At its height, lawyers say, everybody -- clients and lawyers seeking jobs -- wanted to go to Washington's Wald, Harkrader & Ross.
In the late 1970s and early '80s, the firm was one of the fastest growing in town, representing big corporate clients attracted by Wald, Harkrader's excellent reputation for antitrust and environmental work, among other areas of expertise. It was a firm that was involved in such highly visible cases as the Trans-Alaskan Pipeline and numerous claims by American companies against Iran after the Iranian hostage crisis ended.
The founders professed an unusual commitment to "democracy" and "openness" in the way the firm was managed, prompting young law-school graduates to flock to its offices. When it saw a gap in its talent pool, Wald, Harkrader would aggressively seek out stars from other firms.
Wald, Harkrader lawyers insist their idealism hasn't dissipated, but it has been sorely tested in the past several years. Financial pressures have squeezed the firm. Some of its legal specialties that produced much of its revenue -- especially those involving federal regulatory agencies -- experienced a drop in business as a deregulation mood struck the nation. And a series of painful and acrimonious disputes over the firm's direction rocked Wald, Harkrader.
In the latest wave of departures, a dozen partners and several associates left the firm at the end of last year, bringing to more than 50 the number of attorneys that have quit the firm in the past 1 1/2 years. The firm now employs about 50 lawyers, compared with nearly 120 in 1984, after a contraction that lawyers say is virtually unprecedented for a firm of Wald, Harkrader's size.
"What we had going on here for the past couple of years was a contest for the soul of this law firm," senior partner Robert E. Wald said in an interview last week. "We fought to maintain the core of the values we had at the beginning, and we like to think we have succeeded."
Others, formerly with the firm, are less charitable. They say that Wald and other senior members were wedded to an antiquated notion of the profession that did not correspond to the increasingly tough fiscal realities of the business.
One ex-partner, who, like several of his colleagues, asked not to be named, said, "The basic issue is a philosophical one. Are we a business that is well-run and profitable and attention is paid to the bottom line . . . or is it going to be run like a family?"
No matter their views on how events turned out, current and former colleagues describe Wald, 59, as the visionary and driving force behind Wald, Harkrader's growth as one of Washington's most prominent first-generation law firms. Along with Carleton A. Harkrader, a fellow ex-Federal Trade Commission lawyer, and William W. Ross, a former attorney with the Federal Power Commission, Wald set up shop in 1961 and has been building ever since.
Like many Washington firms, Wald, Harkrader & Ross made its name on the strength of antitrust and federal agency work -- the kind that flourished as government involved itself in vigorous regulation throughout the 1960s and most of the 1970s. Growth was steady and modest, and by 1976, the firm had hired about 35 attorneys.
The growth rate, however, turned sharply upward in 1977, after Wald, Harkrader merged with two smaller firms. Overnight, Ross and Wald say, the firm had more than 50 lawyers, with additional expertise in a number of areas from environmental and labor law to aviation work.
More importantly, it had laid the groundwork for its subsequent development into a quite different kind of firm: a full-service firm that corporate clients could turn to on a range of subjects.
Over the next few year, the firm continued to grow, and by 1981, Wald, Harkrader had again doubled in size.
The expansion was fueled in many ways by the economic exigencies of the profession, which increasingly forced firms to pay more attention to business issues -- from peddling for clients to bearing down on expenses. Expanding expertise was only part of the game. Head-to-Head With Big Firms
"We were head-to-head with firms like Arnold & Porter [another major Washington firm] in competition for clients, genuinely so, and we didn't have anything like their capabilities," said Ross. "We became much more conscious of the need for breadth. We were playing in a league where we just knew we had to be bigger."
The arrival of the Reagan administration in 1981 turned diversification into a watchword, lawyers say. While deregulation began during the Carter period, federal agencies accelerated their withdrawal from regulatory actions -- causing consternation among firms that relied heavily on that kind of work. Work before the now-defunct Civil Aeronautics Board disappeared, for example. Wald, Harkrader's antitrust specialists, starved for Federal Trade Commission work, increasingly turned to other areas for business.
Accordingly, the firm also aggressively continued to seek out new partners in other areas, hiring a considerable number from other firms. Wald, Harkrader was especially successful in the international area, hiring among others Noel Hemmendinger, a prominent trade law expert, and John A. Westberg, who had formerly practiced in Iran and who brought numerous Iranian claims cases to the firm.
The firm also won some coups in its existing lines of business, representing Occidental Petroleum at Love Canal and helping the Stroh's beer company foil antitrust objections to its takeover of Schlitz.
Throughout this period of rapid growth, the leading partners tried, with increasing difficulty, to maintain the "democratic" values of the work place that they had prided themselves on since the beginning -- and for which they had become well-known in the profession.
