Latham & Watkins
Latham & Watkins
Sales: $502 million (1998)
NAIC: 54111 Offices of Lawyers
Latham & Watkins is one of the world’s largest law firms, with about 1,000 attorneys practicing in 14 American and international offices. It represents business clients in many industries, including healthcare, software, and technology. From its historic foundation of tax and labor law, Latham & Watkins has diversified to provide counsel on virtually all aspects of modern business practice, including financing, bankruptcy, regulatory compliance, litigation, and intellectual property issues. Because of the firm’s emphasis on teamwork and cooperation, it has often been cited as one of the nation’s best-managed law firms.
The Depression and World War II
Dana Latham and Paul R. Watkins were both born in Illinois in the late 1890s. Latham graduated from Harvard Law School in 1922, and Watkins studied law at Illinois Wesley an University. In January 1934 the partners founded a law firm in Los Angeles. Latham’s expertise was in state and federal tax law, while Watkins, formerly the general counsel for Pacific Finance Corporation, built a strong practice in labor law.
In spite of the Great Depression, the new law firm prospered. Its first significant client was Consolidated Rock Products Company (which was still a client fifty years later). Within a year the partnership had gained clients including Pacific Finance Corporation; the Crushed Stone, Sand & Gravel Association (the predecessor of the Southern California Rock Products Association); West Shore Company; the Rule Company; Western Geophysical Company; and the London retailer Fortnum & Mason.
Soon after the United Geophysical Company was founded in 1937, it began using the services of Latham & Watkins. As United Geophysical was exploring for oil overseas, especially in Central and South America, the law firm gained its first experience in international law. When Consolidated Engineering Corporation was spun off from United Geophysical and became a public corporation, Latham & Watkins began its initial venture into securities law. Herbert Hoover, Jr., the son of President Herbert Hoover, played an important role in helping Latham & Watkins gain several early clients, including United Geophysical.
The partnership developed an emphasis on labor law after the passage of the National Labor Relations Act in 1935, which guaranteed collective bargaining. The firm represented employers in many union disputes, and major unions opposed the firm. By the time World War II began in 1939, Latham & Watkins had four attorneys. During the war, the company continued to prosper, in part because many new laws and regulations were enacted as part of the war effort.
In the early years of World War II, Latham began representing Major Corliss Champion Moseley, who ran aviation companies based in Southern California. During the war Moseley trained some 26,000 pilots and 13,000 mechanics at the Glendale, California, airport under a federal contract and was a key player in building up civilian and military aviation capabilities during the war and into the early 1950s.
Post-World War II Practice
In the early postwar period the firm grew as it recruited young attorneys and some of its veterans returned, and in 1949 Latham & Watkins established its first written partnership agreement. By 1954 the firm employed 14 attorneys and had begun to develop a litigation practice. In 1967 Latham & Watkins remained modest in size with just 30 attorneys, but rapid growth in the years ahead made it one of the nation’s largest firms, surpassing many law firms that were much older.
Clinton R. Stevenson was chosen managing partner in 1967. Three years later Latham & Watkins installed a new computer system, “the first installation of its size and nature in a law firm west of the Mississippi,” according to its corporate history, Bold Beginnings. In 1972 two partners opened an office in Santa Ana, Orange County, in a building owned by one of the firm’s clients, C.J. Segerstrom & Sons. By 1983 the Orange County office had moved to Newport Beach and employed 21 attorneys.
In 1978 the firm recruited its first experienced attorneys in order to open a branch office in Washington, D.C. Carla Hills, secretary of the Department of Housing and Urban Development (HUD) under President Gerald Ford, was hired to head the new office. This office developed new clients, such as Synfuels and Continental Wingate, and the location allowed the firm to better serve other clients, including Sears, Roebuck; The Signal Companies; Hughes Aircraft; and Mars, Inc.
Latham & Watkins established a San Diego office in 1980. In its early years this office handled real estate development for Torrey Enterprises and Mobil Land Development Company, conducted litigation in the AFTRA antitrust case, and represented National Semiconductor, Intermark, Oak Industries, Nucorp Energy, and other clients. In early 1982 extended negotiations resulted in a merger between Latham & Watkins and the Chicago firm Hedlund, Hunter, & Lynch, which employed 20 lawyers and specialized in litigation. This was the firm’s first merger, a difficult but productive turning point in its history. By 1983 the firm had grown to 237 attorneys and added new specialties such as bankruptcy, commercial, and international law.
