By Carlyn Kolker Will Out-Of-Town Firms Hit the Jackpot?

www.americanlawyer.com AUGUST 2005

BettingBetting OnOn VegasVegas Will out-of-town firms hit the jackpot? By Carlyn Kolker

Snell & Wilmer’s Patrick Byrne B E T T I N G O N Vegas

A booming market has become an irresistible lure for some out-of-state firms. Can a high-stakes wager in once-forbidden turf pay off? By Carlyn Kolker

TALL, HANDSOME, AND is one of the country’s fastest-growing metropolitan corporate, Patrick Byrne is areas (its population grew by 70 percent between not the Las Vegas lawyer 1990 and 2000 alone), but as a legal market, it is just of lore. He’s not famous starting to awaken. Ten years ago Nevada did not have like Oscar Goodman, who, a law school. Five years ago it had the most restrictive according to his official rules on multijurisdictional practice in the country. biography, showed up in And for decades Las Vegas’s legal community was a the mid-sixties with $87 and a University of tiny pool of lawyers at insular firms, handling local Pennsylvania law degree, and proceeded, according matters for hotels, casinos, and mining companies. to his unofficial biography, to become counsel to Today, all that is changing, driven by a housing Meyer Lansky and Tony the Ant Spilotro, before boom, a hotel boom, an office boom, and, most getting elected mayor. Nor is he infamous like the important, a fundamental shift in Las Vegas’s biggest fictional Tom Hagen, who moved to Vegas on behalf business, gaming. (That’s the politically correct local of his one and only client who wanted to diversify term for the business previously known as gambling.) out of his olive oil business. Instead, Byrne is the Local firms are slowly being forced to make way head of the largest branch office in Las Vegas of for outsiders—regional players like San Francisco’s any Am Law 200 firm, the 27-lawyer outpost of Gordon & Rees, Los Angeles’s Lewis Brisbois Phoenix’s Snell & Wilmer. When it comes to Bisgaard & Smith, and Phoenix’s Lewis and Roca and dramatic offers, he’s just hoping to find a local IP or Snell & Wilmer. And in May, Greenberg Traurig, regulatory lawyer who might be susceptible to the a national firm with big ambitions for the market, temptations of a lateral move. arrived. These firms are beginning the long march to If legal markets went through life stages, Las a war over billing rates, salaries, and clients. Vegas would be an adolescent. At roughly 1.5 Are these arrivistes late to the party? Over the last million people, the city is in the awkward years: It decade casinos have morphed from a local attraction

P HOTOGRAPHS BY M ICHAEL L LEWELLYN Phoenix transplant Patrick Byrne runs and Roca’s Las Vegas office. A wave of counsel—lawyers who know the unspoken Snell & Wilmer’s 27-lawyer outpost, consolidation has already swept the industry: rules of the local game. Even in Vegas, or Las Vegas’s biggest out-of-state office. Today, five publicly held corporations especially in Vegas, practicing law is a rela- dominate the Las Vegas Strip, and two— tionship business. For out-of-state firms, getting into a multistate, multinational empire. Gross Harrah’s Entertainment, Inc., and MGM a piece of that action is as good as—and nearly revenue from gaming in the United States Mirage—own 16 of the 22 largest hotels. as difficult as—drawing a royal flush. more than doubled in the ten years from Las Vegas’s law firms don’t reside in the 1993 to 2003, according to the American glitz of the Strip—they are in office parks or BEING THE NEW KID ON Gaming Association. Las Vegas’s companies the city’s shabby downtown. But the Strip is the block is never now operate on riverboats in Louisiana, to Las Vegas what Wall Street is to New York: easy, but nothing quite reservations in Arizona, and casinos in The Las Vegas firms depend on the casinos compares to the frosty Macau. “The whole industry went from being for real estate, intellectual property, and welcome that Lewis and a unique, localized practice to something that regulatory work. For years, that work has Roca got when it came was national, and now international,” says been awarded on the basis of established to Las Vegas in 1999. Anthony Cabot, a gaming lawyer in Lewis bonds between casinos and their longtime The firm, today Phoenix’s