Lee Richards III and David Massey (courtesy photos)
Think of the conniptions that the independent directors of Tesla must have had every time Elon Musk took to Twitter. Or how Theranos board members must have felt when Elizabeth Holmes' claims that the company could diagnose hundreds of conditions with a simple blood test could not be verified.
Noting how often CEOs and boards of directors prompted criminal investigations, plunged into regulatory trouble and generated unflattering headlines last year, New York midsize law firm Richards Kibbe & Orbe publicly announced Thursday that it's launching a board and director advisory group.
The group includes litigators, regulatory and criminal defense specialists, securities and governance experts and corporate lawyers who have served at senior levels in the Department of Justice, the Securities and Exchange Commission and public companies, the firm said. The practice will be based out of New York and Washington, D.C., but it will deploy firm lawyers from London if its investigations extend into Europe.
The decisions to reshape the practice is part of a move toward increased specialization for New York's midsize firms; clients in the midst of a legal crisis want to know that their advisers have handled the same type of matters many times before. So firms are realigning their practice groups and changing the way they're marketing their services to focus on the expertise they already have. And most often these reorganizations don't even require lateral hires.
In the case of Richards Kibbe, Lee Richards III, one of the firm's founding partners, points to its representation of the audit committee of Och-Ziff in its recent Foreign Corrupt Practices Act investigation, DOJ and SEC resolution and compliance review and the board of Petrobras, the Brazilian state-controlled oil company, in government investigations and civil litigation in the United States and Brazil.
"Our view is that we’ve done a lot of work for boards. We typically do them when there’s a crisis. We’re representing the boards in an investigation. Sometimes cooperating with the government. Sometimes not," said Richards, a former assistant U.S. attorney in the Southern District of New York.
The pivot here is that the firm wants to represent the same boards before there is trouble as a way to avoid such pitfalls.
“As events of the last year have shown, boards and directors are under a harsher spotlight than ever, which means they can benefit from crisis prevention just as much as they can benefit from crisis response," Richards said.
David Massey, a partner at the firm who is also a former assistant U.S. attorney in the Southern District of New York, noted the firm's "high credibility with the government because that’s absolutely critical. We’re known to the government. We’re known to the law firms. We’re known to the companies and the directors themselves."
In an interview, Massey and Richards noted the value of having Michael Mann, the founder of Richards Kibbe’s Washington, D.C., office and the first director of the Office of International Affairs at the SEC, as part of the group.
Richards Kibbe's decision to reorganize to form a new practice group with existing expertise is similar to what's happening at other midsize firms in New York.
Alan Tarter, the managing partner of Tarter Krinsky & Drogin, said his firm has taken a hybrid approach to focused practices. The firm, while considering itself general service, has both certain industries it caters to as well as niche areas of focus within broader practice groups.
“Over the past five years or so we‘ve realized that industry teams have been a very effective way of practicing,” Tarter said, adding that by knowing the industry, its rules and common issues, firms have the ability to perform services in a more efficient, economical way. “As we became larger and grew we also have a greater ability to create these sub-practices.”
And some industries are better suited to use midsize law firms, Tarter said, highlighting his firm’s work with the staffing and retail industries as examples. The firm also has sub-practice focuses, such as the university technology transfer and Hatch Waxman/ANDA practices under the intellectual property umbrella, or the outdoor advertising group that falls within the firm’s real estate practice.
Ronald Shechtman, the managing partner of Pryor Cashman, said the firm sees itself as full service but has developed specialties based on client needs. One is a family law practice that now occupies three partners and five associates. Its immigration practice has grown to three partners, six associates, two counsel and at least 10 paralegals. And the firm started its latest niche practice, an insurance recovery and counseling practice, with one partner last year.
For midsize law firms that can afford to have sub-specialties on staff, the reward can be a go-to service offering that generates a national or international client base for an otherwise regional firm, consultants noted. But that also puts the group at increased risk of being poached by larger firms.
While Marcie Borgal Shunk, founder of The Tilt Institute, said all firms need to respond to the call for specialization, she said midsize firms may have some challenges in getting there. How many areas can they really be experts in if they only have so many lawyers to go around, she wondered. And for work that is episodic, like antitrust, does it make sense to have one of only a few lawyers serve as that expert?
But regardless of how difficult it may be, Shunk said it’s imperative to specialize.
“I think it’s essential in this day and age to have a niche,” Shunk said. “I think it’s true of lawyers and other professions where you need to distinguish yourself from other competitors, you need to demonstrate there is something unique about you. Because there is so much noise these days, it can be pretty narrow, but anything that narrow comes with risk.”
Shunk has seen specialization work best in midsize firms when it is focused on a broad industry, like financial services, that allows for many practice areas to support it; or when a firm focuses on a few industries that still allow for some diversity of practice. Other midsize firms have gone the boutique route, focusing on just one practice area, and others still have focused on geography. But Shunk said the industry approach is the easiest to implement.
As competition has increased due to minimal demand growth, marketing specialized capabilities may be even more important for midsize firms, legal marketer Gina Rubel said. Specialization can help smaller firms concentrate their marketing spend in a way that makes sense, making sure their marketing isn’t fragmented, she said.
Specialization is often driven by the individual lawyer’s interests, Shunk said, citing examples like craft beer, bicycle manufacturing or art. That love of the subject can make someone a better lawyer, who can see things beyond just the legal issues but also as they relate to the business issues, others have noted.
The trick with specializing is retaining the ability to be agile, Shunk said. On an individual level, lawyers who are the most successful in a niche practice are those who are constantly reassessing where their niche is heading or how they can pivot to use their skills in a new, emerging area, she said. Lawyers and firms have to be “quite deliberate” in staying ahead of where their industry of focus is headed, Shunk said.
Where specialization works best, Shunk said, is when there is a small group within the firm that works “extremely collaboratively” together, not worrying so much about things like origination credit, but rather about building a brand. Those groups can then break out of the broader, regional footprint of the firm to attract national and international clients, she said.
But therein lies the risk.
"One thing that I’ve seen multiple times—because of that, those groups become incredibly connected to one another, incredibly valuable, and therefore pursued,” Shunk said. “So I’ve seen a lot of liftouts of groups that have specialized and become nationally recognized in an area and they get scooped out by a larger firm.”
Lee Richards III and David Massey (courtesy photos)