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In the Name of Diversity

By Annie Gausn | Jul. 2, 2006


Law Office Management

Jul. 2, 2006

In the Name of Diversity

Corporate clients demand more diversity among the law firms that represent them. So how come minority-owned law firms have to be even more creative when landing the work? by Chuleenan Svetvilas

By Chuleenan Svetvilas
     
      As corporate clients push for more diversity among their outside counsel, minority-owned law firms find themselves in an odd position: competing for business with large firms that have minority attorneys.
     
      In the Name of Diversity
     
      Working at a large law firm wasn't an option for Irwin S. Evans. He graduated from Los Angeles's Loyola Law School in 1965, receiving the Bancroft-Whitney Award in Corporations. But at the time very few, if any, African Americans worked for big firms. When he interviewed for an entry-level legal position at an entertainment company, the personnel department told him there was an opening in the mailroom. Evans eventually accepted a job at the Los Angeles City Attorney's office because he wanted trial experience. "I would have preferred a corporate securities position," he says, "but I had to abandon that thought."
     
      After a few years, Evans became a name partner in Lenoir, Young & Evans, a criminal defense and general practice firm in Los Angeles. In 1970, he joined Cochran & Atkins, partnering with two other African-American graduates from Loyola-Johnnie Cochran and Nelson L. Atkins-to form Cochran Atkins & Evans. When Cochran left in 1978, the remaining partners shifted to civil litigation, serving primarily corporate and public entity clients. Today, with eleven attorneys and more than 25 years in business, Atkins & Evans is one of the oldest minority-owed firms in the country.
     
      But survival hasn't been easy. "It doesn't matter how experienced you are, because minority-owned firms are held to a different standard," Evans says. "If a big firm handles a case and the judge gives a bad ruling, then it's viewed as a bad ruling. But if a minority firm handles such a case, someone will ask, 'Why did you give it to that firm?' You never get the benefit of the doubt. There is no such thing as a level playing field."
     
      Still, some minority lawyers have benefited from corporate counsel who demand that outside law firms increase their hiring and promotion of minority and women attorneys. In 1999 BellSouth issued its "Statement of Principle on Diversity," which was endorsed by hundreds of general counsel. In 2004 Roderick A. Palmore, general counsel of Sara Lee, asked corporate counsel to "end or limit relationships with firms whose track records reflect a lack of meaningful diversity." Palmore's "Call to Action" has been signed by more than 95 general counsel.
     
      Most of the recent attention to diversity, however, has been focused on majority-owned firms. Sandra Yamate, director of the ABA's Commission on Racial and Ethnic Diversity, says its minority counsel program no longer distinguishes between minority- and majority-owned firms because "many corporations no longer emphasize such a distinction."
     
      By all accounts, the response to calls for greater diversity has been modest. A 2005 report by the American Bar Association entitled "Miles to Go: Progress of Minorities in the Legal Profession" found that, nationally, "minority representation among partners remains less than 4 percent in all but the very largest law firms, and only 4.4 percent in the nation's largest 250 law firms."
     
      But the decline in explicit, organized support for minority-owned firms had unintended consequences. In order to compete, some minority-owned firms-which tend to be smaller than many majority-owned firms-have had to change their marketing strategies, diversify, consolidate, form national alliances, and network with African-American, Latino, Asian, and women-owned firms.
     
      The resulting competition between minority-owned and majority-owned firms for corporate work can complicate the selection process for general counsel, who control the flow of work to both. (See "The GC View," page 27.) In contests between minority-owned firms and equally qualified majority-owned firms with minority and women lawyers, which should corporate counsel hire? The answer could determine the future of minority-owned law firms for a generation.
     
      DEFINING DIVERSITY
      Twenty years ago corporations were still complaining, when urged to hire minority counsel, that "We can't find them."
      So in 1987 Evans and Atkins, working with at least ten other minority attorneys, set up the Corporate Counsel Conference within the National Bar Association, an organization of African-American lawyers. "The premise was that African Americans spend a lot of money as consumers, yet no African Americans were running or representing the companies," Evans says. "We wanted to tell corporate America, 'Here are the lawyers,' and that it should have representation by minority firms."
     
      The first Corporate Counsel Conference took place in February 1988. Three months later the ABA launched its minority counsel "demonstration" program to encourage corporations to retain lawyers of color. According to the ABA's Yamate, initial participants included 21 minority-owned firms, seven majority-owned firms, and ten corporations. That same year Evans, then president of the California Association of Black Lawyers, organized a conference in California patterned on the National Bar Association's program. The following year, the California Minority Counsel Program (CMCP) was formed; it continues to organize annual gatherings of corporate counsel and minority attorneys.
     