third-largest, wanted to become a regional player and When Snell registered with the state bar, & Rees sent two lawyers to town to service decided that Las Vegas was central to that it met the same fate as Lewis and Roca. In nursing home, health care, and hospitality strategy. It found two experienced local Las Vegas, Snell & Wilmer would be known clients. That same year Lewis Brisbois came attorneys, Martha Ashcraft and Von Heinz, as Curtis and Associates. “It was really to Las Vegas, mostly to handle insurance partners from Las Vegas’s Jones Vargas, to difficult,” says Byrne. “It was confusing for defense work. Lewis Brisbois now has 23 form the core of its outpost. It seemed like a clients.” Receptionists answered the phone lawyers in Las Vegas and recently leased perfect opportunity: “They had a book of “Curtis and Associates, affiliated with a floor of office space to make way for business, Las Vegas was on the cusp of Snell & Wilmer,” and the firm produced more. Some firms have come and gone: exploding, and there was a low cost of entry,” two different sets of marketing material, Los Angeles’s Jeffer, Mangels, Butler & says current Lewis and Roca managing stationery, and business cards. Like Lewis Marmaro partnered with a local firm in partner Kenneth Van Winkle, Jr. and Roca, Snell & Wilmer filed a complaint 2000, but left less than two years later. But there was a hitch: Lewis and Roca against the state bar. The state bar, in Jeffer partner Jeffrey Reuben chalks the couldn’t use its name in Las Vegas. Under turn, announced it would file disciplinary departure up to “a difference in philosophy long-standing Nevada State Bar rules mandated proceedings against Curtis. with the local firm.” by the state supreme court, firms could set up A federal district court granted Lewis and Snell & Wilmer, meanwhile, has steadily offices in the state only if their name partners Roca an injunction against Rule 199 in April increased its presence. At 27 lawyers, Snell were members of the Nevada State Bar. 2000. The state bar appealed to the U.S. has the largest out-of-state office. It has Lewis and Roca were both dead, and they Court of Appeals for the Ninth Circuit, which steadily added partners and associates in were never members of the Nevada bar. upheld the injunction. The following year, real estate, corporate work, and litigation. “We felt that one of the things we had to the Nevada Supreme Court ordered the state In April 2004 Snell hired five lawyers sell was our franchise, so we made a decision bar to look into repealing the restrictions on from Las Vegas’s Gordon & Silver to handle as a partnership to challenge the name multijurisdictional practice. In 2002 the rules real estate and construction law matters, rule,” says Van Winkle. The firm filed for a were changed to allow out-of-state firms to a booming practice in a city where preliminary injunction in federal court, practice under their own names, although construction cranes dot the open landscape. arguing that the restriction, known as Rule they must complete an annual registration The firm has “a pretty good market share” 199, violated the Constitution’s commerce process with the state bar, and there in representing developers in mixed-use clause, as well as the First Amendment. As are limits on the number of pro hac vice and high-rise condominium developments, the matter wound its way through the federal appearances that out-of-state firms can make. says partner James Mace. Clients include courts, Lewis and Roca would practice locally (Snell & Wilmer’s litigation with the bar was Turnberry Associates, The Related Group under the name Ashcraft & Heinz. settled when the state bar was on the brink of of Florida, and Ruffin Trump LLC. Still, That was just the de jure roadblock. There drafting the new regulations.) Snell has not snagged anyone in the critical was a de facto one, too—the clubbiness of With the Rule 199 dispute resolved, the IP and gaming regulatory areas. Byrne the local legal community. “The bar is so way was finally clear for out-of-town firms. says he is aggressively looking to hire much smaller [than in other cities], and the Lewis and Roca grabbed its first high- lawyers in those practices. judiciary is so much smaller, and the judiciary profile group of laterals, hiring