Darwinian Law: Evolution in Action

By Dennis Boone

The history of law firms in Kansas City dates back more than 160 years, but the megatrend that has defined this market since World War II has produced a handful of large firms with global brands.
They’ve given the region a reputation for excellence in legal services, but the smaller firms aren’t going away, and they’re ceding no ground to their BigLaw brethren.

In 1850, the Town of Kansas was incorporated, shortly thereafter to become known as Kansas City, Missouri. Producing the articles of incorporation must have been an interesting exercise, because the first practicing attorney in town, one Henry B. Bouton, didn’t hang up his shingle until the following year.

That’s the starting point for the spawning of Kansas City’s legal brood, according to one J.D. Stewart, who penned “The History of the Bench and Bar in Missouri” back in 1898.

“Mr. Bouton was, all in all, a unique character,” Stewart wrote. “With his quick and resourceful mind, he would never have been a failure in any field. The habits and customs of those with whom he lived he adopted without a protest, no matter what the environment might be. … Of wiry build with a tongue that reveled in sarcasm, he was loved by few and admired only by those who knew him imperfectly.”

Like most pioneers entering this region during that era, Bouton didn’t leave much of a trail: He started his practice in 1851, married Mary Jane Peery a year later and fathered two children by her, lived in the Westport area and died in 1868.

Bouton, then, didn’t live long enough to see the roots of today’s Kansas City legal community taking hold. But the final trime-ster of the 19th century witnessed the formation of small firms that have become pillars of the legal community in this region today:
• The oldest among them—and the oldest continually operating law firm west of the Mississippi—is known today as Lathrop & Gage, which traces its history to the practice established by Gardiner Lathrop in 1873.
• Five years later, Frank Rozzelle started a firm that would become Stinson, Mag &  Fizzell on its way to the present-day Stinson Leonard Street construct.
• And in 1889, Frank Sebree came to town from Marshall, planting the seed for what is today the largest law firm, in terms of local
attorneys, in KC: Shook, Hardy & Bacon.

The 20th century witnessed the 1916 founding of a firm that would become Husch Blackwell, as well as the youngest of the Big Five firms in Kansas City, and the fastest-growing among them, Polsinelli PC, whose namesake and founder, Jim Polsinelli, is still practicing with the firm he founded in 1972.

Those, of course, are just the five biggest firms, the only ones with at least 100 attorneys on staff in the Kansas City area. Those firms are significant in that they employ nearly as many lawyers locally—1,018 in 2013—as the 45 next-largest firms in the region combined (1,152).

Yet much has happened among those 45 others over the past half-century, as well as among small, boutique firms, to position Kansas City as a center of quality legal services. Those trends have included mergers between Kansas City firms and out-of-market firms, entry into this market of firms headquartered in other cities, and development of expertise in cases with national scope by even small firms.

“In the scheme of things, in a city Kansas City’s size, if you study what are now the largest firms and see what they’ve accomplished on a national level, it’s really pretty amazing,” said Mark Bluhm, managing partner at Lathrop & Gage. “When I came out of law school, I knew I wanted to come back to Kansas City, and there were about 15 firms to consider.” Excluding firms based in other markets, he said, “that list has basically narrowed to five.”

Consolidation is going on everywhere within the field, Bluhm said, but in a lot of other large cities, firms have tended to stick to their home turf. Driving the growth of firms based here has been a willingness to acquire or align with firms from other cities to enhance competencies, build new practice lines and drive revenue growth.

“Really, none of the major Kansas City firms have stayed only in Kansas City,” Bluhm said. “If you go to other major markets, you’ll find several firms in each that said ‘You know, we’ll just stay where we are here.’”

But whether they are large today or boutique firms that have wavered little from their original scope, law firms in this region have stories that in many ways track with Kansas City’s own history. Either as firms participating in legal casework, or through individual actions taken by members of the firms’ leadership, they have often playing significant roles in the benchmark litigation, public policy or civic engagement that have shaped life in this community.

Foundations for Growth

Perhaps most remarkable about the changes in Kansas City’s legal community is the speed of that change. When Ed Matheny followed up his tour of the Pacific by earning his degree at Harvard Law School, Big Law did not exist here. In 1949, he became the 10th lawyer on the staff of what was then McCune, Caldwell & Downing, whose leadership had determined that the firm’s optimum level of staffing was … 10 lawyers.

Matheny, who still keeps office hours at what is now Husch Blackwell, authored a history of the firm (which at that point had been reflagged as Blackwell Sanders). The firm, he wrote, had but six lawyers in 1945, while Shughart Thomson  and Shook Hardy had four each, “and Stinson Mag was regarded as a ‘factory’ with 12.”

“It was a totally different attitude than you see today,” said Matheny. “I had other opportunities, but chose my hometown and never regretted it. In those days, when you went with a firm, if all went well, you were married for life.”

That began to change after the death of founding partner Robert B. Caldwell, he said. “It was an evolution, not all the sudden deciding you were going to add 10–20 lawyers,” Matheny said. “The growth of this firm and many of the others was the result of mergers, not just adding incrementally.”

