Cleary, Gottlieb, Steen & Hamilton History

Address:

1 Liberty Plaza
New York, New York 10006-1470
U.S.A.

Telephone: (212) 225-2000
Fax: (212) 225-3999

Partnership
Founded: 1946 as Cleary, Gottlieb, Friendly & Cox
Employees: 1,900
Sales: $366 million (1998)
NAIC: 54111 Offices of Lawyers

Key Dates:

1946:: The firm is established with offices in New York City and Washington, D.C.
1949:: The Paris office is opened.
1959:: Name partners change, resulting in Cleary, Gottlieb, Steen & Hamilton in New York City and Cleary, Gottlieb, Steen & Ball in Paris and Washington, D.C.
1960:: The opening of the Brussels office is announced.
1963:: The name Cleary, Gottlieb, Steen & Hamilton unites all offices.
1971:: London office is opened, and the firm moves its New York office to 1 State Street Plaza.
1971:: The firm hires its first paralegal.
1980:: Hong Kong office is opened.
1983:: Leo Gottlieb publishes a history of the firm's first 30 years.
1987:: Firm opens its new Tokyo office.
1991:: The firm's office in Frankfurt is started.
1998:: The Rome office is established.

Company History:

Although Cleary, Gottlieb, Steen & Hamilton is still a relatively young law firm, it is a major player in the legal profession in the United States and many nations in Europe, Asia, and Latin America. The firm counsels corporations, nonprofit organizations, several sovereign nations, families, and individuals on a wide range of issues, such as financing, litigation, taxation, mergers, acquisitions, bankruptcy, real estate, and intellectual property concerns. Its February 2000 firm booklet stated, 'In 1999, Cleary Gottlieb was one of the leading issuer's counsel in each of the three principal categories of capital market issuances: equity, debt and high yield debt.' The firm continues to help governments around the world privatize their state-owned enterprises. It helped pioneer mortgage-backed securities and persists in developing innovative forms of financing. Over 200 of its 600 plus attorneys work in its overseas offices in Paris, Brussels, London, Hong Kong, Tokyo, Frankfurt, and Rome.

Origins and Early Practice

In 1946 seven attorneys formed a new law firm with offices organized in New York City and Washington, D.C. Four of the seven founders of Cleary Gottlieb left the Root Clark law firm where they were disappointed in its changing management style and the fact that it was growing too rapidly. A leading tax attorney, George Cleary had graduated from the University of Wisconsin Law School before working at the Bureau of Internal Revenue and then joining the Root Clark firm in 1925. Leo Gottlieb studied engineering at Yale before he attended Harvard Law School and in 1925 became a Root Clark partner. The other two attorneys who left Root Clark were Henry Friendly, a graduate of the Harvard Law School, and Mel Steen, who graduated from the University of Minnesota Law School. All four graduated as the top students of their respective law schools.

The other three of the seven founders came from government service, including Hugh Cox and Fowler Hamilton from the U.S. Justice Department. George Ball helped plan the new law firm, but he did not formally join as a partner until July 15, 1946, when his resignation as the general counsel for the French Supply Council became effective.

In 1949 the firm opened its Paris office, the first American law firm to open a new office there after World War II. (The Coudert Brothers law firm, which was the first American firm in the late 1800s to open a Paris office, had maintained its office there during the war.) Cleary Gottlieb's Paris branch was the firm's first effort to develop an international practice, one that would eventually involve about one-third of its attorneys.

According to Leo Gottlieb's history, the firm's total fees received during the year ending December 31, 1946 were $296,000, and its net income was $119,500. At the end of 1950, its fifth year in business, total fees received and net income had increased to $837,500 and $446,500, respectively.

Not surprisingly, the founding partners' prior connections helped the new law firm gain its early clients. For example, Henry Friendly while at the Root Clark firm served as Pan American Airways' general counsel; thus, Pan American became an original Cleary Gottlieb client. George Ball's earlier ties helped Cleary Gottlieb acquire such clients as the European Coal & Steel Community and later the European Common Market and the European Atomic Energy agency.