The growth of Latham & Watkins in the late 1970s and 1980s was part of a national trend as many law firms expanded rapidly, often by hiring experienced attorneys from rival law firms. In the late 1970s the nature of the law profession changed to become more competitive, especially after the U.S. Supreme Court ruled that professional restrictions against advertising were unconstitutional, and the American Lawyer and the National Law Journal were founded to provide information on law firm management and finances.
In 1985 David H. Maister, president of the Boston consulting firm Maister Associates, described Latham & Watkins as a prime example of a well-managed “one-firm firm” that emphasized institutional loyalty. “In contrast to many of their (often successful) competitors who emphasize individual entrepreneurialism, autonomous profit centers, internal competition and/or highly decentralized, independent activities, one-firm firms place great emphasis on firmwide coordination of decision making, group identity, cooperative teamwork, and institutional commitment.” To promote that kind of corporate culture, Latham & Watkins discouraged individual stardom by having few status symbols for prominent partners, relied on training its own lawyers while recruiting few experienced lawyers from the outside, and seldom acquired other law firms. It also used its institutional history as a way of promoting long-term thinking and loyalty to the firm. Although many Latham & Watkins attorneys were specialists, Maister wrote, “What strikes any visitor to a one-firm firm is the deeply held mutual respect across departmental, geographic, and functional boundaries.” While the law firm had a strong leader in Clinton Stevenson, it emphasized open communication and the participation of other partners and even junior associates in recruiting, selecting new partners, and compensation issues.
From 1978 to 1981 the firm devoted many of its resources to representing Gulf Oil Corporation in the so-called uranium cases, wherein Westinghouse Electric Company sued Gulf for alleged price fixing of uranium. Westinghouse had sold nuclear power plants to several electrical utilities and agreed to provide them with uranium fuel. This was a particularly important case, since in the mid-1960s the United States had placed an embargo on imported uranium as a way to aid domestic suppliers. In 1981 Gulf and Westinghouse settled a major part of their dispute out of court.
Practice in the 1990s
In 1990 the law firm founded a San Francisco branch in temporary offices at 580 California Street, and later that year signed a lease for up to 60,000 square feet at 505 Montgomery Street. The office’s managing partner, Robert Dell, stated in the San Francisco Business Times: “We want to make it a full-service firm, so we’ll start with a core group of finance and corporate attorneys and a litigation group with emphasis on securities litigation.” Responding to an economic downturn, in 1991 Latham & Watkins assigned 20 attorneys to its Insolvency Project, which advised clients on how to handle bankruptcy and restructuring. In some cases, the law firm advised companies that it had helped expand through leveraged buy-outs and high-yield bonds. Other firms such as San Francisco’s Brobeck, Phleger & Harrison also shifted some of their resources to meet the new demands.
In 1991 Latham & Watkins also released 43 junior associates, a drastic move in light of its commitment to retain attorneys from the time they were hired to the time they retired. This decision came as the firm’s profits plummeted in the early 1990s, partly as a result of the bankruptcy of Drexel Burnham Lambert, the law firm’s major investment banking client in the booming 1980s.
In 1993 the firm made a major change that rewarded individual efforts of those “rainmakers” who brought in more business, thus ending the seniority system that was part of the firm’s team approach. Nevertheless, in a 1997 article in the American Lawyer, firm partners insisted that the Latham & Watkins emphasis on collegiality remained intact, although some outside observers had their doubts.
- Dana Latham and Paul Watkins found the law firm in Los Angeles.
- An Orange County office is opened.
- Firm starts an office in Washington, D.C.
- A San Diego office is started.
- A Chicago office is established.
- A New York City office is opened.
- Offices in San Francisco and London are established.
- A Moscow office is started.
- A Hong Kong and Newark offices are started.
- An office is opened in Tokyo.
- The firm establishes Silicon Valley and Singapore branches.