      Starting in the mid 1990s, however, the economic pressures on small firms began to take a toll. Many of the minority-owned firms at CMCP's early conferences no longer exist, according to Gary T. Lafayette of Lafayette & Kumagai, a twelve-lawyer litigation boutique in San Francisco. He ticks off names he remembers: Alexander Millner & McGee and Arnelle Hastie, in San Francisco; Kennedy & Wasserman and Harrison & Brazil, in Oakland. Lafayette, who is African American, worked for majority-owned firms for seven years before joining Alexander Millner & McGee in 1986, then opened his own firm eight years later.
     
      A similar decline in the presence of minority-owned firms occurred in the National Employment Law Council. The organization was launched in 1994 by the principals of three minority-owned firms and an in-house attorney who retained them. When Lafayette joined the council, he was one of several lawyers from minority-owned firms to serve on its coordinating committee. Gradually, many of those firms were acquired by majority-owned law firms. Today, Lafayette is the only lawyer from a minority-owned firm left on the committee.
     
      Emery K. Harlan, chair of the Milwaukee-based National Association of Minority and Women Owned Law Firms (NAMWOLF), says that in the mid to late '90s corporations began changing their focus from retaining minority- and women-owned firms to locating and giving billing credit to minority and women partners at large law firms. "Majority firms were very clever at pushing the dialogue in that direction," Harlan says. "Helping minority- and women-owned firms build the infrastructure to handle more complex and important matters takes commitment."
     
      In addition, Harlan claims, the legal departments at Fortune 500 companies discovered they could satisfy their diversity goals by saying that even though they worked primarily with majority-owned firms, they tried to ensure minority and women lawyers were assigned to their projects. Partly to counter that tendency, Harlan says, NAMWOLF was founded in 2001 as an advocacy organization for minority- and women-owned firms. It currently has 31 law firm members.
     
      The shift in emphasis slowly drained sustained work from minority-owned firms. And several firms that were still in business collapsed when key partners with substantial clients were lured away by majority-owned firms. For example, the largest minority-owned firm in San Francisco-Arnelle, Hastie, McGee, Willis & Greene-closed in 1997 shortly after Otis McGee Jr. left for Sheppard Mullin Richter & Hampton. According to Tania Shah Narang, executive director of the CMCP, many minority-owned firms survived the last economic downturn. Others folded or merged. For instance, San Francisco's Gutierrez & Associates closed in 2001 to join the majority-owned San Francisco firm of Sideman & Bancroft.
     
      In 2004 DuPont's legal department released a report, "Study on the Status of Minority-owned Law Firms in Today's Legal Environment," that concluded the number of minority-owned firms-especially African-American firms-practicing corporate law had decreased dramatically in the previous decade. The report cited major challenges faced by minority-owned firms: gaining access to corporate decision makers, the lack of established relationships, overcoming the perception that minority firms cannot handle sophisticated work, supplying the depth of services needed by large corporations, competition for legal talent, and overt and subconscious racial bias.
     
      MARKETING APPROACHES
      Attorneys at minority-owned firms didn't need a study to tell them what was happening. Evans recalls that most attendees at the National Bar Association's first Corporate Counsel Conference in 1988 were from minority-owned firms. He says that many of those firms, including Atkins & Evans, received business as a result of that meeting and continue to benefit from its annual gatherings. But now, Evans says, many of the attendees are from big majority-owned firms, and everyone is competing for the same business.
     
      Evans maintains there is a significant difference in the results of hiring a minority-owned firm and retaining minority lawyers at a majority-owned firm. "Every dollar given to a minority-owned firm goes a much longer way in the minority community-to our black secretaries, process servers, and court reporters," he says. "In a majority firm, 90 percent of each dollar goes to the majority."
     
      Of course, some corporate matters, such as complex M&A deals requiring teams of lawyers, are best suited for larger firms. Other work, including much litigation, can be done ably by small firms. The real competition is for the work that falls somewhere in between.
     
      Pitted against majority-owned firms, minority-owned firms sometimes find themselves at a disadvantage. "We always face the problem of unfamiliarity-people not having a great deal of experience dealing with minorities in informal and professional settings-so sometimes we do not enjoy the presumption of competence," says Geoffrey T. Gibbs, a former Rhodes scholar and name partner at Gibbs & Oliphant in Oakland.
     
