Can DC Law Firms Thrive in Washington's Gridlock?
D.C. firms are no strangers to congressional gridlock or to waxing and waning enforcement and economic cycles—and many see opportunities in the Trump administration's changing regulatory regime and the stalemate on Capitol Hill.
January 30, 2019 at 06:00 AM
9 minute read
Political inertia, regulatory pullback, and the specter of a financial downturn may throw up special challenges for the capital's leading law firms in the coming months and years.
But D.C. firms are no strangers to congressional gridlock or to waxing and waning enforcement and economic cycles—and many see opportunities in the Trump administration's changing regulatory regime and the stalemate on Capitol Hill.
Shutdowns, legislative stalemates and reliance on regulatory agencies to implement a president's agenda is becoming something of the "new normal" in American politics, said Tom Davis, who served in Congress for 14 years until 2008 prior to entering Big Law. Davis joined Holland & Knight as partner in its public policy and regulation practice in January upon leaving Deloitte.
"The new governance model is you govern through the regulatory regime because the legislative model is dead," Davis said.
Now is the time, Davis said, for businesses to push government to revisit redundant and destructive regulation. Andy Campbell, partner in Morrison & Foerster's corporate department, said the U.S. Securities and Exchange Commission is clearly "looking to make it less burdensome for companies to access the public markets" based on their actions in the rule-making process and review of registration applications.
Eric Tanenblatt, global chair of Dentons' public policy and regulations practice, said the "significant progress being made to regulatory reform" has provided a boon for clients' businesses. He said he expects such progress to continue despite lesser legislation likely making its way from Capitol Hill to the White House.
"While the mainstream media tended to focus on other issues, there was a lot that was done on the regulatory reform front that I don't believe received the attention that it probably would have received had the mainstream media not been focused on other issues," Tanenblatt said. "I think that while some of that will continue to occur on the regulatory reform front in the executive branch, it is a different day in Washington and it will be different dynamics than we've seen the last two years."
The new day in Washington is ripe with divided government, but D.C. firms aim for a bipartisan rosters of lawyers spread across a broad practice mix to weather any storm that crosses the Potomac. Firms looking to remain leading players in the Washington market will not be caught flat-footed by any economic slowdown in 2019.
Barry Boss, co-managing partner of Cozen O'Connor's D.C. office, said while transactional and real estate practice might feel the impact of an economic slowdown immediately, practices that appear likely to be unaffected or earn more business are insurance; litigation; subrogation and recovery; and white-collar defense and investigations.
"Cozen is fortunate because we have such a varied practice, a breadth of practices, that we're well-suited to withstand a downturn," Boss said. "During the last economic downturn, the firm actually increased revenues."
Hogan Lovells views a prospective economic downturn in 2019 as a force increasing competition for work in town. Alice Valder Curran, global head of Hogan Lovells' government regulatory practice group, said the firm's approach to handling such situations involves learning as much about a client's business as possible and reviewing head count to ensure the firm is best positioned to meet clients' needs. In 2019, Valder Curran said, Hogan Lovells is searching for additional qualified employees to hire with experience in the regulatory arena.
"If you want to win that work when there's more competition, one of the things that's going to distinguish you from your competitors is really understanding the business operations of your client and how regulation impacts that," Valder Curran said. "We have an industry sector approach that we've been really championing for well on 10 years now, and that means when you go to clients you literally speak their language. You understand their acronyms, you understand the challenges that they're facing and that means that when you are talking to them about why they should hire you, they feel like you know them in a way that your competitors may not."
Some Big Law practitioners are skeptical of suggestions that the Trump administration's regulatory agenda means less work for their firms. The slowdown in regulatory enforcement is not comprehensive, Valder Curran said, noting that the Trump administration's regulatory enforcement in the realms of trade and privacy has not slowed. Similarly, Crowell & Moring chair Philip Inglima said new regulations are constantly being enacted and even more are being contemplated in the technological realm. The net level of activity for Crowell's regulatory practices remains "rather high," Inglima said, particularly pointing to the shifting U.S. agenda on trade and foreign policy as requiring constant advice and advocacy for the firm's clients.
