Tower Snow, the chairman of Brobeck Phleger & Harrison, specializes in securities litigation, including all types of litigation involving the Securities Litigation Uniform Standards Act of 1998, the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933, the Securities Exchange Act of 1934, the Foreign Corrupt Practices Act, investigations and proceedings initiated by the Securities and Exchange Commission or other federal and state agencies, investigations and proceedings initiated by the New York Stock Exchange, American Stock Exchange, National Association of Securities Dealers or other self-regulatory organizations, financial services litigation, and litigation involving state securities laws or common law claims as they pertain to the purchase and sale of securities. He has testified before both United States Congressional and California Senate Committees on a variety of securities litigation issues. He graduated from the University of California, Berkeley (Boalt Hall School of Law) in 1973.
On February 5 2001, Mr. Snow sat down with Bizlawjournal.com's Ali Oromchian to discuss Brobeck's long-term strategic goals and the current state of the economy and its affects on the legal community.
Q: Could you describe Brobeck's long term vision and how the expansion into Europe falls into that plan?
A: Our strategic vision is to be the dominant law firm in the world representing high technology and new economy companies. Not to be all things to all people but to superbly represent clients in that market segments where we can add value. What we are doing in Europe or New York or wherever else we have an office reflects that. We are focused in a particular market segment where we have great depth and breadth and great specialized expertise and what we are trying to do is to help clients in that market segments succeed in their business plan. So in New York and Europe for example, we have done more technology, public offerings, venture deals, and M & A transactions both in New York and Europe than any New York firm or in Europe any European firm because although there are many fine law firms in both those locals there is no law firm that has the expertise we do in technology. And as a point of reference, on Friday we were selected by the London Legal Press as the best United States' law firm in Europe. I think that reflects the level of service we provide our clients, the culture we have internally and our focus on a market sector, which we serve superbly.
Q: Do you see the slowdown in our economy affecting Brobeck's growth into Europe and into Asia in the future?
A: Markets go up and markets go down but this is a long-term focus. Are we as busy now as we were a year ago? No. Are we materially less busy? No. We are not running at full capacity, but if you go back a year or two years, we were turning down so much work it was very painful. We remain very busy, the market I believe will pick up over the course of the year and I predict that 18 months from now our biggest challenge will be that we cannot hire enough people. We expect to grow substantially in Europe this year. We have approximately 75 lawyers in Europe and I hope we will have at least 100 if not significantly more by the end of the year. I expect us to hire domestically 100 to 150 lawyers this year. We have looked at Asia. We are looking at Asia and undoubtedly we will go to Asia at some point but at this point and time, the United States and Europe are more attractive opportunities. One needs to prioritize opportunities. It is the tale of the low-lying fruit. You are going to go with your resource where there is low-lying fruit, and there is a lot of low-lying fruit in the United States and Europe and that is where we are going to look first.
Q: Does Brobeck prefer to have American or local attorneys in a new office when it launches?
A: What we try to do is to have each of the offices built with both types of people. It is very important culturally to transport the Brobeck culture everywhere. For example, we would never open an office without one or more Brobeck people going to the office to help get it established. On the other hand, it is naïve to think that you can enter a new market with people from out of town and only people from out of town because they are not tied into the local business community. The model that has worked to great success for us is that we move some of our own people but then we look for the very best talent that is tied to the local business community. That way we have one Brobeck culture yet we have the benefits of people that intimately know the needs of the local client base. A good example would be Carmelo Gordian in Austin. Six years ago, we sent people from the West Coast to help him build the practice. We now are the dominant firm in Texas in the technology space. I think we have close to 150 lawyers in Texas and I think we will have 300 there in the not too distant future. It is because we tied the institutional expertise and institutional culture to an individual who had intimate familiarity with the needs of the Texas high tech community. We try to do that in every office we open and every place we go.
Q: Would you agree that implementing this formula is just as important in Europe as it is in the United States?