      "I think it's a sad reality that exists out there," says Paul D. Gutierrez, who founded his latest minority-owned firm, Gutierrez-Ruiz, in 2003 after working just two and a half years at Sideman & Bancroft. "I don't think bias is necessarily intentional or blatant-'You're a minority firm and I perceive you as less qualified to do my work'-but you can't change people's personalities," he says. "If you hire a minority firm and they screw something up, your head is on the block because you took a chance. But if you go to a huge law firm and they screw it up, you can say, 'Hey, I went to the best.' "
     
      These factors produce an ironic twist in law-firm marketing. Although majority-owned firms invariably promote their commitment to diversity, some minority-owned firms barely mention it. These firms either assume that the background of the attorneys is obvious from their surnames or website photos, or they don't want to be perceived as doing only certain kinds of work. David Sanchez, for example, says that when he and Richard S. Amador launched the Los Angeles firm of Sanchez & Amador in 1994, they didn't want to be known solely as a minority-owned firm. "It's very easy for that to happen," he says. "The first couple of years, I would get phone calls from people asking if I did 'Mexico' work."
     
      Sanchez had worked previously at Buchalter Nemer Fields & Younger and Stroock & Stroock & Lavan, and Amador began his career at Loeb & Loeb. They chose to emphasize their big-firm experience, competence, and depth of knowledge-which they would provide at a lower price than large firms. "We wanted to fight being pigeonholed," says Sanchez, who heads the firm's transactional practice. "In other words, if we announced we were a minority-owned firm and that we were going to take on set-aside or bond work, that's all we would ever get. We had no interest in that." His transactional clients include Wells Fargo and Comerica Bank. Amador also handles litigation matters for those two financial institutions and for clients such as the California State University system and the California Community Foundation.
     
      Gary Lafayette says that he and Susan T. Kumagai formed a minority-owned firm "by implication." Kumagai, who has worked for minority-owned firms for 20 years, says their firm's marketing focuses on its track record and experience. For clients that may be uncomfortable with giving significant matters to small firms-let alone minority-owned firms-Lafayette adds, "We emphasize that we've handled work with significant exposure." Their clients include Denny's, Eastman Kodak, PG&E, Shell Oil, and Wal-Mart.
     
      Gutierrez, taking the opposite approach, says he does not hesitate to post on his website that Gutierrez-Ruiz is "100 percent Hispanic-owned," because some people give him work on that basis. But he notes that the only clients who continue to send him business are those that are not part of any minority counsel program. "They establish a relationship because of what our firm is rather than because we are members of a minority organization," says Gutierrez, whose clients include JP Morgan, Toyota, and Wells Fargo.
     
      The principals at minority-owned firms have different views on the effectiveness of diversity campaigns. Nelson Atkins, of Atkins & Evans, says that if general counsel are interested, they will give work to minority-owned firms-especially if compensation and promotions are tied to diversity benchmarks. "But if those people leave, the new people may come in with old attitudes and the work decreases or goes away, regardless of your track record."
     
      Vickie E. Turner, a name partner in the San Diego firm of Wilson Petty Kosmo & Turner, says that diversity campaigns have had a positive effect on her litigation boutique. "With corporations being more interested in diversity, we have been able to showcase our talents and legal skills," says Turner, previously a partner at Luce Forward Hamilton & Scripps. Name partner Regina A. Petty, formerly a partner at Gray Cary Ames & Frye, adds that her firm has received work from DuPont, General Motors, and Shell Oil as a result of the clients' concern for diversity hiring. (Turner and Petty are African American; name partners Claudette Wilson and Frederick Kosmo are white.)
     
      When it comes down to it, though, relationship building is as important in the success of minority-owned firms as are diversity initiatives by corporate counsel. Geoffrey Gibbs, who founded Gibbs & Oliphant in 2004, relied on a chance meeting with Isabelle Salgado, a former law school classmate who worked as SBC's assistant general counsel, to provide key introductions for him. Nearly two years later Gibbs's firm was invited to attend a diversity reception at the San Francisco office of Orrick Herrington & Sutcliffe; that produced an offer to do transactional regulatory work for AT&T (formerly SBC). "We have been hired principally through old-fashioned contacts and meeting with people," says Gibbs, who was formerly an associate in the capital markets group at O'Melveny & Myers. "The critical thing is to have a chance to meet people, like the folks at AT&T."
     
      BUSINESS STRATEGIES
      In the struggle to compete with much larger firms, minority-owned law firms also have responded by doing what the majority-owned firms do: expand their market presence through mergers, acquisitions, and strategic partnerships. In 2004, for instance, the Southern California firm of Alvarado, Smith & Sanchez joined forces with Adorno & Yoss, a Miami, Floridabased firm with nearly 250 lawyers in 14 locations across the country. "It was part of our business plan to grow in this fashion," says Ruben A. Smith, a Mexican-American partner in the Irvine office of the firm, whose California offices are now known as Adorno Yoss Alvarado & Smith. "It was a natural fit. Companies were reducing the number of firms they used. We joined Adorno & Yoss to be able to represent national companies in different markets. In order to compete, you have to have a national platform."
     
