On the heels of several busy years, the Houston legal market has remained hot during the first half of 2013 as more and more Am Law firms scramble to open offices in Space City in order to take advantage of the growing workload tied to the booming energy industry. Katten Muchin Rosenman became the latest Am Law firm to launch a location in the city when it announced late last month that it was entering the market as part of a broader effort to expand its environmental practice. Katten launched the office with workplace safety and environmental partner Mark Farley from Pillsbury Winthrop Shaw Pittman, along with three associates from that firm, and Tom Kiehnhoff, a former assistant U.S. attorney in Texas. Farley will head the office while building the firm’s new workplace safety practice, which will include work with energy companies and related clients on such matters as industrial accident response and litigation. Katten’s move coincides with a federal government push to step up enforcement of environmental regulations in the wake of accidents such as last month’s fertilizer plant explosion in West, Texas. Farley—who joined Pillsbury from Baker Botts in 2008—says he spoke to “a number of firms” interested in his practice before signing on to lead Katten’s new location. In opening the Houston office, Katten became the 11th Am Law firm to establish a presence in the city since 2010—and the third to do so this year (K&L Gates and Reed Smith both launched Houston offices in February). Last year, The American Lawyer wrote about the effects of the booming oil and gas industry on the legal market in Houston, including the constant overtures from headhunters being entertained by local energy lawyers.
Little, if anything, has changed since then. ”The Houston market is just something to behold,” Lee Allbritton, a legal recruiter with Texas-focused Amicus Search Group, tells The Am Law Daily. Partners at Am Law 200 firms in Houston who practice in an energy-related field, he says, are “in the epicenter of free agency—we’ve never seen anything like it in Texas.” Allbritton says the competitive atmosphere is especially fierce surrounding the finite number of experienced local partners with practices that touch some aspect of the energy industry: “Those [partners] that are in those bedrock firms—like Vinson & Elkins and Baker Botts, Andrews Kurth, and some others—are being assaulted daily by people like me trying to persuade them that the newest elite firm to come to town is worthy of their consideration.” Allbritton says Amicus, which keeps close tabs on lateral moves in the Texas market, has tracked more than 40 partner moves in the Houston market so far this year. He also estimates at least a 30 percent increase in lateral activity in the first quarter of 2013 over most individual quarters over the past three years. Not surprisingly, some of the newest firms in town are serving as the most frequent landing spots for laterals: Reed Smith, for instance, welcomed labor and employment partner Mark Temple and commercial litigation partner Leah Rudnicki from Jones Day and Akin Gump Strauss Hauer & Feld, respectively, last week. The firm previously brought in Fulbright & Jaworski litigator Julie Hardin, in March, after opening its office with a group of 12 partners from a variety of firms. For its part, K&L Gates added four Houston partners in April, including energy partner Anthony Newton from Haynes and Boone. The opening of the firm’s Houston office in February was led by former Fulbright corporate partner Charles Strauss. Other firms stocking up on lateral hires in Houston include Paul Hastings, which launched in the city in April 2012. The firm expanded its local presence in March with the addition of Baker Botts white-collar cochair Sam Cooper and Andrews Kurth capital markets partner Gislar Donnenberg in April. Sidley Austin, which opened its own Houston outpost in February 2012, announced last week that it had landed former Andrews Kurth capital markets partner Timothy Langenkamp. Earlier this month, sibling publication The Texas Lawyer reported on litigator Paula Hinton’s move from Houston-based Vinson & Elkins to Winston & Strawn. And last week, McKool Smith welcomed commercial litigator Tom Bayko to its Houston and New York offices. In another recent move, Mayer Brown—which has had an office in Houston since 1982—announced last week that it hired energy tax partner Ed Osterberg, who spent nearly three decades with V&E. Neil Wasserstrom, partner-in-charge of Mayer Brown’s Houston office, says it is obviously difficult to get a lawyer to leave a firm after that long and that it took Mayer Brown roughly six months to