Representatives of Nevada’s largest and most prestigious law firms gathered at the Four Seasons Hotel recently to discuss challenges and issues affecting their profession. The gathering was part of Nevada Business Journal’s monthly Industry Outlook series. Gloria Sturman, president of the State Bar of Nevada, served as moderator for the roundtable discussion, which included agenda items related to running a law firm as a business, including the threat of outside competition, the challenges of growth, rising insurance costs, recruitment of attorneys, and many others.
Following is a condensed version of their comments.
Gloria Sturman: For the next 30 days, I am president of the State Bar of Nevada. My firm is Edwards, Hale, Sturman, Atkin & Cushing. We have 10 attorneys, and primarily practice insurance defense. I do mostly civil rights defense for Clark County. I would ask each of you to introduce yourself and describe the biggest challenge of your firm.
Todd Kennedy: I am an associate with Lionel Sawyer & Collins, where I have been for seven years. Our firm has around 90 lawyers and is continuing to grow. We do just about everything, from gaming law to litigation, which is what I focus on. One of the biggest challenges, I think, is simply adjusting to the new market for law firms, especially larger ones, and making sure that over the next five, 10 or 15 years we’re still in a position in Las Vegas where we are one of the major law firms.
Charles Lybarger: I am on the opposite end of the spectrum, as a sole practitioner. Primarily, I do litigation – injury litigation and some commercial litigation as well. I have been in town for about 33 years and I have been an attorney for 11 years.
Joseph Dempsey: I am the managing partner of Dempsey, Roberts & Smith. Mr. Roberts and I opened the firm about 10 years ago, and we currently have 50 employees, about 20 attorneys, and we do litigation defense. We also do personal injury and criminal law, and I personally do international and corporation law.
George Ogilvie: I’m with McDonald Carano & Wilson. We have offices both in Las Vegas and Reno. We have 15 lawyers in Las Vegas and over 20 in Reno. We are a general business firm, handling transactions and litigation. We do a lot of construction litigation. We represent general contractors and subcontractors in commercial building disputes. We also have an estate planning and tax department.
Mark Ricciardi: I am the managing partner of the Las Vegas office of Fisher & Phillips. We’re a labor and employment firm exclusively representing management, founded in 1943 in Atlanta. We have 170 lawyers in 10 offices across the country, including five lawyers in Las Vegas.
Bill Spohrer: I’m with Jolley, Urga, Wirth & Woodbury, where I share management responsibilities with Bill Urga. We have been around about 30 years. Our pressing problem right now is to integrate associates into the management process so they understand the business of practicing law as well as the profession of practicing law.
John Steffen: I am the managing partner of Hutchison & Steffen, a general civil litigation firm. We currently have 20 attorneys and 50 employees. Our greatest concern as a firm has always been keeping up with our growth. We started the firm in 1996, and for the second time in our history we have had to open a satellite office because we don’t have enough room to house our attorneys.
Bruce Alverson: I am with Alverson, Taylor, Mortensen, Nelson & Sanders. We have about 40 lawyers now. For years, we were almost exclusively a litigation firm, but within the last six or seven years we have diversified, and we now do just about everything with the exception of tax work. We do have a Reno office as well.
Neal Tomlinson: I am the managing partner of Cobeaga Tomlinson. We opened our firm in June of 2001, when it was just Mitch Cobeaga and I. We now have nine lawyers and 20 staff people in a diverse civil and commercial litigation practice.
Mark Tratos: I am the president of Quirk & Tratos. We focus on intellectual property (IP), with offices in Las Vegas and Los Angeles. Our Las Vegas office does full-service intellectual property, from patents to complex licensing for Internet issues. Our Los Angeles office represents primarily entertainment clients, focused on celebrity rights and television work.
Michael Bonner: I am the managing partner of Kummer Kaempfer Bonner & Renshaw. We are primarily a business-focused law firm with emphasis in local governmental affairs, land use, zoning, commercial litigation and business transactions, as well as corporate finance, gaming and related transactions and real estate. Our firm has 35 attorneys and approximately 95 employees in Las Vegas.
Joe Brown: I am the president of Jones Vargas. We have about 65 or 66 lawyers, 70 percent of whom practice in Las Vegas. We are the oldest Nevada law firm operating continuously, other than perhaps Woodburn & Wedge. A lot of attorneys in Las Vegas at one time or another were with our firm. We do a lot of commercial litigation, real estate, banking and securities. We have a very large governmental affairs practice. I think we all have similar problems in managing growth and keeping good quality people.
