Shearman & Sterling
Shearman & Sterling
Sales: $425.5 million (1998)
NAIC: 54111 Offices of Lawyers
Shearman & Sterling is one of the largest law firms in the United States, if not the world. It is famous for representing Citigroup, and its predecessors Citibank and the National City Bank of New York, a client relationship stretching back to 1891. It represents not only large banks but other financial institutions such as Merrill Lynch and Goldman Sachs, and numerous other corporate clients in many industries, from energy and utility clients to the high-tech field. Shearman & Sterling’s expertise centers on corporate concerns, from financing, tax, and bankruptcy to mergers, acquisitions, and antitrust. The firm’s international practice is most prominent in Germany, where it is nicknamed “German & Sterling,” but it has clients in many nations in Europe, Asia, Latin America, and the Middle East. Its overseas offices are located in London, Paris, Frankfurt, Dusseldorf, Hong Kong, Tokyo, Beijing, Singapore, Toronto, and Abu Dhabi, United Arab Emirates. Its representation of international clients brings in about 40 percent of its annual revenues. With a long history of participation in industrialization, globalization, privatization, and other historic events and trends, Shearman & Sterling sets a great example of openly telling its story, unlike some law firms that seem ultrasecretive by comparison.
Origins in the Gilded Age
Thomas Shearman, the senior partner who founded Shearman & Sterling, was born in 1834 in Birmingham, England, and came to the United States in 1843 with his family. In the 1850s he worked as a law reporter for the New York Times and studied the law on his own before being admitted to the New York Bar in 1859. Meanwhile, John Sterling, the other founder, was born in Stratford, Connecticut, in 1844 and in 1867 graduated from Columbia Law School before joining the New York Bar.
In the 1860s both Shearman and Sterling worked for the Field law firm headed by a prominent Republican named David Dudley Field. Probably the largest New York City law firm at the time, the Field firm represented railroad men James Fisk and Jay Gould in the 1860s. However, in May 1873 Field dissolved his firm, so in November 1873 Shearman and Sterling organized their own partnership with five lawyers and two other employees.
Shearman, an outgoing individual heavily involved in community affairs, excelled in the courtroom drama of litigation, the traditional style of law practice. In contrast, introverted Sterling became one of the first lawyers to serve as a corporate counsel, working as an insider “tactician” and “boardroom gun” helping companies grow, according to a phone interview with Bruce Weindruch, CEO of The History Factory, a history consulting firm hired by Shearman & Sterling in 1997. Gerald W. Gawalt’s 1984 book The New High Priests described how big city law firms, such as Shearman & Sterling, grew after the Civil War to meet the needs of the country’s expanding corporations.
The new partnership took six former Field law firm clients who helped the new law firm get off the ground. Those clients led Shearman & Sterling to represent Jay Gould from day one. Gould had plenty of work for the new partnership, for in 1873 he faced 63 cases and a year later he had 97 cases pending. Shearman & Sterling, for example, helped Gould hand Cornelius Vanderbilt a rare setback when the latter tried to take over the Erie Railroad, and later the law firm helped Gould gain control of the Union Pacific and Western Union Telegraph.
At about the same time, in 1875 the trial of the prominent Reverend Henry Ward Beecher began, with Thomas Shearman, a member of his church, as his defense attorney. Accused of adultery with one of his church members, Beecher was acquitted by the jury and was able to return to his ministry after one of the era’s most sensational cases.
In 1884 six utilities serving Manhattan merged to create Consolidated Gas Company, a consolidation that was typical of utilities around the turn of the century. Later Shearman & Sterling gained Consolidated Gas as a major client.
During the depression that started in 1893, Shearman & Sterling helped the National City Bank of New York triple its assets and become the nation’s largest bank by purchasing the Third National Bank of New York in 1897. From that point, “Citibank,” which was National City Bank’s wire code address, helped numerous businesses consolidate, and it also became Shearman & Sterling’s major long-term client.