five lawyers Byrne’s plight isn’t unusual. Finding knows the bar, and vice versa,” says Paul from Quirk & Tratos, a local IP boutique, in qualified talent has become the trickiest Hejmanowski, managing partner of Las 2003. It now has 15 lawyers in its Las Vegas part of any managing partner’s job in Las Vegas’s 80-lawyer Lionel Sawyer & Collins. office, and scored its biggest coup in March, Vegas. “Part of the challenge is that Las Of course, Lionel Sawyer, founded in 1967, is when it hired Cabot from Lionel Sawyer, Vegas is still in many respects an overgrown a key beneficiary of that sort of familiarity. It where he headed that firm’s gaming small town,” says Ashcraft. The talent pool has relationships with most of the major gaming practice. In 2004 San Francisco’s Gordon is limited: Las Vegas may be growing fast, companies, and its partnership includes former U.S. senator Richard Bryan and two sons of Senate minority leader Harry Reid. By 2000 Lewis and Roca (as “Ashcraft & STAKING THEIR C L A I M S Heinz”) faced even more competition, this A selective look at the firms, mostly from California time from a familiar source. Snell & Wilmer, and Arizona, that are putting down roots in Las Vegas Phoenix’s largest firm and a powerhouse across the Southwest [“Valley of the Sun King,” August 1999], had decided to move FIRM ARRIVAL DATE SIZE CONCENTRATION into Las Vegas. Three partners were sent from Phoenix to open the outpost, which LITTLER MENDELSON 1996 13 Labor and employment would be headed by Byrne, a young partner LEWIS AND ROCA 1999 15 Corporate, gaming, IP who had worked closely with Snell chairman John Bouma on professional malpractice SNELL & WILMER 2000 27 Real estate, bankruptcy, litigation and insurance litigation. (In Phoenix, Byrne had an office next to Bouma’s.) Snell also LEWIS BRISBOIS 2004 23 Insurance defense recruited Patricia Curtis, a real estate partner from a local firm, Hale Lane Peek GREENBERG TRAURIG 2005 13 IP Dennison and Howard. merger transactions and financial work, we do go outside” of Nevada, says MGM Mirage general counsel Gary Jacobs, who is also an of counsel with Christensen, Miller. “But we have relationships with "At 27 lawyers, Snell has the largest many firms in Las Vegas.” The local firms out-of-state office. It has steadily added handle IP, labor and employment, real estate, and regulatory matters, he says. partners and associates in real estate, The inability of Las Vegas’s native firms to do major securities work for gaming corporate work, and litigation." clients—and the disinterest of elite firms in anything else—creates a balance that the out-of-state firms would like to upset. “My sense is that the market has been underserved on pure corporate but its newcomers move to work in the the state who can do major securities transactions and securities work,” says tourism industry, not as lawyers. Nevada’s work,” says Frank Schreck of Las Vegas’s Snell & Wilmer’s Byrne. “We are doing sole state law school did not produce its 30-lawyer Schreck Brignone. our best to keep some of that work in first graduate until 2001, and the stream When Harrah’s Entertainment bought the marketplace.” of eligible associates from it continues Caesar’s Entertainment, Inc., for $9.4 But the local work that Las Vegas to be relatively small. billion in a deal that closed earlier this firms do is not commodity work, and local “It can be a challenge to find people at year, the transaction was handled by counsel means more than a signature. the partner level who are practicing at the Latham and Skadden. For its initial Nevada is the Delaware of the West; many level of Lewis and Roca,” says Ashcraft. public offering last year, Las Vegas Sands out-of-state companies are incorporated Until the regional firms began bidding for turned to Paul, Weiss, Rifkind, Wharton there but headquartered in other partners, Las Vegas did not have a lateral & Garrison, and when Boyd Gaming states, and Las Vegas lawyers handle market to speak of, and wresting the top Corporation bought Coast Casinos, Inc., for incorporations and provide comments partners from their comfortable perches $1.3 billion last year, the M&A work went to on Nevada law. at local law firms still can take months or Cravath, Swaine & Moore and Gibson, Just as the casinos have created