Jeffrey Burr: I’m president of Jeffrey Burr & Associates. Our tax, estate planning and probate firm has 22 employees and five attorneys, all with strong tax backgrounds. We have carved out a little niche in the market, and love being there.
Douglas Malan: I am managing partner of Deaner, Deaner, Scann, Malan & Larsen, soon to be called The Deaner Law Firm. Our firm focuses primarily on real estate transactions and litigation and represents some municipalities as well. We have 15 employees, six of whom are attorneys. We are looking at expanding a little bit, but don’t want the headache that some of you have with many, many attorneys and many employees.
Specialization versus General Practice
Sturman: Let’s discuss the opportunities and challenges of specialty versus general practice. Do you go to the niche and stay there and have the opportunity to be the biggest fish in that pond, or is it better to become a much more general firm, like Jones Vargas?
Burr: Early on in my career, I made a decision that I wanted to get into a practice where we could concentrate in an area, become known as specialists and assist other law firms in that particular area. Several of the firms here at the table don’t have tax or estate planning attorneys as part of their staff, and we do, so our largest referral source has been other attorneys. We avoid some of the challenges of the large firm, and I think there is a real role for the specialty firm in today’s market, especially in our area.
Ricciardi: We feel that, by being a boutique or a specialty firm, we can offer our clients a lot more depth than other firms. Even in a 100-lawyer general corporate firm, if you have a five-lawyer labor department, it’s hard to have the depth of 170 specialists. The other advantage in being a specialty firm is that we get a lot of referrals, especially in traditional union matters from other lawyers in town. We are never a threat to them, because we are not interested in competing with anything else they do. If the client ever mentions a topic to us other than labor, we send them right back to the attorneys who referred them.
Tratos: One of the things we are seeing in the IP specialty area is the disintegration of the boutiques, which are being absorbed into the large general-practice firms.
Sturman: Do you think that’s unique to that niche?
Tratos: It is right now, because what is happening is, every business has an IP issue of some sort, so more and more of the larger general-practice firms are trying to become IP players as well.
Ricciardi: We are seeing just the opposite in the world of labor and employment. A lot of the bigger firms are shunning their labor employment lawyers, feeling like the work isn’t profitable enough because can’t be billed at the rates charged by corporate lawyers. As a result, they are starting their own boutiques, or are joining people like us.
Sturman: Does anyone want to speak in favor of general practice?
Alverson: We have a general litigation practice. It’s my attitude that if you know how to try a jury trial, you can take any case in front of the jury – it’s just a matter of technique and persuasion. You can learn the substantive law and the issues. I have never done brain surgery, but I have tried brain surgery cases. We started out as a general firm, but what I see now is that as a firm gets bigger, it will dedicate three or four or more lawyers to a particular area. So maybe a firm itself does general work, but within that firm, it’s a series of boutiques.
Kennedy: At Lionel Sawyer & Collins, one advantage I’ve found is that in any case I am working on, when something comes up – a tax issue or estate question –it’s nice having lawyers right down the hall who specialize. It benefits us and our clients because we can say, “Yes, we can do that for you.”
Tomlinson: One of the challenges for the general practitioner is that, because we are becoming so specialized as the market grows and law firms are getting bigger, a general practitioner now has to compete with specialized attorneys. We represent a lot of attorneys in legal malpractice cases, and a large number of those cases pertain to general practitioners who have taken cases outside their expertise. They get involved with things they simply don’t have the specialty to handle. While they may have a certain degree of competence or technical knowledge, it may not be to the standards of the community because of the presence of larger firms.
Sturman: For the larger firms, is it a challenge running the northern and southern offices of a pretty big company?
Brown: I think it all depends on the quality of your management. We have a wonderful managing partner. You have to be organized and get along with people. I think it’s been very successful in our case.
The Out-of-State Invasion
Sturman: Another issue is migration of national law firms into the Nevada market. Mark, you have had a successful merger, although other mergers did not succeed.
Ricciardi: I had been fending off merger proposals for about five or six years, and what scared me about a lot of the failed mergers was that they involved a behemoth firm from somewhere else that wanted a cute little branch office in Las Vegas. If you’re in that situation, you don’t get a seat on the management committee, and they don’t really care about you, other than the fact they have planted a flag in Las Vegas. Our situation was somewhat different. I had a thriving, successful practice, and the firm I was about to join had 10 offices and a very good democratic process. They already had a client base in Las Vegas, so they weren’t here just to steal my clientele and then leave. In my case, it worked out very well. Having a national presence has helped me because when my clients need help in other states, now I don’t have to refer it out to some other firm. I think mergers will continue to happen, but we won’t see the huge national firms coming in, because they will insist on a rate structure that wouldn’t work here. But we will see a lot of regional firms and smaller national firms.