The Partnership from 1900 to 1945
Following the passage of the 1890 Sherman Antitrust Act, especially in the early 1900s, Shearman & Sterling represented many corporations, including American Sugar Refining Company, and company leaders accused of illegal monopolies. For example, the firm successfully defended Edward Harriman during Senate hearings about his control of the Union Pacific and the Chicago & Alton railroads, Mutual of New York in a 1905 investigation, and Standard Oil’s William Rockefeller and Henry Rogers during a House of Representatives investigation.
After the turn of the century, Shearman & Sterling gained as a major client the Consolidated Gas Company that had been formed in 1884 when six firms serving Manhattan had merged. The law firm counseled the merged utility on policy, financing, and litigation issues. It also helped the Saratoga Gas Company win in 1908 a major court battle involving gas rates set by the New York State Commission for Gas and Electricity.
Shearman & Sterling’s work for National City Bank of New York led to its participation in major national and international events of the 20th century. When the Bolsheviks (Communists) took over the Russian government in 1917, they also confiscated money held by branches of foreign banks. Shearman & Sterling in the 1920s helped National City Bank depositors recover their funds in the bank’s branch in Petrograd.
In 1918 the law firm had just two partners, plus 11 associates and 18 clerks. Its client National City Bank felt that its outside law firm needed more help, so in 1919 Shearman & Sterling completed its first merger. It merged with Cary & Carroll and added ten new partners, which allowed the merged law firm to retain National City Bank as its major client, similar to the New York law firm of Milbank, Tweed representing the predecessor of the Chase Manhattan Bank.
In the 1920s Shearman & Sterling gained the following new clients: Chemical National Bank, Home Insurance Company, Combustion Engineering Company, Consolidated Coal Company, Cuba Railroad Company, Herring Hall Marvin Safe Company, Montana Consolidated Copper Company, and Old Ben Coal Company.
In the Great Depression of the 1930s, Shearman & Sterling successfully defended National City Bank directors as others tried to blame them for money lost in the stock market crash and depression. It also represented the bondholders of New York City’s private Interborough Rapid Transit Company as the failing company restructured and combined with the Brooklyn Manhattan Transit Corporation to create the municipally owned “largest mass transportation system in the United States.” The law firm history Enterprise also stated the merged system featured “308 miles of underground and elevated track with more subway cars than the London, Moscow and Tokyo systems combined.”
Post-World War II Practice
After World War II, Boykin Wright and several other lawyers left what became Cahill Gordon to join Shearman & Sterling. They brought new clients and generally helped the firm grow, and for a few years the firm was called Shearman & Sterling & Wright.
Shearman & Sterling by 1953 had helped 42 German corporations and 14 German municipalities arrange to pay their debts. The firm also helped some German companies survive breakup attempts by occupation officials and aided recovered firms like BASF and Siemens to restart business operations in the United States. Thus the New York law firm played a key role in assisting West Germany become a friend of the United States and an economic powerhouse during the Cold War.
The Ford family and Ford Foundation turned to Shearman & Sterling when it decided the Ford Motor Company should become a public corporation while maintaining family control. Thus in 1956 the law firm helped in the “largest equity offering to date—involving more than 700 underwriters—and the last of the great private industrial family enterprises” became a public corporation, according to Enterprise.
When Malcolm McLean invented shipping containers in the early 1950s, Shearman & Sterling helped him gain the private financing needed to start Sea-Land. McClean’s containers revolutionized both land and maritime shipping.
- Shearman & Sterling is founded.
- Firm is retained by National City Bank of New York, a predecessor of Citigroup.
- Firm merges with Gary & Carroll, a major expansion that adds ten new partners.
- First overseas office is opened in Paris.
- London office is started.
- Firm begins its first West Coast office in San Francisco.
- Los Angeles office opens.
- Firm starts offices in Tokyo and Washington, D.C.; after 114 years on Wall Street, New York headquarters is moved to the Citicorp Center.
- Hong Kong office opens.
- The Singapore office is established.
- Firm opens its Menlo Park, California office and celebrates its 125th anniversary.