"It's not unusual for our clients to need guidance on emerging issues, even in advance of formal regulation, or to seek to participate in the development of appropriate regulations," Inglima said in an email, explaining where the firm is finding work. "Even if one particular part of the code, CFR [the Code of Federal Regulations], or FAR [Federal Acquisition Regulation] is in less active use by a certain agency, there typically is still a need to be anticipating and adapting to what's next."
Tanenblatt said Dentons clients' needs ensure that they do not get distracted by the political controversy of the moment disrupting standard operating procedure in Washington.
"We need to be on top of what is happening and what is proposed by the various departments and agencies so that we can be looking out for our clients' interest, whether it's helping our clients respond to public comments that are being asked for or pointing out issues that need to be raised that perhaps lawmakers have not thought about, that's just something that we do day-in and day-out and the changing political climate really doesn't impact the extent that we have to do that just because that's what our clients expect of us," Tanenblatt said.
Valder Curran said that she thinks there is a generalized perception that the Trump administration has wrought less enforcement and things are consequently slower for regulatory practices but people are missing most of what Hogan Lovells' government regulatory group does. She said her group finds itself "steady, if not busy" despite the perceptions that there is less regulatory enforcement across the board.
"That [less enforcement] only impacts the litigation and investigation side of the practice and that is just a piece and not even the largest piece of what a regulatory practice is," Valder Curran said. "Most of a regulatory practice is advising clients about policy change, how they can influence policy change, how they implement policy change, how they monitor their own operations under new policies and that is busy because there's been a lot of change with this administration and businesses have to adapt to implement that change and so that is a big piece of what a regulatory practice does, what we do here, and this is politically agnostic work."
It may be the only politically agnostic work left in Washington. The new balance of power in Congress looks to have had ramifications for jobs as disparate as the White House chief of staff and to counsel quitting Congress to cash out in the private sector. But as the end of 2018's results pour in, Big Law firms may find that the D.C. region presented more challenges. A Citi Private Bank Law Firm Group flash survey of the third quarter raised eyebrows in its revealing D.C. recorded the lowest level of revenue growth among all of the 11 U.S. regions that the survey studied. The Citi survey did not include international and nationwide firms that have a presence in D.C. but are headquartered elsewhere and it excludes some other entrants as well. But Citi's findings may have broader implications for the Washington market.
Lisa Smith, principal of consulting firm Fairfax Associates' Washington office, said at the end of 2018 the D.C. market was likely "down a little bit" because of the differing level enforcement coming out of the federal government and because the Trump administration is not fully staffed. Firms with a broad practice mix that are not as reliant on the uncertain regulatory and enforcement environment are well positioned for the future regardless of what comes next.
"Divided government poses similar challenges to firms as do changes in the administration," Inglima said in an email. "We strive to have balance in our legal talents, and to make sure our practitioners are adept at working with both parties, and dealing with all three chambers of the federal government. Because we invest heavily in the recruitment and development of regulatory expertise, we seek a span of agency and legislative reach that makes this impact less of a concern."
Vinson & Elkins D.C. managing partner Craig Seebald said as an antitrust cartel litigator he has seen a major regulatory enforcement slowdown in "pockets," but has seen a "mixed bag" of enforcement coming from the federal government. Seebald said a lot of Vinson & Elkins' business is corporate, and driven by the energy and private equity business, making them not as reliant on regulatory work as some other brick-and-mortar D.C. establishments.
"Being diversified, having a large corporate practice … I think we're in a pretty good position to weather the downturn here and I think, look these things are temporary in nature and I think we play into the long term so even though things are somewhat slow on the regulatory thing, my guess is that in a couple years it's going to be the opposite," Seebald said. "I think we actually look at it somewhat as an opportunity from our perspective; we're, if anything, probably ramping up our lateral hiring in D.C. in areas like white-collar and regulatory because while the market is down we think this is a good time to go out and get top-notch talent so we're prepared for when the pendulum swings the other way."
Many Washington firms have demonstrated attention to the current political climate and market forces dominating D.C. in their longer-term plans, particularly in thinking about where the work will be come 2020. In 2018, the U.S. Department of Justice witnessed multiple attorneys general and other vacancies could need to be filled in the coming months. Given the turnover across the Trump administration—the White House similarly had three different lawyers act as White House counsel last year—D.C. firms are beginning to look past the present tumult in order to ensure they outlast whoever is running government in the years to come.
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