Sunday, May 28, 2000

New day for old-line law firm


Taft, Stettinius & Hollister forced to change

By Cliff Peale
The Cincinnati Enquirer

        It doesn't get much more traditional Cincinnati than Taft, Stettinius & Hollister.

        The firm boasts a heritage dating to 1924 and includes brothers Charles and Robert Taft. Since then, it has served the city's elite with distinction.

        But as it enters the 21st century, Taft is facing a new set of challenges. More than a dozen partners — nearly 20 percent of the total — have either retired or left within the last year, including two groups who formed their own Cincinnati legal practices.

        Several rainmakers, including longtime managing partner Charles Lindberg, have retired.

        The firm has responded with gusto, diving headfirst into the Internet revolution brewing in Over-the-Rhine as a founding sponsor of Main Street Ventures and bolstering its intellectual property practice.

        Observers both inside and outside the firm say Taft is in transition, with new leadership, new lines of business and new difficulties in keeping its partnership ranks growing.

        “Business is in transition, so if we're going to play the role we want to play, we'd better be in transition,” said Tom Heekin, the 40-year Taft veteran who became managing partner there in January 1999.

        Taft is not alone. Cincinnati's biggest law firms, and those across the country, are struggling to attract and keep lawyers, expand practice areas and find ways to keep increasingly restless clients happy.

        The changes often are barely visible from the outside, but they show the inner sanctums of the legal profession are not immune to pressures haunting industries from banking to steelmaking.

        “We see more people leaving,” said Clifford Roe, managing partner at Dinsmore & Shohl, which includes about 200 lawyers but saw its staff decline by nine partners and four associates between 1998 and 1999, according to the National Law Journal.

        “When Tom Heekin and I started practicing law, you didn't change law firms. You just didn't do it.”

        Like law firms across the nation, the biggest three in Cincinnati also are looking for new practice areas, hoping to take advantage of the hot business trends.

        Taft's foray into the e-commerce practice is one example. Another came several years ago, when Frost & Jacobs was a founding partner of the Bio/Start incubator for young biotechnology companies at the University of Cincinnati.

        Another hot area is intellectual property, including trademarks and patents. Made even more important by the information-rich Internet business community, intellectual property is a growth area for all three of the biggest firms here.

        Dinsmore & Shohl, for example, has 18 lawyers in its intellectual property practice.

        “We would triple that group if we could find them,” Mr. Roe said. “There's an intense competition for that group of lawyers.” @SubHed:Ticket to success For some of the partners who left Taft, a partnership at the firm once was a ticket for a successful career.

        “For me, when I went to Taft, that was like the gold ring,” said Charlie Pangburn, one of five partners who left in June to form a Northern Kentucky law firm.

        Mark Ruehlmann, one of three younger Taft partners who left in September to start a Cincinnati office for the Cleveland firm of Squire, Sanders & Dempsey, said Taft definitely has to face a new kind of competition for both clients and its own employees.

        Squire, Sanders & Dempsey has more than 500 lawyers and offices in international cities such as Hong Kong, London and Moscow.

        “Our assessment is that it was no longer good enough to be a pre-eminent firm in Hamilton County,” Mr. Ruehlmann said.

        “We gave up our partnerships, and quite frankly our positions of respect at Taft. But this gives us an opportunity to grab the exciting national business. I think we're positioned to compete for work now that a lot of firms in town can't compete for.”

        Other lawyers who have left Taft pointed to its unfunded pension liability program as a problem. In essence, the firm pays retirement benefits out of current earnings, rather than a separate fund.

        Last year, Taft modified it into a tiered system, meaning older partners got more out of the pension fund than younger partners, according to some who have left the firm.

        They also pointed out that the buy-in to the Taft partnership — the amount a newly elected equity partner has to pay for an equity stake in the firm — often tops $100,000 per partner, higher than many other local firms.