convince Osterberg to come aboard. But Wasserstrom says the firm has something of an edge when it comes to recruiting thanks to its long history in Houston coupled with its international reach. (Mayer Brown has 14 overseas locations, compared to V&E’s nine.) Osterberg tells The Am Law Daily that he heard from “a couple” of other firms before deciding that the move to Mayer Brown would allow him to work with a larger tax practice than he had at V&E, as well as a greater international reach. Osterberg says another key factor in his decision was Mayer Brown’s established presence in the area: “These other firms, a lot of them have been in Houston for six months or less. So I felt that Mayer Brown in Houston had already established itself as a member of the Houston legal community and it wasn’t a ‘here today, gone tomorrow’ operation.” Osterberg adds that the recent level of activity in the local legal market, with firms flooding the city and recruiting local lawyers, has been “quite remarkable” and unlike anything he’s seen in his career. The addition of a half-dozen partners in Houston in the past year notwithstanding, Mayer Brown’s Wasserstrom says he doesn’t feel any particular pressure to grow in the face of the increased competition. “We are looking at this point to grow with profitability in mind,” he says. “We don’t need to grow just to grow.”
When it comes to Katten’s new office, Farley and firm managing partner Vince Sergi both agree that specific and realistic growth targets are necessary for firms new to the market to establish. “I think that if you come to Texas with . . . the strategy that you’re just going to come out [and] quickly try to assemble a full-service firm that’s going to compete with the existing Texas firms, I think that’s going to be very challenging,” Farley says. Sergi is confident that Katten’s plan to focus on building its environmental practice—which also just added three former Baker Botts partners in Austin—will allow the firm to compete within that niche without feeling the need to stretch itself by trying to build a full-service office. “I think we’ll be able to compete very effectively because we’re there for a client-driven and practice-driven purpose in environmental and workplace safety,” Sergi says. Obviously, not all firms that blaze a path to Houston will ultimately rise to the top of that market. “They all come to town with the expectation that they’re going to be wildly successful and I would say maybe a quarter of them are,” Allbritton says. Still, interest in the Houston market does not appear to be waning. In November, after SNR Denton announced the now-completed three-way tie-up with Salans and Canada’s Fraser Milner Casgrain that created the firm now known as Dentons, The Texas Lawyer reported that opening a Houston office would be a priority for the combined firm. “Obviously we have aspirations to be there,” Joseph Andrew, who served as SNR’s global chair at the time and now holds the same title with Dentons, said. (Several other firms are thought to be considering a move to Houston, according to a source familiar with the market, including: Allen & Overy; Gibson, Dunn & Crutcher; and Willkie Farr & Gallagher, among others. An Allen & Overy spokesman tells The Am Law Daily that the firm has no plans to open a Houston office. A Willkie spokeswoman declined to comment on the matter, and a Gibson Dunn spokeswoman was not immediately available for comment.) Looking back at the plethora of large energy deals with Houston connections already announced this year, it isn’t hard to see why firms with an interest in energy industry work would want a presence in the area. Last month, a Bracewell & Giuliani team led by Houston-based partners advised Texas company Lufkin Industries—which makes pumps and other machinery used in oilfields—in its $3.3 billion sale to General Electric. In February, Houston-based Linn Energy turned to a team from Latham & Watkins for a $4.3 billion deal to buy Berry Petroleum Company. (As The Am Law Daily has reported, Latham opened its Houston office in 2010 with groups of lawyers from Baker Botts as well as Akin Gump and V&E.) And in January, several Houston-based Mayer Brown partners led a team from that firm advising China’s Sinochem Group on the $1.7 billion investment in a shale oil and gas project run by Dallas company Pioneer Natural Resources. V&E lawyers in Houston and Dallas, as well as New York and Washington, D.C., advised Pioneer on that deal.
Reprinted with permission from the May 13, 2013 edition of National Law Journal © 2013 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.
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