even years, since the take-home pay for Dunn, respectively. Top Am Law 100 a unique style, demonstrated by the top partners at local firms can far exceed firms also represent investment banks in Strip’s mishmash of five-star restaurants the average rungs of regional firms. When underwriting debt and equity financing and tacky casinos, luxury hotel suites Lewis and Roca sought an employment for gaming companies. and tasteless musical acts, they have group, it searched for over two years for a Some of these ties go back years. created their own brand of legal work. local partner with a book of business. “We Latham, for instance, represented what The financing, IP, and labor work that pushed on for years in the L&E area, and is now Harrah’s—the largest gaming the gaming industry needs is as special, tried to find more senior people. But they company in terms of market value—in bold, and confounding as the casinos are very entrenched,” says Van Winkle, 1990, when it was spun off from Holiday themselves. Local work in Las Vegas is the firm’s managing partner. Unsuccessful, Inn. “They were an afterthought of local not so much because it is small-time, the firm instead hired four midlevel a big hotel company,” says Charles but because it is industry-specific. associates from Fisher & Phillips, an Ruck, a partner in Latham’s Costa Local lawyers have cornered the Atlanta-based employment shop across Mesa, California, office. “This is a company market—in fact, written the rules of the hall. The firm’s attitude became: that hundreds, maybe thousands, of the market—for regulatory work, where “Let’s accept the fact that they may Latham lawyers have worked on over the the jackpot lies in local gaming work. come over without a book of business,” years.” Latham represented the company To make almost any move, gaming Van Winkle says. “That’s easier to do if as it set up casinos from Louisiana to companies must take a trip to the you’re paying salaries of three-, five-, Virginia, partnered with Indian casinos, regulators. State officials approve major seven-year associates.” and made major acquisitions, including transactions, new games, gaming licenses those of Harveys Casino Resorts for $712 for the top executives, and transfers of NOT EVERYTHING THAT happens in Las million in 2001 and Horseshoe Gaming those licenses during a merger. To receive Vegas stays in Las Holding Corp. for $1.5 billion in 2004. approval for an impending merger, the Vegas—high-end cor- Despite the volume of work, Ruck says state regulatory authority requires a porate work, for in- that Latham sees no need to open an lengthy brief with full disclosure. For stance. For that, gam- office in Las Vegas. “I don’t think that’s on the regulators, “the question is: Is it good ing companies go to our radar screen,” he says. for Nevada or not good for Nevada?” says New York or Los An- Another beneficiary of Las Vegas MGM Mirage’s Jacobs. geles, to such firms as corporate work is Los Angeles’s Chris- “We do the gaming [regulatory] work Skadden, Arps, Slate, Meagher & Flom; tensen, Miller, Fink, Jacobs, Glaser, for all the major transactions on the Latham & Watkins; and Gibson, Dunn & Weil & Shapiro, which has had a long Strip and all the financings they do,” says Crutcher. “I don’t know anybody in relationship with MGM Mirage. “For major Schreck, of Schreck Brignone, one of a small cadre of local lawyers who handles gaming regulatory work. Schreck, who worked at the Nevada Gaming Commission in the seventies, helped draft gaming regulation. Since then, he has "My sense is that the market has been represented hundreds of gaming clients in under-served on pure corporate transactions regulatory work, including both Caesar’s and Harrah’s in their merger. In addition, and securities work," says Snell & he represents executives in approvals for licenses. It is, Schreck says, work that Wilmer's Byrne. "We are doing our best to builds relationships with clients deeper keep some of that work in the marketplace." than any deal work: “You have a bonding experience,” he says. “They have to divulge [all their personal] information to me.” That process, Schreck says, creates personal ties that send those executives the changes. Only one major firm, Quirk work has spread. Gaming companies back to the