged June 1 with Portland-based Spears Lubersky Bledsoe Anderson Young & Hilliard. Later that month, opened small Los Angeles office.

-- Strategic outlook: In early 1989, adopted aggressive new plan calling for offices in a minimum of five major West Coast cities. Last month's Portland merger and branch opening in L.A. puts the number at four (the others are Seattle and Anchorage). The fifth may be in Northern California. Annual growth rate of 6 percent to 8 percent predicted by managing partner David Lycette, believes that a strong presence in California could be the key to fulfilling a longer-term goal of attracting new business from clients operating in the Far East.

Preston Thorgrimson Shilder Gates & Ellis

-- lawyers: 209

-- Office locations: Seattle, Bellevue, Tacoma, Spokane, Portland, Anchorage and Washington, D.C.

-- Recent moves: Picked up five veteran business litigators, including Fred Tausend and Don Mullins, earlier this year from the disbanded firm of Schweppe Krug & Tausend. Merged last November with 62-member Seattle firm Shidler McBroom Gates & Lucas.

-- Strategic outlook: Trying to adjust to what has been hailed as the nation's largest merger of two law firms from the same city. Several key partners and associates resigned after merger. ``Most of our attention, at the moment, is focused on consolidating the current Preston offices,'' said Kirk Dublin, managing partner. Dublin has yet to be convinced that California office is a must to play the regional game.