When the economic meltdown hit law firms, Andrew L. Sandler and Benjamin B. Klubes could have played it safe. After all, they were partners in the District office of the prestigious New York law firm Skadden Arps Slate Meagher & Flom, specializing in consumer financial services enforcement and litigation, a practice area gearing up for an influx of work even as other areas of corporate law slowed down.
Yet as others retrenched, the pair decided to take a calculated risk. In March 2009, a month when layoffs at the nation's largest firms crested and more than 3,500 lost their jobs, according to one industry Web site, Sandler and Klubes decided they would open their own boutique firm servicing clients in the financial services industry.
BuckleySandler launched that spring with about 40 attorneys, a group composed of colleagues they recruited to join them from Skadden and attorneys working for the financial regulatory firm Buckley Kolar, an upstart that had also been founded by Big Law refugees.
In the two years since the two groups joined forces, BuckleySandler has tripled in size to nearly 130 lawyers and opened offices in New York and Los Angeles to go with the one on 24th Street NW in the District, all without a merger, large-scale acquisition or even taking on debt.
The firm shares work with white-shoe Wall Street firms that include Wachtell, Lipton, Rosen & Katz; Sullivan & Cromwell; Skadden Arps; and Cleary Gottlieb Steen & Hamilton. It boasts a roster of clients that include some of the nation's largest banks, among them Morgan Stanley, Bank of America, Wells Fargo, BB&T and J.P. Morgan Chase.
“Sometimes it's better to be lucky than good,” Sandler said of their timing.
BuckleySandler's success is largely predicated on its eschewal of many tenets that have defined Big Law: Instead of being all things for all clients, the firm continues to maintain its focus on litigation and regulatory work for financial services firms. Mergers and hiring large ready-made groups of partners aren't on the table. The firm largely ignores the time-worn process of recruiting new attorneys from the campuses of the nation's law schools. Sandler says the model keeps the firm nimble, invoking a favorite metaphor to describe how the firm can offer the same quality work but at more competitive rates.
“We thought that the environment called for a speedboat rather than a battleship,” Sandler said.
Sandler's plan to join forces with the attorneys at Buckley Kolar, who included Jeremiah S. Buckley, Joseph M. Kolar and John P. Kromer, was hatched over an elliptical machine at the Kenwood Golf and Country Club when Sandler approached longtime friend and colleague Buckley, who had himself left the firm Goodwin Procter several years before. At Skadden, Sandler regularly directed his clients to Buckley Kolar for regulatory guidance, given that the area has long been a difficult one for Wall Street firms to build because the work commands lower hourly rates than that of capital markets and mergers practices.
“Ben and I could not build that capability at Skadden,” Sandler said. “More and more for our clients . . . we found ourselves bringing in the Buckley Kolar firm on a fairly regular basis. These are the most significant issues these companies face.”
For Buckley, a pairing made sense because he knew litigation would explode as the industry dealt with multiple investigations and lawsuits, making the combined boutique a one-stop shop for banking and lending clients that might be in trouble.
“There is massive securities and class action litigation in connection with the financial crisis both within the industry and brought by consumers,” said consultant Peter Zeughauser of the Zeughauser Group, which regularly advises law firm leaders on structure and business practices. “There's also all of the regulatory action around that to try to stave off or prevent another financial meltdown. At a boutique, you're likely to have a more finely tuned model because it's all you do, you can focus all of the firm's management and all of the firm's resources on it.”
That's not to say being a boutique doesn't have its risks. Zeughauser said he works with some firms, such as those focusing on class action consumer-lending cases, where work is bustling thanks to the financial crisis. Nevertheless, in three to five years Zeughauser said he expects consumer-lending work to slow.
And therein lies one of the challenges of firms that specialize. They benefit disproportionately when business is brisk but can suffer more when work peters out, prompting some to think about diversifying.
“The work isn't going to go away but it's not always going to be at this level,” he said.
BuckleySandler attorneys regularly handle the type of matters typical of the firm's larger counterparts. More than a half-dozen mortgage service companies caught up in the foreclosure affidavit crisis are being represented by its lawyers. Partner Samuel J. Buffone defended the Google executives accused of violating Italy's data privacy laws after a video showing the bullying of a mentally handicapped teenager was posted online. Recently, the firm's attorneys scored two dismissals in a case brought by the city of Baltimore against Wells Fargo over alleged predatory lending practices.
The firm's structure also allows it to tackle projects that would be difficult at a larger firm. BuckleySandler built a database of state lending laws that can be accessed by multiple clients in the wake of the Dodd-Frank Consumer Protection Act. Kromer cited the database, which was not paid for by any one client at an hourly rate, as an example of how the firm can provide value to its clients.
“This is something we offer to clients on a fixed-fee basis,” Kromer said of the database. Being a boutique “gives us some flexibility . . . so clients can manage costs on their side.”
The firm has been able to compete with its larger counterparts in large part because of the way it divides work among various tiers of attorneys. Since the recession, clients are increasingly reluctant to pay high hourly rates for junior-level associates doing relatively straightforward legal work. BuckleySandler has responded by assigning that work to staff attorneys who command a lower rate. Those attorneys can remain in that group or progress to the associate level, where mid-level lawyers do mainly research and writing at mid-level rates. The firm also has a higher percentage of the sort of senior-level lawyers for which general counsels within companies are still willing to pay top dollar.
“You can't have that depth of experience at a large law firm because of the leveraged model,” Sandler said. “But clients really want senior, really knowledgeable people.”
The firm does little to no on-campus recruiting, relying instead on finding associates at peer firms who have several years of experience and those finishing judicial clerkships. Recruiting from law schools typically requires firms to hire incoming associates two or more years in advance.
“It has substantial burdens and costs and frankly has a time period that's not consistent with our needs,” Klubes said of the on-campus interview process.
Instead, BuckleySandler has hired at least three partners, including Buffone, who were approaching the mandatory retirement age at their previous firms.
At the firm's inception two years ago, Sandler says, the plan was to grow 10 percent each year and reach 80 lawyers by the firm's five-year anniversary. Given that BuckleySandler is already nearly double that size two years in, growth was the “central topic of our partners' retreat in October” at the adjacent Fairmont Hotel, Sandler said. The group left large law firms in part because they felt the model wasn't working, and they need to figure out that sweet spot where the firm is large enough to meet client demand, yet still maintains its upstart culture.
“We use the Potter Stewart method,” Sandler said, referring to the Supreme Court justice's famous remarks about obscenity. “We'll know it when we see it. I'm not sure we can be any more precise than that.”