A: Yes. The managing partner of our London office used to be the managing partner in Palo Alto. So, our London office is comprised of one-half U.S. attorneys one-half U.K. attorneys. What Tom Kellerman who is the managing partner brings is intimate familiarity with Brobeck. A great ability to make sure that the London office gets all the support it needs, our culture, and it is a win-win. Everybody benefits from that. I'll give you a counter-point, if you look at how the New York firms have done in the West Coast the answer is not very well. Many of the elite New York firms have come west only to close up their doors and go home. The reason was not that they are not great law firms and it is not that they did not send extraordinarily talented lawyers. It is that they send extraordinarily talented lawyers with a lot of resources behind them to business communities that they knew nothing about. They had no local roots, no local connections and were unsuccessful in developing any kind of franchise. You need to do more than that. You have to understand and be able to connect to the local business community. You need local people.
Q: Do you believe the reluctance of some firms such as Wilson to match the recent $10,000 raise Brobeck initiated is a direct result of the slow down in the economy?
A: I think the reluctance of Wilson, Cooley and other firms to match us reflects the slow economy and reflects the difference of those firms with Brobeck. Unlike our other technology competitors, we are almost perfectly balanced between litigation and transactional. So if you were to look inside our firm, you would see 50% of our revenue comes from litigation and 50% comes from the transactional side. In a market like this, all of our litigation practices are going full board and in fact have more work than they can do. On the transactional side of our business, half of transactional practices are going full board, real estate and our commerce and finance group, and the only part of our firm that is really being affected by the slower economy is the pure high tech, dot com type transactional. We are much more balanced and much more diversified and we continue to be very busy and have a lot of forward economic momentum, which in turn allows us to be the leader again in salaries. The best example of the difference would be if you look at the boutiques like a Gunderson or a VLG, those are absolutely the perfect models in a red-hot economy. However, it is like playing roulette. When you bet on number 32 and 32 shows up that is the absolutely best bet you can make. If you are cold, in a cold economy those are absolutely the most vulnerable bets. So we can probably never do as well as the pure play boutiques can, on the other hand in a down market we do infinitely better than they do.
Q: What do you predict will happen to these boutiques? Do you think they can survive this economic downturn?
A: I believe some will and some will not. I do not know how long this market turn will be and I would be surprised in this particular market downturn that any of the better boutiques do not survive and go right through it. But longer term, if we fast forward 10 years I would be willing to bet that some of the boutiques that have some of the most high profile names do not exist. I would be quite confident that some of them do not exist a decade from now. I think similarly some of them will exist and will be doing absolutely fine but the model has yet to prove itself to be sustainable over the long term. I believe the differentiator will be the boutiques that have very cohesive shared cultures will do fine. Fundamentally, they are fine. The boutiques that are focused on the individuals than on a shared collective effort are unlikely to survive in the long term.
Q: Are many of these boutiques moving away from the dot coms and going to more traditional technology clients?
A: Wilson is a very diversified firm so they cover the whole technology spectrum, as do we. The difference between Brobeck and Wilson is that Brobeck is much more balanced between litigation and transactional than Wilson is, which I think is the right model. The boutiques have focused on the emerging growth companies and I actually think they do a good job evaluating clients they have the opportunity to represent, covering a broad spectrum of types of companies including manufacturing companies, biotech companies, B-to-B companies, B-to-C companies and a host of others. The key is to pick from the many opportunities only the most attractive, which is what we do as well. So I do not think they are pigeon holed into a space unless they have decided to be solely in the emerging company growth space. If they do the right job selecting quality companies they will do fine in the longer term. For a larger institution, particularly one that wants to have a global franchise, you have to cover the whole spectrum of clients. Not just the startups but the tech powerhouses and you have to cover them worldwide.
Q: What are the goals and objectives oft Brobeck's new e-commerce litigation group?
