Down the street at Howrey, Ruyak found an important ally in his partner Mark Wegener, who some say had a better understanding of law-firm economics. And unlike Ruyak, Wegener had no trouble being the heavy.
“Mark just had a steel nerve,” says former Howrey executive-committee member John Taladay. “He was as no-nonsense as you’d ever want to meet. Mark was the person Bob turned to to execute on things.”
Wegener became managing partner of finance and was put in charge of collections, meaning he was the one who pushed lawyers to collect money from their clients. Attorneys are notoriously uncomfortable with this process and often need extra encouragement to get cash into the firm.
“People didn’t want to get a phone call from Mark Wegener,” Briggs says. “He was a terror when it came to collecting money.”
Wegener was a vice chair of the firm’s executive committee, which had six partners, including Ruyak, its chair. The body was in charge of policy- and strategy-setting and approving investments, while the heads of Howrey’s three practice areas were tasked with monitoring the business of their groups.
The executive committee was supposed to make decisions together, but former members say Ruyak often presented ideas that were “prepackaged” without soliciting debate or input from the full committee.
“The way things worked, it was like Bob would say, ‘This is what I’m doing. Does anyone disagree?’ ” Briggs says.
When Wegener sat on the committee, says a source close to management, this wasn’t as much of a problem, because if Wegener wasn’t sold on an idea, Ruyak listened to him.
Ruyak disagrees, calling the executive committee a team effort: “To think that any one person or two people were making decisions for the firm is ludicrous.”
Another highly respected member of the committee was Cecilia Gonzalez, who also acted as a sounding board for Ruyak. Both Wegener and Gonzalez were respected among their partners. They were also two of the firm’s biggest rainmakers. Wegener generated as much as $25 million in business a year; Gonzalez could bring in about $20 million.
Even early in Ruyak’s tenure as managing partner, when the firm was doing well, it got itself into some troubling situations.
In 2000, Howrey filed a class-action suit against tobacco companies on behalf of tobacco farmers. Howrey took the matter on a contingency basis, meaning the firm wouldn’t get paid until it won or settled the case. Contingency cases are gambles for law firms because they require an investment up front with no guarantee of making it back. In usual billing arrangements, clients pay by the hour, so revenue is more predictable.
The tobacco case, led by antitrust partner Alan Wiseman, turned into a huge investment, consuming in the range of $20 million worth of resources and lawyer time. Some partners began to get nervous.
“Partners were looking at it, going, ‘What if it just craps out? Or what if it actually goes to trial and then goes to appeal and just keeps getting dragged out?’ ” recalls Sean Boland, who later became co-head of the antitrust practice and a vice chair of the firm.
Relief came at the end of 2003, when the tobacco class action finally settled. Howrey got a payment of about $75 million. For the first time, Howrey’s profits per partner—what the average partner makes for the year—hit the $1-million mark.
“So for the larger audience of the firm, it was validation of strategy. Happy days are here again,” says Briggs. “But the takeaway [within the executive committee] was ‘Boy, we can never ever let this happen again. We can never get ourselves into an investment this large’—a little bit like a land war in Asia.”
Because of their big 2003 payday, Howrey’s lawyers seemed to lose some motivation in 2004.
“I recall the complacency,” Boland says. “People saying, ‘Jesus Christ, if we can top off our year every year with one contingency case, we’re golden.’ ”
But there was no contingency win to buoy the performance in 2004. The firm missed its revenue target by 6.5 percent, with profits per partner falling to $775,000.
Over the coming years, Howrey would invest even more heavily in risky contingency work, even as the economy worsened around it.
Warren Gorrell was set on continuing the expansion of Hogan & Hartson that began under Bob Odle.
Even before he became firm chairman, Gorrell had garnered firsthand experience opening new offices. The firm had sent him to New York in 1998 to start its outpost there, and his work growing that office continued into the early part of his chairmanship.
Gorrell engineered acquisitions of two small Manhattan firms to bolster Hogan’s presence. When Gorrell acquired the prestigious firm Davis Weber & Edwards, it was viewed as a coup. “People went, ‘Wow,’ because they were one of the very hottest litigation boutiques in the city,” recalls New York legal recruiter Jon Lindsey.
The 2002 acquisition of Squadron Ellenoff Plesent & Sheinfeld, which along with Hogan had represented Rupert Murdoch’s News Corp., made the firm News Corp.’s primary legal counsel. The media giant continues to be Hogan Lovells’s biggest client.
Gorrell’s ultimate vision, though, extended beyond New York. During his tenure as chairman, Hogan & Hartson opened eight international offices on three continents.
“Looking at what’s happening in the world, we saw that globalization was real, and if we were going to be a part of it with our clients, we needed to grow internationally as well,” Gorrell says.
Deciding where to open was a delicate task. “It wouldn’t simply be because somebody thinks it would be neat to have an office in Paris,” says Robert Johnston, who was executive director of Hogan & Hartson and has the same position at Hogan Lovells. “There’s got to be a business reason that’s driven by practice and client needs.”
Johnston says that once a business reason was identified, he would work on rigorous models showing projections over the next two to three years of what it would cost to staff and operate the office and what the expected revenue would be. Only then would the executive committee decide whether to approve the plan.
Next: Hogan & Hartson's international offices open