Other initial clients who had some previous association with Cleary Gottlieb founders included Salomon Bros. & Hutzler, Salomon family members, Nathan W. Levin and the Rosenwald family, Royal Typewriter Company and members of the Thomas Fortune Ryan family, Pennsylvania Railroad, A.T. & T. and New York Telephone Company, American Bosch Magneto Corporation and George Murnane, and Trico Products and the Evans and Oishei families.

The partnership's first new client was movie star/singer Bing Crosby, who was being sued by the Kraft Cheese Company over a contractual dispute over a Kraft-sponsored television series. In this case and later work, the firm 'found Crosby to be an intelligent and agreeable client,' according to Gottlieb's history.

In 1946 the law firm began providing legal services to Gerard Piel in his founding of Scientific American, one of the most important scientific journals of the post-World War II era. May 1948 marked the journal's first issue, and the firm in the 1980s was still counsel to the journal and its publishing subsidiary W.H. Freeman & Co.

In 1959 name partner Henry Friendly left the firm to become a judge of the U.S. Court of Appeals, Second Circuit. So the firm in New York City changed its name to Cleary, Gottlieb, Steen & Hamilton, while in Washington, D.C. and Europe it became Cleary, Gottlieb, Steen & Ball.

Cleary Gottlieb in the 1950s began representing oil companies. In 1951 it gained as a client the Foreign Petroleum Supply Committee, which had been organized by several oil firms, such as Exxon and Gulf, after the leftist Mohammed Mossadegh took over the Iranian government and the huge oil refinery in Abadan, Iran. This work led to representing other oil organizations and companies in the same decade, including Venezuelan Petroleum Company and Standard-Vacuum Oil Company.

The law firm in the 1950s also began serving R.H. Macy & Co., General Instrument Corporation, Monroe Calculating Machine Company, the Venus Pen and Pencil Corporation, and the Woodward Iron Company. When Elihu Root, Jr., joined the law firm in 1954 as 'of counsel,' he brought one of his clients, the Fiduciary Trust Company, which for many years was a source of both revenues and increased prestige for Cleary Gottlieb. The firm's international practice was greatly aided by Jean L. Blondeel, who in the 1950s served as special counsel to the World Bank. He later became president of Luxembourg's Kredietbank, S.A. while serving as Cleary Gottlieb's European counsel.

With these and other clients, Cleary Gottlieb's finances improved. At the end of 1960 the firm's 63 lawyers and 92 clerical staff provided services that brought in $2.6 million in total fees, while net income for 1960 was $1.1 million.

Practice in the 1960s and 1970s

Cleary Gottlieb increased its services to the oil industry in the turbulent 1960s and 1970s, mostly from the work of name partner Hamilton. In 1963 the firm first began representing the American Petroleum Institute, the New York City trade association that included virtually all big oil companies. During the 1967 Six Day War between Israel and Egypt, 26 oil companies organized as the Middle East Emergency Committee hired the firm. In December 1974 the firm again was retained by major oil companies, including Gulf, Exxon, Mobil, Texaco, and Standard Oil Company of California, all of which were trying to deal with the Arab oil embargo. The firm's attorneys helped its oil clients in many nations, not just the Middle East. Daniel Yergin's book The Prize described the colorful history of the oil industry without much detail of the role of law firms.

Hamilton also brought many non-oil clients to the firm, including the Mutual Life Insurance Company of New York (MONY), The Oil Shale Corporation that later became Tosco Corporation, and the Sherman Fairchild Foundation and estate.

As multinational corporations expanded, they confronted different laws and cultural differences in the countries where they operated. Finding that the French and Belgian bar organizations were becoming less friendly to foreign law firms, some Cleary Gottlieb partners helped work with government and bar representatives in Paris and Brussels to resolve these disputes. Part of that effort involved helping the state of New York develop rules to license foreign lawyers, which in effect was an exercise in reciprocity.