Unlike more autocratic competitors, the firm gave young partners an unusual amount of say in management decisions. Associates, or lawyers who had not yet reached the inner circle as partners, were provided access to financial information not available to their counterparts at other firms. Partners told recruits in the late 1970s that lines of communication at the firm "are open and usually crackling."
But, as several current and former partners suggest, "democracy" was one thing when the firm employed 30 lawyers. It was quite another in a firm of 100 lawyers, many of whom, fresh from firms with entirely different management philosophies, were not as sympathetic to Wald, Harkrader's "sentimental approach to the practice of law," in the words of founder Carl Harkrader.
Certainly as the democracy grew, one issue increasingly proved a source of contention: money. Income dipped a bit after one of the firm's most prominent attorneys, Terry F. Lenzner, left in 1981 and took with him the lucrative Trans-Alaska Pipeline case. But the most pressing irritant was a cash-flow squeeze in 1984 after slow payment by some big clients, former partners say. Cash Flow Caused Problem
"The cash-flow problem should not have been fundamental," said one partner who left this past year, "but it brought to the fore discussion of how the firm ought to be run." The points of tension were varied, according to various current and former Wald, Harkrader lawyers.
One strong source of frustration for some was the firm's compensation scale. Compared with other similarly sized firms, partners say, the difference between what junior and senior partners made was always relatively narrow. Some of the more productive lawyers did not make as much as their counterparts in other firms.
"We have always been a profitable law firm," said Wald. "But it is the level of the profitability versus the expectations of lawyers that causes problems."
"And," he said, "the expectations of lawyers are often fed by an unreal sense of their own worth."
To others, particularly some who have since left the firm, the differentials were not insignificant. No concrete figures were available, but one former partner estimated that Wald, Harkrader compensation came in well below what he termed the normal range of Washington law salaries: $100,000 for the youngest partners on up to more than $400,000 for the most senior.
"You take all these numbers and deflate them significantly. At the bottom you're talking 20 percent below other firms . At the top you're talking about 50 percent," said the ex-partner.
As this partner and a sizable number of others saw it, one of the reasons for this was that the firm had become overextended and was increasingly seeking growth for growth's sake, without attention to the underlying profitability of certain ventures. London and New York Offices Opened
Offices were opened in London and New York, but were proving to be a drain on resources, some partners felt; additionally, they thought, the firm brought in several new lawyers who did not pull their own weight.
"Bob Wald's vision was a firm that was primarily oriented toward an endless expansion without concern for profitability," said one of the discontented lawyers. Despite his professed devotion to openness and democratic ideals, this lawyer added, Wald refused to bend this vision to accommodate other views.
Wald insists he compromised on many issues, and indeed the firm did tighten up in certain areas. In 1984, he said, the firm cracked down on expenses and spending. Ex-partners say the firm also implemented changes in the compensation scheme in 1985, pushing salaries more in line with the amount of business each partner brought in.
Nonetheless, it was increasingly evident that compromise was only possible to a degree. Not only were Wald and Ross, among other partners, committed to expansion as an investment in the firm's future, but they also said they did not want to deviate from the firm's basic policies on salaries.
"I wouldn't for a minute say that every investment we made turned out successfully," said Wald. But some lawyers, he said, "didn't have the heart to see certain things through." He and Ross brush off concerns about the partnership's financial health. "If you looked at the balance sheet," Ross said, somewhat heatedly, "You'd say 'Gee, what a successful business.' It's a matter of perception, of expectation." Lawyers Bail Out
In any event, the underlying tensions did not go away, and the resulting divisiveness grew wearying, both current and former partners agree. For a range of reasons -- some personal, some relating to the underlying friction -- sizable numbers of partners and other lawyers bailed out over the course of 1985.
The largest group of departures occurred at the end of last year, when the firm's remaining environmental team and other lawyers left under a negotiated agreement. Included was Thomas H. Truitt, the head of the environmental team and, as some sources described, one of Wald's major foils. But both Truitt, who is now at Piper & Marbury, and Wald say his departure was "amicable."
While Wald and Ross say they cannot be sure that a few more departures won't occur, they say they believe the basic contraction has just about ended. The firm is in good financial shape, they say, and will continue to seek possible avenues of expansion. Nor, they stress, has their basic faith in open discussion and democratic governance been shaken, although they acknowledge these very principles helped contribute in the first place to their difficulties.
"It gave people an opportunity to vent frustrations that are suppressed in a lot of firms. It was therapeutic, but also unproductive," said Wald. But he added pointedly: "The style in a lot of firms that some of our people have gone to is going to be shocking to some."