And that, he said, was a phenomenon that wouldn’t have been possible without the game-changing evolution of information technology, because “IT links all the various locations together” and allows coast- to-coast operations.

In 1954, the same year the silicon transistor was invented and IBM unveiled the world’s first mass-produced computer, a lawsuit was filed that would lead to another profound change in Kansas City’s legal community: Ross v. Philip Morris. Originally filed in Missouri state court, it eventually becoming a federal case as one of the nation’s earliest attempts to exact payment from a tobacco company by someone claiming a smoking-related illness.

Standing in the way of any award was the theretofore small firm of Shook, Hardy & Bacon.

“That was important, not just because we won that case,” said John Murphy, Shook’s chairman. “but because the company made the decision that they would use Shook wherever the lawsuits were filed. Before that, we might represent a corporation if they had a case in Kansas City, then they would use Cincinnati firms if they had a case in Cincinnati. That event was really the first time that a major corporation went to a national-counsel type of appro-ach, bringing a firm versed in the people and the issues to where a suit was filed. The heart of that idea was that companies would use the same counsel all over the country, and before that, it hadn’t been done.”

Shook’s expertise in blocking damage claims against tobacco makers eventually led to representation of nearly all cigarette manufacturers in the country. Along the way, it developed a national reputation for a winning streak that spanned nearly 30 years. That success was grounded in a strategic decision that shapes the firm’s business model today. Shook hired not just legal expertise, but a full-time scientific staff of researchers and analysts who could help the attorneys involved delve deeply into the wide range of causes of cancer and smoking-related maladies, causes that consistently raised doubts among juries that smoking was the definitive, singular source of a plaintiff’s illness.

That experience paved the way for the next round of growth for Shook’s product-liability defense work.

“In the early ’70s, the pharmaceutical companies took the same approach” with hiring national counsel, Murphy said. “Shook started to become regional, then national with pharma in any number of areas. That really gave rise to where they then became a powerhouse in handling complex litigation on a national landscape. Obviously, that’s grown to where we represent a number of companies on that type of basis.”

It’s a model that few other firms in the national have successfully copied.

“It hasn’t been replicated by very many firms, if any,” Murphy said. The idea, he said, was formulated by the late Bill Shinn, and not without considerable opposition from within the firm. After all, there are significant costs associated with hiring a staff of scientists, researchers and analysts. “It had never been done before,” Murphy said, “and the firm was notorious for not wanting to be the first to do something. There were questions about whether that model could work.”

But work it did, and not just with pharmaceuticals. It gave Shook the foundation for expanding the types of products and manufacturers it chose to defend, and allowed for office expansions in major metro areas where federal cases are often filed and where many talented young lawyers seek to make their mark.

It was, Murphy said, “the beginning of true product-liability defense, changing from a negligence standard to product-liability standard.” Shinn, he said, “saw that as something that would not only add extreme effectiveness, but extreme value for clients.”
That vision has helped make Shook the largest firm in Kansas City, but it’s getting a run for that title from the relative youngster at Polsinelli, which can now claim to being the fastest-growing firm in the nation. Earlier this month, the firm broke into the AmLaw 100 at No. 93, the only Kansas City-based firm to make that prestigious listing.

That, said four-term chairman Russ Welsh, has come from a combination of mergers, acquisitions and organic growth.
“At the time I was elected chairman in 1998, the firm had 90 attorneys,” he said; today, the local number alone is triple that figure. That growth, he said, came by bolstering its financial-services expertise in 1999 (plus rejuvenated credit markets in recent years), a merger with the 32-lawyer firm of St. Louis-based Suelthaus in 2003, expansion in to seven markets primarily on the coasts, and then the big one: “Our Feb.1, 2009, merger of then-300-attorney Polsinelli firm with 180-lawyer litigation power house, Shughart Thomson & Kilroy, has been the firm’s largest and most successful merger,” Welsh said. “This combination brought the firm to Denver, Phoenix, St. Joseph, and Springfield.”

Since that union, Polsinelli has added more than 225 attorneys across the country, and two-thirds of those work outside the Kansas City market. That growth is one reason the firm is ranked in the top five in health-care practice nationally, but there is also considerable expertise in commercial litigation, real estate, financial services and intellectual property.

Holding Their Ground

While growth at the Big Law level has defined those larger firms, this market is awash in mid-level, small and boutique firms that have made strategic decisions to avoid merging into big firms.

One of those is Swanson Midgley, a firm that specializes in business for clients local, statewide, nationally and even globally, all with a staff of just 18 lawyers. The firm is among the oldest in Kansas City—it was founded in 1886—but has never strayed from its roots, said Dan Hiatt, managing partner. But even though small in numbers, the firm has had huge clients over the course of its history; the National Collegiate Athletic Association was one from its inception until 1999, when it moved to Indianapolis . The firm, in fact, helped negotiate the first billion-dollar contract with CBS for the Division I basketball championship tournament.