The firm also represented Greek businessman Aristotle Onassis when he started to transform ocean shipping by building larger vessels, using Liberian registration, and other means. Shearman & Sterling continued to represent Onassis after he married the widowed Jacqueline Kennedy, helping him, for example, start and finance his Olympic Airways and defending his controlling interest in the famous Monte Carlo Casino. Finally, the law firm represented his daughter Christina in estate negotiations with his widow after he died in 1975.
In 1959 Shearman & Sterling aided Merrill Lynch when it became “the first major brokerage firm to incorporate,” according to Enterprise. Other brokerages, again assisted by the law firm, later followed Merrill Lynch’s example as a way to gain investments and limit liability. Not surprisingly, Merrill Lynch remained a Shearman & Sterling client into the 1990s.
In the 1950s Shearman & Sterling, with 35 partners and 90 associates, was the largest law firm in the United States. Only three other Wall Street firms had more than 100 lawyers. By the early 1960s just 21 New York City law firms and 17 firms in other cities had 50 lawyers or more, but rapid growth in the legal profession was forthcoming.
The law firm in the 1960s concentrated on corporate, banking, and trust law, while its litigation practice was “comparatively insignificant,” according to a company timeline. Highlights of its practice in the 1960s included the incorporations of American Express and Studebaker-Worthington Corporation. It also began representing SONATRACH, the Algerian government-owned gas and oil company, when it negotiated with multinational oil companies. SONATRACH remained a client at the end of the century.
Shearman & Sterling in 1967 made banking history when it helped its long-term client National City Bank of New York create the nation’s first one-bank holding company, later called Citicorp, that was able to offer a variety of new financial products and services. Other banks, including Bank of America, Chase Manhattan, and Manufacturers Hanover, followed this example within six months, and eventually most major banks did likewise.
In 1976 Lockheed retained Shearman & Sterling to investigate its business practices after its reputation was hurt by revelations it had spent $30 million in questionable overseas payments. In this post-Watergate era, many were hostile to the widespread bribery of foreign officials by corporations. The law firm’s report, along with the resignation of top Lockheed executives, helped Lockheed survive this crisis.
During the Carter presidency, Muslim fundamentalists led by the Ayatollah Khomeini took over the nation of Iran, and then Iranians captured 52 U.S. hostages in 1979. Carter diplomacy and military efforts failed to rescue the hostages. Since Carter froze Iranian assets in U.S. banks and many individuals as well as U.S. corporations had invested in the Iranian oil-rich economy, lawyers for major U.S. banks negotiated with lawyers representing the Iranian interests. Negotiations occurred in the New York offices of Shearman & Sterling that represented Citibank. Told in detail in a chapter in The Partners, this story illustrated how lawyers worked behind the scenes to resolve a major international crisis.
Like many other large law firms, Shearman & Sterling grew rapidly in the 1980s. From 284 lawyers in 1978, the firm expanded to 387 lawyers in 1983 and 440 lawyers in 1990. New offices were opened and gross revenues rose from $137 million in 1986 to $281 million in 1989, with profits per partner increasing at the same time from $480,000 to $800,000.
In the wake of the 1991 Persian Gulf War, Iraq deliberately started about 500 oil well fires in Kuwait, provoking doomsday predictions from some environmentalists who felt the massive air pollution would damage the world’s climate. The fires were put out in about a year, and Kuwait retained Shearman & Sterling and other international law firms to help it seek reparations from Iraq for its environmental damages.
Meanwhile, the Mexican government hired Shearman & Sterling to assist in negotiating the 1992 North American Free Trade Agreement (NAFTA) with the United States and Canada. Later the firm played a key role in gaining U.S. Senate ratification during the Clinton administration.
From 1989 to 1991 the Cold War ended as the Berlin Wall was destroyed, Germany was reunited, communism failed throughout Eastern Europe, and the Soviet Union was broken up into Russia and several other smaller governments. In 1992 the newly formed Republic of Kazakhstan hired Sherman & Sterling to help create a national oil company, develop its major oil and gas reserves, resolve border disputes, and write legislation involving foreign investment and other matters.