A: If you look at major American law firms, all of us did very classic types of litigation in the past. What we have tried to do and done it successfully is transition classic litigation skills to focus them on high tech and the new economy. An easy example would be that we have a significant number of lawyers here who did very classic product liability work. In the last decade, we have transitioned them over so that they are still product liability lawyers for high tech and new economy companies. An example would be, we are representing Nokia worldwide in its cell phone litigation raising the issue of whether using cell phones causes brain cancer. We represent Compaq computer in litigation challenging the software used in some of its laptops. The skill set would be classic but the application of it would be 21st century. If you think downstream, the biotech market segment is starting to show real promise in that they are moving from research to actual products being delivered in the market. At some point, one of those biotech products is going to have unforeseen results and that is going to create very complex litigation. That is the type of litigation we want to be involved in. If you look inside Brobeck, you would find a lot of our litigators not only work in the high tech space but also have hard science degrees.
Q: I think even an undergraduate degree in the sciences would be valuable in this arena, but what would you recommend to attorneys who do not have that formal science or engineering degree but still want to participate in this sort of cutting-edge litigation?
A: If you want to work in the tech space, the more you do to orient yourself to the space the better. So if you want to work in the technology space, the absolutely best thing you can do in addition to getting a law degree, are hard science degrees and an MBA degree as well. We are in many cases quasi-investment bankers. 50% of what we do is legal work, but 50% is business counseling. Anything one can do to enhance the business side of the equation is good. If one is not in the position to get a second degree, I think as you suggested a useful undergraduate degree clearly has value. If one did not get that, I'm an English major for example, in law school one can take courses that tie in with our type of practice. So, I would take every corporate securities course on could take if one wants to be a technology transactional lawyer. It is like any other field, the more you can learn about the space you want to work in the more likely you will get hired by the people you want to work for and the more likely you'll do really well there.
Q: Should we expect Brobeck to be the first firm to go public when the ABA gives law firms permission to do so? How warm do you expect Wall Street's welcome to be?
A: Law firms will go public at some point in the future. Of course, they cannot now because professional rules do not allow it. Nevertheless, they will go public for two fundamental reasons and it is why all other businesses in the world go public. First, they need the capital that you receive from going public to scale on a national or global basis. You need to build your infrastructure and you simply cannot do it on a national or global level based on operating revenues. The other strategic driver is that the most successful enterprise needs to compensate their people in the most successful way and as the technology community has amply demonstrated there is no better motivator than stock options. Law firms cannot offer their people stock options because we are not a public company. Brobeck, unlike most American law firms, offers the next best thing. We have very significant internal venture funds where we invest on behalf of everybody in our law firm, partners, associates and staff, into baskets of emerging growth companies. So, they are not stock options but the venture investments are the next best thing. We clearly would want to go public if we were able to. The rules will change. Law firms will go public. Law firms will be truly giant global enterprises some day and whether we are first or not will depend on the evaluation we can get which will be driven by the market and circumstances at the time. Typically, the first one out does not always get the best evaluation so it might be we do not want to be first.
How the market will receive us going public? If you ask investment bankers today they will say that all kinds of companies went public over the last three years with insignificant revenues and no profits. To the extent that a law firm can demonstrate significant revenues and profit growth the market will accept that and receive it as any business enterprise. The real question is what value can you deliver to your shareholders, what is the upside of the return and what are the alternatives to the investment community. So last year we grew 52% in revenues and 56% in profits and I believe that we should be able to see robust growth for years to come.
Q: How do you predict these stock options to affect the attrition rate among associates at big law firms?
A: If people's long-term income is tied into options and the options require longer-term commitment to the enterprise you do in fact see a reduction in attrition. I cannot quantify it but our investment funds have had some impact on our attrition rate and stock options will certainly have the same affect.
Q: Lastly, If you could have lunch with anybody, dead or alive, who would it be and why?
A: If I could have lunch with anybody it would be Abraham Lincoln because I think he was truly an extraordinary man in extraordinary times. In my opinion, he was unequivocally the greatest American in overall contribution and I think that would be a richly rewarding experience.
Tower Snow is chairman of Brobeck, Phleger & Harrison.