When a team of 30 lawyers decamped the litigation powerhouse Irell & Manella in early January, plenty of heads turned in the Big Law Community because of the prominence of the departing lawyers and the questions it left about what would come of the 74-year-old California firm.
Rumors, particularly in the headhunting industry, had already been swirling about Irell’s future, with speculation that the chair of its litigation department and leading intellectual property lawyer, Morgan Chu , was approaching retirement in his early to mid 60s.
The exodus that hit Irell on Jan. 6 brought something more solid for Big Law gossipers to sink their teeth into:
John Hueston, one of the lead prosecutors in the Enron corruption trial, led the pack of 30 to form a high-end white collar defense boutique, Hueston Hennigan, and brought with him between $45 and $50 million in revenue, Hueston told Big Law Business.
Aside from his role in Enron, Hueston last year procured a $5.15 billion settlement from Anadarko Petroleum on behalf of Tronox, Inc. creditors , who had fraud claims against Anadarko over its 2006 acquisition of the chemical company.
As it has become important for AmLaw 100 managing partners to hold onto their key partners -- particularly big business generators like Hueston -- we thought it would be valuable to Big Law leaders to look at Hueston’s rationale behind his move.
Big Law Business caught up with Hueston several weeks after the dust settled around his departure, and, in an interview, Hueston laid out why he feels his practice is better-suited at a boutique, and why his associates will have a more meaningful role by his side.
Hueston responded to some questions in emails outside of the interview. Below is a full transcript of the Q&A. Hueston’s verbal and written responses have been combined, and edited for clarity and brevity.
Big Law Business: Why was a boutique more attractive for you than a big firm?
Hueston: A boutique has no institutional incentive to “feed the beast” and employ large numbers of lawyers at all times regardless of client needs. Instead, we can invest in our attorneys, cultivate loyalty and minimize attrition, and bring a higher quality of lawyering to our clients and enjoy a better esprit de corps ourselves.
Big Law Business: We’ve seen a number of groups splintering off from big firms. Why do you think that is?
Hueston: I think they see opportunity in the marketplace. Rather than spending significant hours awash in large firm bureaucracy and fighting conflicts issues, they can focus their mission in the legal marketplace and create an office culture that brings a smile each day when you arrive at the office.
Big Law Business: What will you be doing differently at your new boutique?
Although we are already 32 lawyers fully occupied with work, we plan to grow slowly so that we can choose to work on only the most interesting and challenging matters. We are prioritizing a mix of cases that include ones of high public impact, regardless of fee considerations.
We will guarantee at least one trial in the first two years for each of our incoming associates, with a goal of at least five trials by fifth year. We are building an “experience ladder” that every associate will climb to ensure advanced skills and opportunities. Combined with profit sharing incentives, we believe we offer and will continue to offer the most motivated and skilled teams for the toughest cases.
Big Law Business: Profit sharing incentives?
Hueston: In the first year, no matter how we do, we will at least meet market bonuses to reward people. What we aim to do is give them a share of profits so that in a profitable year they’ll do substantially better than top standardized bonuses nationally.
Big Law Business: Why?
Hueston: We are doing that on purpose because we feel associates at big law firms have adopted the wrong attitude to the practice of law. I think most law firms offer bonuses tied to hourly milestones, such as 2,000 hours being a trigger for a bonus. What I have observed is that that has produced, predictably, an attitude among associates of, ‘What do I need to do to get over 2,000 hours to get a bonus?’ Here we are trying to defeat those historic incentives and re-define them.
Likewise, we will constantly seek to align our firm’s financial incentives with those of our clients by offering fee structures based on performance and client budgeting priorities. We will train teams to focus on and understand key client needs and to develop themselves as “outside GCs” for our clients. We are aware of no other firm with our approach.
Big Law Business: You mentioned that you’ll ‘guarantee’ at least one trial for an associate in their first two years at the firm. How will you do that?
Hueston: Even if there is not a paying client opportunity to ensure that they have a trial, we’ll make sure that they have pro bono or other trials, regardless of the time it will take for them to take off on other matters. That is difficult for larger firms to emulate. They anticipate larger numbers of associates. It would require for much of the larger firms a massive allocation of resources and oversight into the very large incoming classes, and I think practically, it would be very difficult to do. And their model disincentivizes that approach. Very large firms bring in large classes of associates with the intention of whittling them down as the years progress. Our approach is to scrutinize associates as they get in the door and assess them with an eye toward partnership. We don’t have significant attrition in mind.
Big Law Business: How do you make sure you bring on the right associates?
Hueston: That is not an easy task. What we’re looking for, in part, is the same as what some of the best firms are looking for: Students graduating at the top of their classes, significant activities showing advanced writing skills, students in leadership positions. We are also looking for people who have shown creativity and entrepreneurship in their career objectives. We are not interested in taking on any associates who asked about hourly requirements.
Big Law Business: Who are your biggest clients?
Hueston: Amgen, Glaxo Smith Kline, T Mobile, Blackberry, PIMCO, Waste Management, Sempra Energy, Corelogic, Masimo, the University of California, State Compensation Insurance Fund, Allergan and Pacific Life.
Big Law Business: When you moved, there was buzz in the legal market about what this means for Irell & Manella. Do you stay in touch with your former colleagues?
Hueston:We have warm relationships with many of our former colleagues; in fact, I recently opted to employ several Irell attorneys on one of our matters.
Leaders of Irell & Manella did not respond to requests for comment for this story.