Sturman: George, do you see as much competition from regional firms, mostly from Arizona, opening up offices here?
Ogilvie: I don’t really see that it has impacted us as a law firm yet, but who’s to say where we might have been without those encroachments from Arizona? Certainly, we are aware of it and taking steps to preserve our position in the marketplace for future encroachments. I tend to disagree with what Mark said. I think it is a good possibility that we will see Gibson Dunn, or Pillsbury, or whoever entering the market. Certainly those firms cannot bill at the same rate structure here as they can in the larger cities, but they have offices all across the country, and they know they can’t bill in Denver what they can bill in D.C. or New York.
Bonner: Nevada, and especially Las Vegas, is a unique market. It’s still a small business community and a relationship-driven community. The mistake that has been made is in not understanding the critical nature of that. This marketplace is changing. The population base is increasing, and we are becoming a larger, more visible business community and a regional business center. It’s important for Nevada-based law firms to be aware of that and to focus on the right type of client service, because you never know when the big guy might move in.
Tratos: One of the things we had to address in our IP practice was changing technology. We had to develop a recruiting program to hire new lawyers who had different kinds of science and engineering backgrounds. And we needed to do that because of the threat of large out-of-state firms. It’s a tough thing, forcing your growth to be able to meet the competition.
Burr: I think it’s important, though, for us to recognize when we have limitations. Clients we deal with seem to welcome out-of-state experts, like the firm you associate with in D.C. for a complex tax matter, and you are orchestrating it for them. It’s important for any firm to have that open mentality, and to let their clients know, “We can service you in 99 percent of the needs you have right now, but we are going to go find the top lawyer in America to help you with this one narrow issue.”
Dempsey: Our firm is small, and I think over the years our clients have appreciated when we tell them, “This is beyond what we do.” It’s been our practice to go with the client to meet the attorney who does have the expertise in that area, to be available if the client does have a question and answer it to the extent I can, and then say, “Let’s get with the expert.” As Bruce mentioned earlier, lawyers can get in trouble. I think part of it is trying to be territorial and protecting your client base, but maybe doing that is a disservice to your client.
Sturman: How about recruitment efforts?
Tomlinson: We have recruited lawyers from Texas, Arizona State, Stanford. We have hired a UNLV grad from the class of 2002, and that has worked out very well. We have hired several people from our old firm, Beckley Singleton, who liked what we were doing and wanted to come over. So recruiting really hasn’t been a problem for lawyers or for staff people. The hiring field, not just for lawyers but office staff, is still very favorable to firms. There are people out there looking for work, and we have been lucky to find some quality people.
Sturman: When we hired our office manager four years ago, we had maybe five applicants. Now she’s leaving because her husband is being transferred, and we had 70 applicants for her job, so the market has changed.
Steffen: Unlike other parts of the country the field is very green in Las Vegas. There is lots of work, and people in other parts of the country who normally wouldn’t have looked at Las Vegas as a desirable place to live will now consider it.
Dempsey: We hired an excellent attorney out of UNLV, and we find there is a nice advantage to having the law school in town now. We can get law clerks and try them out and bill them at a good rate and pay them a decent salary. It’s a real nice resource. Our firm is heavily involved in pro bono work, so we find there is a nice correlation with the university.
Kennedy: Having the Boyd School of Law here in Nevada has been a great advantage, We take a good hard look at its graduates. We have hired several and the school is turning out some good lawyers.
Ogilvie: Recruiting is one area where the influx of Arizona firms has impacted the firms here. Snell & Wilmer, Lewis & Roca entered the market here and are paying first-year associate rates they pay in Phoenix. Everyone has had to adjust accordingly.
Insurance Costs Impact Bottom Line
Sturman: Law firms haven’t seen quite the problem and taken quite the hit doctors took, but legal malpractice rates have gone up substantially. And health insurance for employees is just a nightmare. We spend 50 percent of our time in management meetings agonizing over our health insurance. Where do you see that going?
Alverson: Our malpractice rates are going up significantly. But the difference between malpractice insurance and healthcare insurance is that there are quite a few companies who will underwrite legal malpractice. Health insurance is a whole different matter. There are only two or three insurance companies that are underwriting it now in the Las Vegas area for lawyers, and the rates have gone up considerably. We provide medical insurance for employees and all dependents, so it’s an important issue to us. It’s very expensive, but we feel an obligation to make sure the entire family is covered.
Sturman: That is a recruitment tool also, because a lot of places will insure the employee but not the family. Does that help you keep your employees loyal?
