‘Big’ relative term in legal market where midsized players rule

NEW OUTLOOK: Neal R. Pandozzi, left, of Nixon Peabody's public-finance group, confers with Andrew Prescott, the newly appointed office managing partner of Nixon Peabody in Providence. / PBN PHOTO/TRACY JENKINS
NEW OUTLOOK: Neal R. Pandozzi, left, of Nixon Peabody's public-finance group, confers with Andrew Prescott, the newly appointed office managing partner of Nixon Peabody in Providence. / PBN PHOTO/TRACY JENKINS

In 1991, the largest law firm in Rhode Island, Edwards & Angell, had 171 local attorneys. The next-biggest player, Hinckley, Allen, Snyder & Cohen, had 140.

By last year, what it meant to be big in the Rhode Island legal industry had changed dramatically. The firm at the top of Providence Business News’ 2016 list of law firms with the most local attorneys, the renamed Hinckley Allen & Snyder LLP, had 60 Rhode Island attorneys. The next three firms on the list, based on 2015 year-end data, had 48, 42 and 41 local lawyers.

So why are Rhode Island’s largest law firms shrinking? And what does it take to compete in a field now dominated by midsize and small players?

“The Great Recession changed many clients’ spending habits and a lot of the larger firms had to shrink,” said Michael Sweeney, a partner at Providence-headquartered Duffy & Sweeney Ltd. “We’ve grown because we service companies that come here and want the senior-level service they can’t find with large firms elsewhere. Smallness is good when it comes to customer service,” he said of his firm, which employs 17 local lawyers.

- Advertisement -

The post-recession atmosphere, he added, “has forced firms to do things with less people, more efficiently.”

Andrew Prescott, newly appointed office managing partner for the Providence office of Nixon Peabody LLP – at 172 years old, the state’s oldest law firm – agrees the recession took a toll on the local market that’s still felt today.

“We exist in a market that has experienced extreme challenges in terms of employment,” he said. “Unlike Boston or major metropolitan markets, the city of Providence and state … [have] not experienced the type of growth that would allow the legal market to expand.”

But the stagnation in the local market doesn’t mean there aren’t any big law firms in the state, or that outside firms don’t see growth opportunities here. While Nixon is a small player locally with 13 Providence-based lawyers, it had 697 lawyers nationally at the end of last year.

And one of the newest players on the Rhode Island legal scene, Locke Lord, has 37 local attorneys but last year reported a total of 827 nationally.

NEW PLAYER

In 2015 Texas-based Locke Lord, led by Jerry Clements, the firm’s chairwoman, executed a merger with Edwards Wildman LLP, then a national firm with a Providence office, which had been faltering for several years.

Clements was attracted to Rhode Island for the local knowledge of capital markets, insurance and life sciences – sectors in which Locke Lord wanted to expand its expertise.

“Providence is a hard market to break into. … [The city] is a small market with many firms that have long histories and lawyers who know each other well. … It’s much better to find a firm that’s been in existence for a long time and has a good reputation, good group of people and add those to your platforms,” explained Clements.

“Locke Lord is so big … [its merger] is a very salient example of the local law firm being transformed overnight into part of a behemoth,” said Michael Yelnosky, dean of Roger Williams University School of Law.

Clements plans to build on the more than century-old Providence legacy of Edwards Wildman.

“We saw Edwards Wildman as a huge opportunity because it’s a great brand. … They just needed to figure out where they were going to go and what the strategic plan was for the future,” she said.

Christopher Graham, who worked at Edwards Wildman and is now Locke Lord’s Providence office managing partner, said the merger helped the firm achieve a number of goals Edwards had fallen short of since the Great Recession.

“It feels great. … We had a strong year and actually hit budget. [That] was something Edwards Wildman had not accomplished for a couple years,” he said.

Graham explained that while the firm’s focus has not changed – it still does major business in the fields of private equity, mergers and acquisitions, complex litigation and municipal finances – the biggest impact of the merger has been elimination of redundancies at the Providence office.

“Following the merger, management took a hard look at talent. In some mergers it’s, ‘We win, you lose, our people stay, your people go.’ I’m pleased to say in this merger, management said, ‘Let’s take a wider look and see where the talent is,’ ” said Graham, although the office lost a number of support staff.

And even at a tight 37 local lawyers, down from 52 at the end of 2014, Graham is positive, saying, post-merger, the firm still competes in the Rhode Island market.

“We have been so busy on the transactional work [which includes research and preparation for merger and acquisition contracts and house-closing procedures] it’s been going gangbusters, and you hear about the impending bear market and say, ‘Hope not,’ ” he said.

“Firms that are successful today are very flexible in their approach to billing,” added Clements. “Providence is a great example of a market where we’ve got lower overhead and can do some flexible arrangements.”