firm. & Tratos, has joined with a regional or now need regulatory advice not just in Even intellectual property takes on national player: That firm, a 13-lawyer IP Nevada, but also in, say, New York State. a local hue in Las Vegas. Brand protection boutique, was absorbed by Greenberg “When I got here back in 1981, gaming is an essential part of a gaming company’s Traurig, forming the basis of that firm’s law was limited to Nevada and New business and marketing strategy. Mark Las Vegas operation. (Greenberg almost Jersey,” says Cabot, the Lewis and Roca Tratos, the IP lawyer who heads Green- always expands by hiring one or two lateral gaming lawyer. Today, Cabot is as likely berg Traurig’s new Las Vegas office, says partners at a time, but in a nod to Las to help a client in Texas—or Sydney—as that he has secured trademark and trade- Vegas’s unusual market dynamics, Green- in Las Vegas. dress protections for such exotic things as berg chief executive officer Cesar Alvarez Cabot himself is testament to the fact sounds of a volcano at the MGM Mirage says his firm decided to pursue a merger that another phenomenon of the modern hotel and the facade of the Treasure because “in a small market like that, it’s legal market, the lateral job hop, is coming Island casino. harder to start with onesies and twosies.”) to Las Vegas. If other partners mimic The most powerful players in town, such Cabot’s move from Lionel Sawyer, new FOR ALL ITS POTENTIAL, Las Vegas, with as Lionel Sawyer, Schreck Brignone, and firms will have a shot at breaking in. “If about a half-dozen out- Jones Vargas, have so far demurred on outside firms in Las Vegas succeed, it’s of-state firms, has not yet merger opportunities. “Candidly, that’s why because . . . they can attract good local grown into a midsize legal it’s a market that hasn’t seen a lot of firms people,” says MGM Mirage’s Jacobs. market. Phoenix, Denver, coming here,” says Snell & Wilmer’s Byrne, But for the economics to work for most and Atlanta all have who adds that Snell’s preferred method of out-of-state firms, Las Vegas lawyers will more, and larger, out-of- growth, like Greenberg’s, is hiring small have to start charging higher rates. Las state firms. Will the city groups of lateral partners. Vegas rates are approaching Phoenix transcend its small-town But mergers are another phase in rates, but battles over billing rates have not roots and join the firmament of midsize the evolutionary cycle of a legal market. begun. “That may happen, but I don’t think markets? Can it become a destination, or is How long can Las Vegas’s natives any impact [in rate changes] has been it fated to be a blip in the strategic plans of remain independent? Lionel Sawyer’s noticeable yet,” says Gary Goodheart, firms looking for a “national footprint”? Hejmanowski says his firm intends to stay managing partner of Jones Vargas. Las Vegas’s quirky work and insular bar single: “If we can maintain the perception Goodheart admits that could change if are serious impediments to large firms that that our services are good and our fees more national firms pour in. “Companies have looked at the market. “We have not are appropriate, we can be successful.” are not used to paying $600 to $700 an gotten our arms around it,” says Arthur He says the firm has a tight network of hour here,” says Schreck. Currently even Makadon, chairman of Philadelphia’s referrals that connects clients to work that Las Vegas’s premier partners charge as Ballard Spahr Andrews & Ingersoll, who the firm cannot provide. Schreck, on the little as $300 an hour. says he has considered a Las Vegas other hand, says he has spoken with two And the bottom line may be that presence for the firm’s real estate practice. merger candidates lately: “We have some for many firms, that sort of a payoff But much would need to change before interest in being able to provide more may not be high enough to merit a bet the Nevada desert would be flooded services to our clients.” on Las Vegas. with Am Law 100 firms. If the needs of clients are the criterion, Ending the independent streak of the Schreck’s position may prevail. As casinos local players would need to be chief among have expanded, the reach of their legal E-mail: [email protected].

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