In 1997 Shearman & Sterling represented Morgan Stanley when it merged with Dean Witter, “creating the largest U.S. securities firm ranked by equity capital,” according to Enterprise. The law firm in 1997 also represented Robertson Stephens and Alex, Brown when the two securities firms were acquired by BankAmerica and Bankers Trust, respectively.
In 1998 the law firm represented Citicorp when it merged with Travelers Group to form Citigroup, a transaction worth $140 billion that consolidated insurance and banking entities. Its lawyers in Frankfurt and Dusseldorf advised Germany’s Daimler-Benz when it merged with Chrysler.
The American Lawyer in its July/August 1998 issue ranked Shearman & Sterling as the ninth largest U.S. law firm, based on 1997 gross revenues of $356 million. In the July 1999 issue, the magazine ranked Shearman & Sterling as the seventh largest U.S. firm, due to its 1998 gross revenues of $425 million, and also listed it as number 13 in terms of revenue per lawyer ($625,000).
In 1998 Shearman & Sterling went to great lengths to celebrate its 125th anniversary. With the help of The History Factory and Thomas Heinrich, a Baruch College business history professor, the law firm established a company archive, created a historical exhibit, and published Enterprise to highlight the firm’s major deals and clients since 1873. The firm’s exhibit and publications “illustrate an important, if seldom-acknowledged, relationship between business and the law,” said senior partner Stephen Volk in the April 22,1999 New York Law Journal. The firm’s web site included most of the material from Enterprise, in contrast to some law firm web sites that seldom mention any firm clients or history. Bruce Weinruch, CEO of The History Factory, gave speeches on Sherman & Sterling’s heritage to the firm’s lawyers.
“The underlying purpose is to help define what Shearman & Sterling really is as a professional institution: its culture, if you will,” said Larry Smith in a 1999 article. “Yet Shearman didn’t go to all this trouble just to name-drop dead clients. The practical reason for partners to celebrate history, or to even care about culture, is that the bond thus forged is crucial once they sit down together to actually practice law.”
Shearman & Sterling faced numerous challenges as the year 2000 began, including 11 of the 15 European Union nations adopting the “euro” as their common currency, new laws concerning banking and insurance, the booming electronic economy, and growing resistance to globalization, as seen in the 1999 “Battle in Seattle” protesting meetings of the World Trade Organization. With stiff competition from much larger consolidated law firms and also the big accounting firms that employed thousands of lawyers, Shearman & Sterling seemed well prepared by balancing its sense of heritage with new technology and innovative legal thinking.
Baker & McKenzie; Jones, Day; Skadden, Arps, Slate, Meagher & Flom.
Cherovsky, Erwin, “Shearman & Sterling,” The Guide to New York Law Firms, New York: St. Martin’s Press, 1991, pp. 179–82.
Earle, Walter, and Charles Perlin, Shearman & Sterling 1873–1973, New York, 2nd edition, 1973.
Enterprise, New York: Shearman & Sterling, 1998.
Galanter, Marc, and Thomas Palay, Tournament of Lawyers: The Transformation of the Big Law Firm, Chicago: University of Chicago Press, 1991.
Gawalt, Gerald W., The New High Priests: Lawyers in Post-Civil War America, Westport, Conn.: Greenwood Press, 1984.
Lavelle, Marianne, “Mexico’s NAFTA Hand; He Doesn’t Lobby; Instead, This Lawyer Shaped the Debate,” National Law Journal, November 15, 1993, p. 1.
Smith, Larry, “How One Megafirm Uses the Past to Buttress the Future,” Of Counsel, March 15, 1999.
Snider, Anna, “Shearman & Sterling Marks Its Place in History,” New York Law Journal, April 22, 1999.
Stewart, James B., “Iran: Shearman & Sterling; Davis Polk & Wardwell,” in The Partners: Inside America’s Most Powerful Law Firms, New York: Simon and Schuster, 1983, pp. 19–52.
—David M. Walden