      So far the consolidation is working. "Allstate went through a request for proposals process in 2005 and went from more than 100 firms to 13 firms," Smith says. "Fortunately, we were one of the 13." Partner Raymond G. Alvarado estimates that roughly 20 percent of the firm's new business-both litigation and transactional-is a direct result of the merger.
     
      In late 2005 Hank Adorno, chair of Adorno & Yoss, created a network of minority-owned firms, the National Minority Law Group (NMLG). "Members can compete for national contracts," says Francisco J. Gonzalez, the group's managing director. "And at the local level, every one of our member firms has the resources of the whole group to serve their clients. Although we are not a law firm, we behave like one."
     
      The network currently has 19 members nationwide, including four firms in California: Lafayette & Kumagai in San Francisco, Adorno Yoss Alvarado & Smith in Southern California, Atkins & Evans in Los Angeles, and Wilson Petty Kosmo & Turner in San Diego. The network does not formally advocate for increased diversity in the profession. "NMLG does not play the diversity card in the traditional sense," Gonzalez says. "We just want to compete on an equal footing with the big firms."
     
      NAMWOLF's approach is different. It strongly promotes the benefits of diversity among its members, which include seven California firms. In addition, 85 corporate members of the NAMWOLF association-including DuPont, Eastman Kodak, and Coca-Cola-have agreed to eventually commit 5 percent of their budgets for outside counsel to minority- and women-owned firms.
     
      Both national organizations ensure that members meet a certain level of experience and competence, insisting that firms be "AV rated" by Martindale-Hubbell and have significant corporate practices.
     
      Vickie Turner of Wilson Petty Kosmo & Turner says her firm has joined both groups because of the opportunities for networking and referrals. At last year's annual gathering of corporate counsel and outside law firms, organized by NAMWOLF, minority-owned firms predominated.
     
      By contrast, some attorneys from minority-owned firms complain that majority-owned firms now have the advantage at the California Minority Counsel Program's annual business development conferences. Tania Shah Narang of CMCP says attendance at last year's conference of more than 500 people was "fairly evenly divided" between attorneys from minority-owned firms, majority-owned firms, and corporate legal departments. But she says that some majority-owned firms were better represented than the minority firms, sending 10 to 15 attorneys each. During some parts of the conference, such as the sponsored receptions or luncheon, Narang says, the majority-owned firms predominated.
     
      One attorney from a minority-owned firm calls it "disgraceful" that lawyers from majority-owned firms participated in the conference's "Corporate Connections" section, which matches outside counsel with in-house attorneys for one-on-one meetings. Without taking sides, Narang acknowledges that attorneys from both minority- and majority-owned firms at such gatherings perceive that their competitors are getting the better deal.
     
      "That tension has always been there, since the days of the ABA's Minority Counsel Demonstration Program," adds Regina Petty of Wilson Petty Kosmo & Turner. "I was a partner in a large firm when those efforts began, and people told me I didn't need the program because I already had it made," Petty recalls. "But I had to work just as hard as the minority-owned firms in marketing, because my rates were higher and that meant the segment I marketed to was smaller. As partner, I needed to bring new clients to my firm."
     
      As more minority attorneys from majority-owned firms win business from corporate counsel, the future of minority-owned firms may seem bleak. But many minority-owned firms say they are doing quite well. Wilson Petty Kosmo & Turner hired its twentieth lawyer this year. Sanchez & Amador, which has been turning away litigation work for the past two years, has hired three attorneys within the past twelve months: a first-year associate and senior and mid-level litigators. Adorno Yoss Alvarado & Smith has added five attorneys this year in California. Gibbs & Oliphant recently hired two more attorneys. And Lafayette & Kumagai intends to hire at least two attorneys before the end of the year.
     
      Marketing, networking, and merging appears to be working for these firms. Lafayette says the biggest challenge for his firm is recruiting legal talent. Some lawyers have left to work for majority-owned firms, and he has also hired lawyers from majority firms. "People are poaching from each other," he says. "When I first started practicing, it was a rare experience to recruit an associate from a minority-owned firm."
     
      Certainly, young minority lawyers have more opportunities today than when Irwin Evans graduated from Loyola 41 years ago. In fact, Evans says their opportunities are "unlimited." And should they decide to work for a minority-owned firm, he says, they'll have plenty of chances for networking. "You have a very strong bond with minority-owned firms in other states," he says, and the camaraderie among the firms often leads to new business. "I get a lot of referrals from out of state." But ultimately, Evans says, the key to his firm's longevity is providing good service.
     
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Annie Gausn

Daily Journal Staff Writer

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