Cravath Swaine & Moore’s move to Washington is set to shake up the local legal market as elite firms look to stockpile lawyers with regulatory chops.
The storied Wall Street firm and M&A powerhouse was one of two of the nation’s top firms without a presence in the nation’s capital, along with perinneal dealmaker Wachtell Lipton Rosen & Katz. That changed Monday as Cravath announced it’s launching in Washington, the third office in the firm’s 200 year history and its first new outpost in five decades.
“I see this as a regulatory play for clients who want to have boots on the ground in Washington,” said Dan Binstock, a Washington-based legal recruiter.
As regulatory scrutiny increases, firms are looking to add federal government expertise depth to their benches. Not surprisingly, many of those lawyers can be found in the nation’s capital.
Former Federal Deposit Insurance Corporation Chairman Jelena McWilliams will lead the new office, Cravath said Monday. Elad Roisman, a former Securities and Exchange commissioner and acting chairman, and Jennifer S. Leete, a former associate director in the SEC’s enforcement division, are also joining the firm in Washington.
The office launch marks the second major change in seven months for Cravath, which in December said it would loosen up its strict “lock step” pay formula in which lawyers are compensated based on seniority.
The new office seemed overdue, Binstock said.
“A move like this is a big deal,” said Binstock. “I’m surprised it hasn’t happened sooner. But, when you’re a firm like Cravath, there’s no compromising on the quality and it can take years to align the right people at the right time.”
‘Hack’ Town No More
Many New York law firm leaders traditionally have dismissed the nation’s capital as home to “hack regulatory lawyers,” said Jim Jones, a senior fellow at Georgetown Law’s Center on Ethics and the Legal Profession.
As the Biden administration ratchets up antitrust and other scrutiny, Big Law’s largest M&A firms are increasingly making regulatory lawyers a more crucial part of any deal team. They’re looking to lawyers in Washington for institutional knowledge of federal agencies like the SEC, Justice Department and Federal Trade Commission.
The most profitable New York firms have typically taken one of two approaches to their operations in Washington,” said Jeffrey Lowe, a Washington-based legal recruiter for Major, Lindsey & Africa.
Some have stayed very small and focused on just bringing in the regulatory expertise that they need to service work coming from New York, he said. Others have branched out, bringing in a broader rage of lawyers.
Among the top New York firms, Cadwalader Wickersham & Taft, Cahill Gordon & Reindel and Davis Polk & Wardwell have fewer than 50 attorneys on the ground in Washington, according to data from Leopard Solutions. Cleary Gottlieb Steen & Hamilton, Fried Frank and Simpson Thacher & Bartlett have more 100 attorneys in the city.
“I always thought of Cravath as the last holdout of the traditional New York model, ” said Georgetown’s Jones, who was managing partner at Arnold & Porter in Washington for more than nine years. That model focuses on institutional clients that often last generations, home-grown partners instead of laterals, and a rigid lock-step compensation system, Jones said.
Cravath joins several of its closest competitors—like Davis Polk & Wardwell, Cleary Gottlieb Steen & Hamilton, and Sullivan & Cromwell—who branched out beyond New York long ago. It also follows elite firms who have walked away from the lock-step pay formula in recent years, while making lateral partner additions that had before been rare.
“Very few firms are positioned to resist market forces,” Jones said.
Cravath isn’t the only new entrant in Washington. Silicon Valley-founded Fenwick & West opened its office in the city in August, eyeing growing work in the antitrust and trade space.
“Fenwick’s decision to open in Washington was driven by the desire of the firm to respond to the demands of its clients,” said Thomas Ensign, a former Freshfields Bruckhaus & Deringer partner, who was one of three lawyers who helped launch the office last year. The office now houses 17 lawyers and staff.
“The clients commercially are interacting with the government more and they are also facing increasing scrutiny from regulatory agencies,” he said.
The new office additionally serves as a “bridge” to legal talent in the metro area, according to Ensign.
“Opening an office in DC may be a reflection of the firm’s talent needs and where the talent happens to be,” said Lisa Smith, a law firm consultant at Fairfax Associates, in an email. “Of course, when there is a regulatory aspect, that talent is more likely to be in DC than in New York,” she said.
It’s hard to replicate the big money practices in New York and rates are typically lower than what you would see in New York which has posed a problem for some firms, Lowe said. But, for Cravath, finding top talent and expanding in a city like Washington might not be all that difficult.
“Whenever you have one of the very best firms in the world come to town, that is something that definitely gets the attention of partners,” he said. “People like new and when there’s a potential for something new for them, they’re very attracted to it,” Lowe said.