In the 1960s Cleary Gottlieb gained Banque Nationale de Paris, the major French bank, as one of its major European bank clients. The firm also began representing the Asian Development Bank. The firm's international practice benefitted from the public service of two of its name partners. In 1961 President Kennedy appointed George Ball as the Under Secretary of State for Economic Affairs, and later that year Ball was appointed as the Under Secretary of State, the number two position in the U.S. State Department. Fowler Hamilton served as the administrator of the U.S. Agency for International Development from 1961 to 1963.

Beginning in the mid-1960s, the firm increased its Latin American practice, especially in Brazil, working to help Dr. Alberto Jackson Byington develop oil shale projects, an alternative to Brazil remaining so dependent on oil imports. In 1969 the Brazilian government chose Cleary Gottlieb for assistance on a major bond issue. The firm also provided counsel to foreign banks and corporations with business interests in Brazil. For a few years in the mid-1970s the firm partially supported a Rio de Janeiro office used by its attorneys and local Brazilian lawyers, but that was just a temporary arrangement. The firm continued to have a significant practice in Latin America, mainly from its attorneys based in New York City.

George Cleary reported in an interview reproduced in the law firm's July 9, 1970 Cleargolaw News that the firm had a general practice, with considerable involvement in international business finance. At that point the firm had 120 lawyers. Cleary also said his firm had no criminal practice, except occasionally defending a client in an antitrust case.

In December 1970 Automobiles Peugeot, S.A. of Paris retained Cleary Gottlieb. Leo Gottlieb would describe this as 'a major development in the firm's history,' as it accounted for significant firm revenues and enhanced the firm's reputation in international legal practice.

In his history of the firm, Gottlieb also detailed the firm's personnel as of December 31, 1975, after 30 years of practice. The New York office had 295 individuals, including 103 lawyers. Paris was Cleary Gottlieb's second largest office, with 62 persons, including 24 lawyers. Third was the Washington, D.C. office with 49 individuals, including 19 lawyers. The Brussels office employed 40, including 17 lawyers. The firm's smallest and newest office in London had just 13 employees, which included four lawyers.

Late 20th Century History

Two events in the late 1970s significantly influenced the legal profession. First, the U.S. Supreme Court ruled that professional restrictions on advertising violated First Amendment rights of free speech. Soon some lawyers, doctors, dentists, and other professionals began heavily advertising, just like other businesses. Second, two new periodicals, The National Law Journal and The American Lawyer, began publishing articles on law firm finances and management and began ranking America's largest law firms, based on either their gross revenues or their number of lawyers. That information facilitated experienced lawyers ('rainmakers') moving to more profitable firms. Those legal developments, combined with new federal laws, numerous mergers and acquisitions, new business startups, and a rapidly growing economy in the 1980s, led to the rapid and broad expansion of many U.S. law firms.

As part of those trends, in the 1980s Cleary Gottlieb increased its international practice with its first two Asian offices, first in Hong Kong in 1980 and then in Tokyo shortly after the Japanese government in 1987 first allowed foreign lawyers to practice. Overall, the firm grew from 194 lawyers in 1986 to 243 in 1990, and at the same time hired more paralegals and support staff. It increased its number of women attorneys from 42 in 1986 to 63 in 1990 and minority attorneys from seven in 1986 to 13 in 1990.

Cleary Gottlieb's gross revenues steadily increased from $100.5 million in 1986 to $181 million in 1989. New associates in 1986 received an average salary of $66,000, while in 1990 they earned $83,000. Likewise, profits per partner jumped from $470,000 in 1986 to $775,000 in 1989.

'Cleary Gottlieb is a rarity among New York's more successful law firms in that it is not a conglomeration of superstars,' wrote Erwin Cherovsky in his 1991 book that compared New York law firms. He added that its 'lawyers have produced a powerful, transaction-driven corporate law firm that has ridden the M & A [mergers and acquisitions] boom and created a boom of its own.' Cherovsky's comments were based on Cleary Gottlieb's status as one of the few large law firms that maintained its traditional 'lockstep' compensation plan that paid partners on the basis of seniority, not their individual efforts as 'rainmakers.'