        That amount typically is taken out of a new partner's salary for some set number of years. Mr. Heekin denied the unfunded pension plan was a problem that would have driven partners away from Taft. @SubHed:Lost in the mix

        The law firm also has had to deal with the same trouble as many companies: satisfying employees in their 30s and 40s who are increasingly entrepreneurial and want a bigger say in their future.

        Don Hemmer, one of the five Taft partners who left to form the firm in Northern Kentucky, said younger partners there sometimes felt left out in a firm dominated by older partners.

        “I was a steady Eddie,” he said. “I worked long hours, I had a good client base, I didn't complain. But people like me sometimes got lost in the shuffle.”

        In response to the intense competition for both people and clients, Taft clearly is trying new things. Mr. Heekin points to Main Street Ventures, which is partially funded by Taft and run by associate George Molinsky.

        The firm has started a new e-commerce practice group led by longtime partner Stuart Dornette — also the attorney for the Cincinnati Bengals.

        Both longtime partners called the Internet practice an example of Taft's commitment to causes that will help the community at large.

        “What I'm proudest of is the role we're able to play in that,” Mr. Heekin said. “When you write about Main Street Ventures, you write about Taft, Stettinius & Hollister.”

        Mr. Dornette said Taft now has between 90 and 100 clients with Internet projects, ranging from start-ups on Main Street to bigger clients working on online ventures.

        “I don't think there were that many in the whole city a year ago,” he said.

        The law firm has about 25 lawyers working on those projects, and hopes Taft lawyers in all specialties will add skills in serving online clients. It has imported trainers from companies like Oracle and Cisco to help the process.

        “Whatever business they're in now, people five years from now are going to have to understand the impact of the Internet,” Mr. Dornette said. “Lawyers are no different.”

        Taft started another business line last year when it opened a Family Business Planning Practice Group to advise owners of closely held companies. According to Taft's Internet Web site, that practice includes about a dozen lawyers.

        Mr. Heekin also said Taft will build a bigger presence in Kentucky. It came close to that after merger talks with the Louisville firm of Brown, Todd & Heyburn, but the two mutually called off the talks in late 1997.

        The firm has downsized its Northern Kentucky office since the group of partners left last year, but Mr. Heekin said Taft would get bigger in Kentucky, either through internal growth or mergers with other law firms.

        “If we're going to be there, we want to be there with a presence that permits us to serve our clients,” he said.

Losing partners
        Law firms across the country have been dealing with these issues for several years. But at Taft, the transition and the number of departures have been especially dramatic in the last year.

        Since mid-1999, longtime partners Mr. Lindberg, Jim Bridgeland and Jim Ryan have resigned. Mr. Lindberg was a longtime director of client Gibson Greetings Inc. before it was acquired last year, while Mr. Bridgeland served for years on Star Bank's board before it became Firstar Corp.

        In June 1999, the Northern Kentucky group — Mr. Pangburn, Mr. Hemmer, Dick Spoor, Mike DeFrank and Henry Kasson — left to form their own firm. In September, Mr. Ruehlmann, Steve Lerner and Steve Mahon left to open the Squire, Sanders & Dempsey office.

        Some partners went to clients. For example, Phil Schultz left in October to become chief financial officer at Taft client Eagle-Picher Industries. Another, Jim Brun, became a partner at rival law firm Keating, Muething & Klekamp in March.

        Others went to high-profile jobs outside the legal profession. In January, partner Elizabeth Galloway became senior vice president and chief legal officer of the Ladies Professional Golf Association.

        While law firms nationally are seeing higher salary demands and more turnover among associates, Taft has lost partners who once were considered among the firm's future stars.

        All told, there are about 65 partners and 65 associates left at Taft, Mr. Heekin said. By comparison, Taft was listed locally with more than 150 lawyers in 1999.

        Mr. Heekin brushed off the departures and said they had not hurt business at the firm.

        “I'm surrounded by 130 of as good lawyers as you're going to find anywhere,” Mr. Heekin said. “My focus is on them. I don't have time to think about something that happened a year ago.”

       



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