But to most Rhode Island legal observers, the merger of Edwards Wildman and Locke Lord is not seen as a sign of things to come locally. Rhode Island has seen its share of law firms merge in the past. Edwards Wildman, for example, merged with Palmer & Dodge in 2005, Kendall Freeman in 2008 and Wildman Harold in 2011. But such merger activity has become less common as the size of the biggest players has shrunk.

“I would not expect to see [mergers like Locke Lord] repeated with regularity. [It] resulted from a unique set of circumstances … as opposed to some greater trend in the law business that would drive additional mergers of that type,” said Prescott.

Joseph Kuzneski, a Hinckley, Allen & Snyder LLP partner, agrees. He called the merger a “special case” due to the international business model of Edwards Wildman.

“Once you embark on a model which entails a large geographic presence, you’ve got to continue that expansion. I don’t see many firms in Rhode Island using that same model,” he added.

But he thinks the relative lack of growth in the local legal market has made it more competitive. That includes pressure put on the bigger law firms to decrease fees in order to meet various-sized clients’ needs.

“I think right now there is a window of opportunity for medium-sized firms, the major firms in Rhode Island in my mind, to benefit from this focus on companies taking a hard look at fees and using the appropriate firm to do the work,” he said.

And just because local firms aren’t caught up in a flurry of merger activity, it doesn’t mean there isn’t still pressure to grow, says James Hahn, a partner at Providence-headquartered Partridge Snow & Hahn LLP.

“The bigger firms [with a presence outside the state] have gotten bigger, and I think there is still pressure on the midsized firms to get bigger. What ends up happening is you have very big firms and very small firms. The firms in the middle end up with overhead costs that put pressure on them, until they become a sufficient size to support them,” he said.

GROWTH POTENTIAL?

The Rhode Island Bar Association does not keep track of the number of local lawyers in the state on an annual basis. But PBN’s research suggests that number has remained relatively stagnant among the largest firms, even as some of them shrank individually.

In 2006, the top five law firms, determined by the number of local lawyers, employed 243 local lawyers, for an average of 48. Even after the recession hit, this number grew to 263 in 2011, for an average of 52 lawyers.

Last year the top five law firms employed 230 in Rhode Island, with an average of 46, according to the Providence Business News 2016 Book of Lists.

“In Rhode Island, midsized firms have continued to grow by hiring new attorneys and experienced practitioners, or even small groups of practitioners, but not through merger,” Hahn said.

Legal observers say that while Rhode Island once was seen as a specialty legal market, it is now more generalist.

Sweeney said banking law was prominent among local firms when the Rhode Island market specialized in precious-metal lending and trading from the 1970s to 1990s.

“At this point I don’t think there’s anything left in Rhode Island that people come here for in terms of specialty … [and] I think that’s a good thing; we’re more generalist and not reliant on one specialty,” he said.

“There are some real esoteric things you could find in New York and Boston, but those would be narrow [fields] based more on the clients’ needs,” said Hahn. “We have quality practitioners in most areas.”

As has always been the case, most firms are based in Providence, due to the ease of access to banks and state courts.

“[Providence is] still the hub for most of the business-law firms, not Newport, not Cranston,” Sweeney said.

The shrinking Rhode Island presence of the state’s biggest law firms hasn’t had a measurable effect on local job prospects of graduates of Roger Williams University School of Law. From 2004 to 2014, the percentage of graduates from the state’s only law school that reported to RWU that they were practicing in Rhode Island stayed between 20-29 percent for all but one year, 2013, when it jumped to 36 percent. In 2014, the most recent year for which the school could provide statistics, the percentage fell back to 23 percent, with 41 of 178 graduates practicing in Rhode Island.

“A majority of our students are not Rhode Islanders,” Yelnosky said. “Our alumni can most likely be found in Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania and Maryland – we’ve always had a lot of students who come here and go elsewhere,” he said.

Kuzneski and Prescott say that when local business growth picks up, it will lead to more opportunities for Rhode Island law firms. Both are hopeful the recently announced plan to open a GE Digital office in Providence (with at least 100 jobs) will be a start.

Prescott, whose firm’s roots in Providence date to 1990, believes the presence of such a large company as General Electric Co. could help reverse the stagnation of the past decade. It could “stimulate significant commercial and economic growth which could, in turn, provide a boost for the legal industry,” he said.

Kuzneski, who knows GE employs many in-house lawyers, hopes other firms will follow the behemoth in opening up, or expanding, shop locally.

“If Rhode Island can attract more businesses, but not quite that big, there will be a lot more opportunity for Rhode Island-based law firms,” he said. •

No posts to display