The American Lawyer in July/August 1998 ranked Cleary Gottlieb as America's 11th largest law firm, based on its 1997 gross revenues of $341 million. Its profits per partner were $1,060,000. The following year the firm slipped to number fifteen, with 1998 gross revenues of $366 million and profits per equity partner of $1,075,000.

Cleary Gottlieb played an important role in the increasingly globalized economy of the 1990s. For example, in Europe the firm represented The Walt Disney Company and SVP Finance as they and several other banks and law firms worked together to save EuroDisneyland, the Paris theme park operated by EuroDisney that lost $923.3 million in about 18 months. Cleary Gottlieb also assisted the Khrunichev [Russian] State Research and Production Space Centre that negotiated with Lockheed to build the International Space Station, one of the joint projects between the former Cold War enemies. In 1998 Cleary Gottlieb opened its Rome office, becoming only the third American law firm to have an office in Italy at the time.

Although Cleary Gottlieb did not have a Latin American office, its attorneys based mainly in New York had a significant presence in that area. In 1997 the firm worked on two major Chilean deals involving Linea Area Nacional Chile and Distribucion y Servicio. After years of filing reports for Telebras, the Brazilian holding company that controlled the state-owned telephone system, Cleary Gottlieb in 1998 again represented Telebras as it was split into 12 private phone companies. Along with Davis, Polk & Wardwell, a firm that represented a banking consortium, Cleary Gottlieb then helped the new companies meet the requirements of the U.S. Securities and Exchange Commission so they could gain listing on a stock exchange. Consequently, the International Financial Law Review in February 1999 recognized Cleary Gottlieb as its International Equities Team of the Year for Latin America.

In Asia Cleary Gottlieb also was a major player. For example, in the 1990s it started a Korean practice. In 1999 the firm represented Newbridge Capital Limited when that company acquired 51 percent of Korea First Bank, while the remaining 49 percent continued to be held by the Korean Government. The law firm also represented Daewoo, a Korean company that owed $5 billion to foreign creditors. Cleary Gottlieb's lawyers worked from their base in Hong Kong, traveling to South Korea to negotiate these and other deals, unlike some American law firms which opened offices in Seoul.

Not everyone celebrated these international deals and the globalized economy aided by big law firms like Cleary Gottlieb. A strange mixture of labor unions, environmentalists, and human-rights activists protested the influence of multinational corporations and the support given by the World Trade Organization, the World Bank, and the International Monetary Fund. Nonetheless, privatization of former government-owned businesses continued in many nations, as did many mergers and acquisitions. After $2.7 trillion worth of mergers and acquisitions were completed in 1999, Business Week on February 28, 2000 ranked Cleary Gottlieb as the tenth major law firm in M & A based on its 89 deals worth $397.5 billion.

As corporations merged and grew larger, so did some law firms, the best example being the merger of London's Clifford Chance with New York City's Rogers & Wells and Germany's Puender, Volhard, Weber & Axster, which created the world's largest law firm with almost 3,000 lawyers. However, Cleary Gottlieb's Managing Partner Peter Karasz in early 2000 said his firm had no plans for any such international merger and probably would reject any offers. With about one-third of his firm's attorneys based overseas, Karasz in the January 4, 2000 Financial Times said: 'It's hard to say never [to a merger with a European firm] but we don't have any such thing in mind, given the length of time we have been in Europe and our strengths there. We don't anticipate merging with any other firm because we don't know any other firm that would suit us.' Thus began the new century and millennium for Cleary, Gottlieb, Steen & Hamilton as it faced plenty of challenges, ranging from competition from other large law firms to the challenges inherent in converting to a new European currency (the Euro) and a fast-paced electronic economy based on the Internet.

Principal Competitors: Simpson Thacher & Bartlett; Skadden, Arps, Slate, Meagher & Flom; Sullivan & Cromwell, Shearman & Sterling.

Cleary, Gottlieb, Steen & Hamilton History

Key Dates:

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