“You could argue, wow, we should have built off that huge base,” said Hiatt. But Jack Kitchen, who led the CBS discussion, “had a mentality like mine: Why get bigger? I’m busy doing what I’m doing, and enjoying it.”

Interestingly enough, the mergers that have taken place to create larger firms have helped some of the smaller ones, as well, Hiatt noted.

“Many clients that start off with a 20-lawyer firm, but with all the growth that can take place, that client realizes ‘The firm I started with is gone, and I don’t feel like I fit here any more.’

“That’s not criticizing firms and their fee structures, if it’s the market rate, go for it,” Hiatt said. “But some clients say that’s just too pricey. We don’t shop clients by saying we’re inexpensive or a bargain, but I suspect with our rates vs. bigger firms, we’re noticeably lower. That gives us an advantage if we’re careful in being able to perform services they’re expecting to come from a larger firm.”
At the litigation firm of Bartimus, Frickleton, Robinson & Goza, the head count is up to 15 after last fall’s merger with the former Bartimus, Frickleton, Robinson and Gorny with the smaller Goza & Honnold firm.

“I used to think the optimal number of attorneys in a practice was four, because I could divide everything by four,” quips James Bartimus. “But you simply have to adapt. Because of changes in the law—I still do a lot of single cases, 90 percent of them malpractice, but it’s one case, one client at time.”

Over the course of nearly 35 years in practice, he says, he and his associates have developed key competencies in mass tort litigation as well—“and we’ve gotten good at it,” he says. “Even though we’re a small firm, people nationally want us involved,” which has led to cases involving big names like Google, Microsoft, AT&T, Ford and General Motors.

“We’ve taken on some behemoth litigation,” Bartimus said, “but that requires support people, and it requires staff people.”

KC’s Value Proposition

That quality that truly defines Kansas City as a legal-services market—client value—is at the core of an appeal that
goes far beyond this region’s borders, law firm managers say.

And it was one factor that drove the merger earlier this year between one of this area’s Big Five—Stinson Morrison Hecker—and Minneapolis-based Leonard, Street and Deinard. The new entity, Stinson Leonard Street, reflects a growing need to deliver value said Mark Hinderks, the Kansas City managing partner.

“We never forget the key patriarchs in our history, who had amazing, larger-than-life accomplishments: Arthur Mag, E.R. Morrison, George Leonard, Amos and Ben Deinard,” Hinderks said. But more recently, the firm’s course was charted when Mark Foster of then- Stinson Mag Frizzell and Brian Gardner of Morrison Hecker set the stage for the 2002 merger that created Stinson Morrison Hecker. Chief operating officer Terry Brummer brought modern business principles to the firm, Hinderks said, and the leaders of both firms pushed for this year’s merger as a way to bring value and responsiveness to new clients following the economic disruptions of recent years.

“At each step in our now 135-year history, the leadership of the various key legacy firms in our background made decisions to tie their growth to the needs of business clients, thereby remaining relevant and competitive,” Hinderks said. The firm remains known primarily for its work in banking and financial services—“at the DNA level, we are a business firm,” Hinderks said—but it also has expertise in class-action defense and complex litigation on a national level, as well as a developing energy practice in oil, gas and alternative sources.

At Husch Blackwell, chairman Maurice Watson cites acquisitions and mergers as principal drivers of the firm’s growth, but each of those was framed strategically, with client value in mind.

“The firm we are today is not the firm we were when the various constituents of the current firm were founded” nearly a century ago, Watson said. “We have a number of smaller firms that have combined with our firm over the past five or six years, some with a history of several decades or even longer.” But the most significant move he said, was marrying Blackwell Sanders Peper Martin with St. Louis-based Husch Eppenberger in 2008. The two firms, Watson said, “came together with a common vision and a sense that we had compatible cultures.”

From that, Husch Blackwell has absorbed Welsh & Katz, an intellectual-property firm, adding roughly 50 lawyers in Chicago and Denver and, most recently, in Texas, where the acquisition of Brown McCarroll last year provided strategic entry to three key markets—Dallas, Houston and Austin.

“All of that,” Watson said, “reflects a history that is focused on serving clients and ensuring we have a broad-enough platform of talent in various locations where we have clients and client business, to ensure we can meet the needs of those clients.”
One distinguishing characteristic of Husch Blackwell today is its internal realignment of the legal staff, put in place about a year. No longer structured by practice groups or departments, the firm is organized by industry-sector focus: Food and agribusiness; energy and natural resources; health care; real estate; financial services; and technology, manufacturing and transportation. Within each group, transactional lawyers are aligned with litigators, concentrating legal skills within work groups.

While regional advantages like low cost of living and quality-of-life considerations help hold down legal rates here, other Midwestern cities can claim some of those same attributes, Hinderks noted. “But competing solely on price only gets you so far—the real advantage is to convert the conversation from price to value, focusing on the depth of sophisticated experience you can bring, along with responsiveness and work ethic.”

Price may you get a foot in the door, Hinderks said, “but what brings clients back is when they learn that those lawyers they’ve been thinking of as ‘fly-over,’ can do everything they need with better service—that’s the real value edge.”