Alverson: It should, but I am not sure it does. We also have a very good 401(k) plan. We do 100 percent matching. So between the health insurance and the 401(k), we pay out a lot of benefits. But, when you are talking to young people just coming out of law school, they couldn’t care less. They want to know what the base salary is, and when they are going around to different firms shopping for pay or compensation, I think our benefit package gets lost in the shuffle. But the associates who do understand it and take it seriously, we have found to be the more mature, more responsible people anyway. The people who are the most appreciative of the benefits are the secretaries and the administrative staff.
Dempsey: I had a meeting with our receptionist for an annual review, and I showed her, “This is what we are paying you, and this is how much we pay for your health insurance, which is now 50 percent on top of your salary.” So I had to tell her, “That is your raise.” We are probably going to have to shift at the end of the year to some modified plan. I believe our health insurance cost, other than regular payroll, is our largest expense, exceeding our rent.
Sturman: How about professional liability insurance?
Dempsey: Every opportunity our malpractice carrier gives us for an on-site review we take, because it gets us a 10 percent discount. If we complete five hours of ethics training, we get another discount, so everybody attends five hours of ethics seminars to get every discount we can off the rate, so our rates have held fairly steady.
Sturman: Chuck, as a sole practitioner, how do these kinds of issues effect you in your practice? Do you have time to worry about your practice when you are worrying about these kinds of things?
Lybarger: Well, you have to do it all. There is really no way for me to compete with what the bigger firms do in terms of benefits. So I have to work harder to find people. For health benefits, I have to find somebody who doesn’t need them, who has a spouse with coverage.
Sturman: Do those kinds of things make it harder to be a sole practitioner? Do they make you think, “I need to go get a job at a big firm where I don’t have to worry about this anymore”?
Lybarger: I enjoy too much being my own boss and setting my own hours and my own schedule and so forth. After all, everybody has to deal with those issues – just in different ways.
Bonner: For malpractice insurance, we just renewed our coverage within the last 30 days, and premiums are up significantly. Our health insurance rates and our general liability insurance have both gone up. As most businessmen do, we have tried to look at our costs and where can we cut. For example, we had a sizable, traditional law library, but our younger lawyers are far more likely to conduct research online. So now we are looking to see if it makes sense to keep two or three stacks of hard books as well as paying for online resources. We have tried to refine our ratio of support staff to lawyers and to eliminate duplication where we could, but still not lose our ability to serve our clients.
Sturman: Joe, you mentioned your firm is very active in pro bono work. Do you do that because you feel that is something you are obligated to do, or because it helps improve the image of the profession?
Dempsey: I think both. We as attorneys need to give something back to the community. I have two pro bono cases going all the time, and we have other attorneys in the office who do pro bono work as well.
Sturman: Other than pro bono, what can we do to improve our image?
Ogilvie: Community involvement, being on charitable boards.
Burr: I had the opportunity to be on the school board. It was an interesting opportunity. I enjoyed it and I like being involved in the community.
Spohrer: I look at the image issue from a different perspective. The more approachable we become to our clients, the better image we are going to have. When clients walk into your office and they are afraid to talk to you, or they are shaking because they are nervous, and that’s encouraged, then we don’t do ourselves any favors. When we sit down with them and talk one-on-one, have a cup of coffee before getting into their problems, then the image improves, and people will say, “They are not a bunch of prima donnas. They are just like you and me, but they have training. They can help me with my problems.”
Tratos: One of the things we try to do as a firm is encourage our young associates to teach. We now teach in nine different classes at UNLV and the community college. It helps people understand we are no different than anybody else, and if we can educate them about some of the parameters of law and legal issues, we help the community.
Lybarger: I am sure you all understand this is a long-standing problem. Abraham Lincoln referenced this particular problem in some of his work, so I’m not sure the image of lawyers as a whole is ever going to change significantly.
Dempsey: I also think the image has changed drastically for the worse from the times 30 years ago of Perry Mason, when the whole image of attorneys in the United States was not all that dreadful, but now it’s really unfortunate.
Sturman: Do we blame that on media, or do we blame that on attorney advertising?
Dempsey: What about the situation of [the gas leak incident in] Bhopal, India, when American attorneys hopped on planes and flew over there and tried to snap up grieving family members as clients? I think everybody needs to do some soul searching and try to aspire to the goals of Atticus Finch [in To Kill a Mockingbird]. Just doing a better job and not looking at the dollars.
Sturman: On the issue of ethics, the State Bar will have newly revised Supreme Court rules in accordance with the ABA Ethics 2000 for your review and comment by the end of the summer. There are some changes that are significant. We hope you’ll be involved in the process of defining ethics for the future.