In any case, Latham & Watkins rebounded as the economy improved and its rainmakers brought in more business. In 1997 at least 100 partners brought in a minimum of $1 million each in billings. Profitable clients also improved the bottom line. For example, Latham & Watkins defended Navistar International Transportation Corporation, the owner of Denny’s restaurants, when it was charged with racial discrimination lawsuits settled in 1996. It also represented Minnesota Mining and Manufacturing Company (3M) when it was sued for injuries caused by its breast implants.
Latham & Watkins and other firms like Netscape, Pacific Bell, Sun Microsystems, and Goldman Sachs backed the work of the Electronic Frontier Foundation to protect individual liberties in cyberspace while also promoting responsible use and regulation of such resources. “We need an appropriate balance,” said EFF’s Executive Director Lori Fena in an interview in the March/April 1998 Online to maximize First Amendment rights while also protecting minors from pornography. The foundation dealt with such issues as government regulation of electronic commerce, restrictions on encryption, and the growing volume of unwanted e-mail.
In late 1997 Latham & Watkins helped America Online in its opposition to junk e-mail, also known as spam. AOL gained a court injunction that barred Over the Air Equipment Inc., an advertiser of pornographic Web sites, from sending its unrequested messages to AOL subscribers. “The notion is to pursue them vigorously until the overall effect of deterring spam has been achieved. If you can do it with five suits, that’s a good number. If it takes more than that, we’ll file more,” said Latham & Watkins partner Everett Johnson in the Washington Post.
In the late 1990s Latham & Watkins continued to be a leader for corporate financial transactions. In 1998 it participated in mergers and acquisitions worth almost $60 billion, over $36 billion in private and public financings, and over $30 billion in a private 144A placement. Its corporate clients included Amgen; Bear, Stearns & Company; Cedars-Sinai Medical Center; DreamWorks SKG; Harrah’s Entertainment; Hilton Hotels; Hughes Communications; Kohlberg Kravis Roberts & Company; Nestle U.S.A.; Nintendo of America; Smith Barney; and Safeway.
To keep its clients informed using the Internet, Latham & Watkins created the International Environmental NetworkSM (IEN) as a full-text database with the latest government laws and regulations. The firm also established the Regulatory Flexibility Group, an extranet-based “advocacy consortium of Southern California companies working with regulators to find new ways to reduce emissions from manufacturing plants,” according to the firm’s Web site.
In July 1999 the American Lawyer ranked Latham & Watkins as the nation’s fourth-largest law firm, with gross revenues of $502 million. The firm also ranked seventeenth in revenues per lawyer ($605,000) and fourteenth in average compensation for all partners ($870,000). Despite the firm’s prosperity, it also confronted challenges from other large firms, some with as many as 2,000 lawyers, and big accounting firms that also employed hundreds or even thousands of lawyers.
Gibson, Dunn & Crutcher; O’Melveny & Myers; Skadden, Arps, Slate, Meagher & Flom.
Dewey, Katrina M., “How an Upstart L.A. Firm Made It to the Top,” California Law Business, October 8, 1990, pp. 28-30.
Galanter, Marc, and Thomas Palay, Tournament of Lawyers: The Transformation of the Big Law Firm, Chicago: The University of Chicago Press, 1991.
Hidula, Scott, and Lisa Davis, “Major Law Firm Notes Intent on Large Lease Here,” San Francisco Business Times, May 28, 1990, p. 3.
Hock, Sandy, “What Goes up and Comes Down May Be Restructured,” San Diego Business Journal, August 12, 1991, p. 17.
Kizilos, Peter, “Interviews with Infopros: Lori Fena,” Online, March/April 1998, pp. 35-38.
Leibowitz, Wendy R., “Lawyers Find Niches on the ‘Net,’” National Law Journal, November 23, 1998, p. Al, 7.
Maister, David H., “The One-Firm Firm: What Makes It Successful,” Sloan Management Review, Fall 1985, pp. 3-13.
Osborne, D.M., “Latham’s Leap Forward,” American Lawyer, April 1997, pp. 47 +.
Peck, Austin H., Jr., Bold Beginnings: A Story about the First 50 Years of Latham & Watkins, Los Angeles: Latham & Watkins, 1984.
Pollock, Ellen Joan, “Singing the Latham Song,” American Lawyer, October 1986, pp. 125-31.
“Washington Hearsay,” Washington Post, December 22, 1997.
—David M. Walden