McGlinchey Stafford Carving Out a Niche Serving Consumer Finance Companies

By Lisa Stansky Contributing writer of the Times Picayune

(this article was originally published in the Times Picayune on Tuesday March 16, 2004)

Consumers might never wonder who wrote the long, jargon-filled disclosure form that comes with a credit card or loan application, but there's a good and growing chance the text was at least partly written by a lawyer with the McGlinchey Stafford firm of New Orleans.

McGlinchey is building a lucrative, national practice doing consumer loan counseling and compliance work for national clients such as Bank of America and DaimlerChrysler Financial Services, performing tasks often considered too specialized for other big corporate firms. In the past four years, McGlinchey has used the work to fuel expansions, poaching skilled lawyers in other markets to build its practice.

In January, for instance, McGlinchey, which has 171 lawyers in total, snared the four-lawyer consumer finance practice from McNamee, Lochner, Titus & Williams of Albany, N.Y., and set up a satellite office in the Gotham State capital. Last year McGlinchey grabbed two more lawyers from the prestigious Akin Gump Strauss Hauer & Feld firm to establish a toehold in Dallas. And in 2001, McGlinchey absorbed the consumer finance group of Benesch, Friedlander, Coplan & Aronoff of Cleveland.

Moves such as that have helped the New Orleans firm build a team of 37 lawyers in the practice. The business adds up to about $8 million to $10 million a year and has catapulted McGlinchey onto a national playing field occupied by a cadre of law firms that advise banks, mortgage companies and other lenders. McGlinchey is now going head-to-head with powerhouses such as the 1,000-lawyer Morrison & Foerster of San Francisco and the 730-lawyer Kirkpatrick & Lockhart of Pittsburgh.

"Those are our friends. We send them clients; they send us clients," said David Willenzik, head of the McGlinchey's business law section. "It's not an adversarial relationship."

Laws differ state to state

McGlinchey's growth pattern reflects the evolution of financial institutions, which have crossed provincial boundaries to expand nationwide, said Robert Cook, managing partner at Hudson Cook, a 25-lawyer Maryland firm that specializes in consumer finance work.

A key task involves telling clients what the federal law and the law of each state has to say about consumer credit products they offer. A company making loans to customers nationwide, for instance, might need to know what sort of late fees it can impose, said Bennet S. Koren, who is chairman of McGlinchey's consumer finance group. McGlinchey advises the company on the state and federal laws.

McGlinchey has been able to absorb legal talent wherever the firm finds it in part because clients doing business everywhere don't care where their lawyers are located, said Rodolfo J. Aguilar Jr. of McGlinchey's Baton Rouge office.

"We discovered that geography or location did not matter to them," Aguilar said.

Other large New Orleans firms give McGlinchey kudos for carving out a niche with potential. Local firms that do banking work don't seem to mind McGlinchey's getting a piece of the action by having the firm represent clients on arcane regulatory matters.

"Consumer work and consumer finance is not the type of work that institutional law firms would typically cultivate," because it is deemed to be more rate-sensitive and less lucrative than other areas, said Harvey D. Wagar III, partner with Phelps Dunbar's New Orleans office and regional coordinator of the firm's business practice.

There's work to go around because most banks "are represented by multiple law firms and typically divide their work by areas of practice specialty," Wagar said. "McGlinchey got an early start in carving out a niche with local banks and banks around the state."

Meanwhile, other firms face a steep learning curve if they want to catch up.

"It's so regulatorily intense," said J. Marshall Page III, partner with the general business section of the New Orleans office of Jones, Walker, Waechter, Poitevent, Carrère & Denègre. "You've got the federal law, which is changing all the time, and you've got the law of all of the states."

Attracting talent

Finally, there's the question of finding talented lawyers who thrive on such work.

"That is a challenge: to find a lot of people who want to do that all the time," said Charles P. Adams Jr., of Jackson, Miss., a managing partner of the New Orleans firm Adams and Reese. Adams said the niche probably created "synergies" for McGlinchey. "I'm sure that it is a good strategy for them."

McGlinchey is betting that its compliance work for big-time clients will spill over into other business for the firm's other practice areas.

The compliance practice is about as old as McGlinchey itself, which set up shop in 1974. During the mid-1970s Willenzik took on cases involving relatively new laws, such as the federal Truth in Lending Act. Willenzik recruited Koren, who joined the firm in 1981. Willenzik, Koren and Laura Hobson Brown got the practice rolling, eventually encouraging other lawyers to team up with them.

The firm rippled out from New Orleans during the 1990s in a predictable pattern, with offices opening in regional hubs such as Houston; Baton Rouge; Monroe; and Jackson, Miss.

Geographic predictability went out the window as technological advances such as faxes, e-mail and computerized document management systems dissolved the distance between a colleague in the next office and one in the next time zone. The result: McGlinchey has been expanding all over the place.

The lawyers from Benesch, Friedlander, Coplan & Aronoff jumped over to create McGlinchey's Cleveland office in 2001. In 2003, two Texas lawyers jumped from Akin Gump Strauss Hauer & Feld. In January, McGlinchey landed the entire consumer finance practice from McNamee, Lochner, Titus & Williams of Albany.

Lawyers "could be located in Timbuktu for all practical purposes," Koren said. "All I need is e-mail access, a computer, and high-speed faxes and my brain."

That's put McGlinchey toe-to-toe with big, multipractice firms such as Kirkpatrick & Lockhart and Morrison & Foerster, as well as boutiques such as Maryland's Hudson Cook, a 25-lawyer firm that does only consumer finance work.

Hudson Cook has used the same expansion strategy as McGlinchey, going after talent without being focused on location. Keeping lawyers in smaller metro areas helps keep overhead and hourly rates in check, which can yield a competitive edge.

"My office is in suburbia," said Mark S. Edelman, the managing partner of McGlinchey's Cleveland office, who jumped over from a firm in a tony building downtown. There's now no need for pricey surroundings to impress clients; Edelman usually travels for face time with clients such as Wells Fargo Bank and Nissan Motor Acceptance Corp.

Marc J. Lifset, partner with McGlinchey's Albany office, noted the savings over a metropolis such as Manhattan.

A different business model prevails in McGlinchey's Dallas office, which churns out reams of residential mortgage paperwork. For a fixed per-transaction fee, the firm services mortgage lenders by crafting that stack of documents that a typical home buyer sees at a real estate closing, said partner Ronald M. Bendalin, who joined partner Eldon L. Youngblood in leaving Akin Gump to launch McGlinchey's location there.

Bendalin, Youngblood and one attorney who is of counsel are the sole lawyers in the Dallas office. They are supported by about 112 paralegals and other staff. Though each home deal may seem like small potatoes for a big firm, the numbers add up. Some clients yield 20 units of business each month; others generate several thousand monthly transactions, Bendalin said.

McGlinchey hopes to snag other legal business from its residential mortgage lenders. "We're a big real law firm that can do anything you need us to," Bendalin said.