A SPECIAL REPORT ON THE SOUTHERN CALIFORNIA ECONOMY : THE FINANCIAL CAPITAL OF THE WEST : Law Firms Make a Case for L.A. as National Giants Expand Presence Here

Times Legal Affairs Writer

As Los Angeles has become a major world financial center, law firms here and around the country have rushed to cash in.

"Where banks and investment bankers go, lawyers are sure to follow," says John B. Houck, chairman of the International Law Section of the Los Angeles County Bar Assn., whose own Cleveland-based firm of Jones, Day, Reavis & Pogue, boasting 750 lawyers, opened a Los Angeles office 14 years ago. The local office has grown to 105 lawyers from just three.

More than 50 law firms headquartered in New York and other cities around the nation have recently established Los Angeles beachheads. Starting with one to a dozen lawyers, those satellite offices have mushroomed, planting themselves firmly in Bunker Hill high-rises as close as they can get to their financial clients in the surrounding skyscrapers of the city's dramatic new financial district.

So far, the major home-grown firms have not suffered from the competition. The city's three largest "natives" are among the nation's top 10 firms in gross revenue for 1986 as ranked by American Lawyer magazine: Gibson, Dunn & Crutcher, with 538 attorneys and $156 million in revenue (fourth nationally); O'Melveny & Myers, with 376 lawyers and $127 million in revenue (eighth nationally), and Latham & Watkins, with 420 lawyers and $121 million in revenue (ninth nationally).

Because there has been more than enough business to go around, about the only tense competition among the firms is the annual scramble to hire the nation's top law graduates.

"Our clients are growing at least as much as we are, and so are legal complexities," said Jack Walker, of Latham & Watkins' executive committee, who expects his 420-lawyer firm to have more than 1,000 lawyers by the turn of the century, compared to 35 scarcely two decades ago. "You can't stand still in this kind of business."

The number of lawyers in Los Angeles County licensed to practice law by the State Bar has multiplied 2 1/2 times since 1970 and has increased by 35% since 1980, with 33,103 registered as active.

Firms based elsewhere have been lured here by their own migrating clients or by the prospect of high growth, new financial and commercial clients, or both.

"We are very bullish on Southern California," said Carl J. Seneker II, managing partner of the 330-lawyer San Francisco firm Morrison & Foerster, which opened a Los Angeles office in 1974 with two lawyers and now employs 60 here.

"Initially we followed a client here (Crocker Bank, which the firm no longer represents)," Seneker said. "But it was obvious that Los Angeles would be the leading commercial center of the West Coast, and we wanted to be positioned to take advantage of that."

The nation's largest law firm, New York-based Skadden, Arps, Slate, Meagher & Flom, with 800 lawyers and (according to American Lawyer) $228 million in gross revenue, moved west four years ago because it considered Los Angeles a new market for what it does best--sophisticated financial transactions and major commercial litigation.

National Trend

"It was our view that Los Angeles was becoming a major financial and commercial center and therefore a place we ought to be," said Earle Yaffa, the firm's managing director, based in New York.

Skadden, Arps opened its Los Angeles office with a dozen attorneys and now has 96.

Another reason for major growth of law firms in Los Angeles during the 1980s has been a tendency toward nationalization of legal services in tandem with the national and international reach of banks and businesses.

"Firms used to be much more regional or local in their dealings with clients. You only represented companies that were merchandising on a local level," observed Robert G. Lane, managing partner of Paul, Hastings, Janofsky & Walker, a Los Angeles firm founded in 1951 with three lawyers that now has 300.

"Now our clients are becoming national and international, and they present new opportunities," Lane said. "The focus is much broader, and the dealings are with a lot more money and on a much higher level of risk."

Another major event fueling law firms' growth here, administrators agree, is Los Angeles' emergence as the primary arena for Pacific Basin financial and commercial dealings.

"Asians are interested in investing in Southern California, so they set up manufacturing companies," Houck said. "All this is lawyer intensive.

Growth Assured

"They need corporations created, immigration assistance for business executives, leases or help with buying land and building buildings, and help with dealing with U.S. labor laws and things like OSHA," the Occupational Safety and Health Administration.

Knox M. Cologne III, immediate past chairman of the corporate law section of the Los Angeles County Bar Assn. and senior vice president and associate general counsel of Bank of America, said that the complexity of international financing arrangements alone assures growth in the Los Angeles legal market.

"All the firms continue to grow," Cologne said, "but Los Angeles is not over-lawyered. The economic vitality of Los Angeles in connection with the Pacific Basin assures ample new business for lawyers."

The lawyers flocking to Los Angeles find that the burgeoning financial market here needs some legal specialties more than others. They hesitate to suggest any limitations for their "full-service" offices, but it is clear that the flourishing mega-firms are not rolling up the billable hours on divorce or probate law. The boom categories center more on corporate law and whatever it takes to help a company form, merge, contract, survive and, sometimes, fail.

"Banking and securities law is a major part of our business," said Gerald E. Boltz, chairman of the Los Angeles County Bar Assn.'s Business and Corporations Law Section whose 300-lawyer New York-based firm, Rogers & Wells, opened a Los Angeles office in 1979 with a dozen attorneys and now has 40.

Also important for commercial clients are labor law, environmental law, real estate, taxation, product liability, toxic tort (such as asbestos claims), antitrust and--for the businesses or banks that don't succeed--bankruptcy, said Thomas E. Workman. He is head of litigation for the Los Angeles office of San Francisco's largest firm, Pillsbury, Madison & Sutro, which has 478 attorneys in all offices. The firm's Los Angeles office opened Oct. 1, 1986, with a single attorney, now has 32 and plans for 50 by the end of the year.

"I just don't see any stopping it," said Seneker of San Francisco's Morrison & Foerster office here. "Lawyers are part of a service industry, and our service is required when business transactions take place.

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