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President-elect Barack Obama may still be deciding who will make up his Cabinet, but Washington, D.C., lawyers are already licking their chops in preparation for an administration that will undoubtedly make federal regulation a top priority.
Last week, Legal Times talked to leaders at three D.C. firms with noted regulatory practices to get their take on what areas will be the most active and how their firms plan to capitalize on the increased scrutiny from federal agencies.
ARNOLD & PORTER
Thomas Milch has served as chairman of Arnold & Porter since 2007.
Legal Times: On the regulatory front, how does an Obama administration affect Arnold & Porter and what are some of the more closely watched regulatory areas right now?
Milch: We expect there will be increased regulation, and we have longstanding expertise in many of the [regulatory] fields, so we see it as a sign of good things to come. I think financial services regulation, antitrust regulation, health care, environmental regulation and internal investigations in general are going to be some of the most active areas with this new administration.
LT: Are there any sleeper regulatory areas to watch out for?
Milch: I don't know if there are really any sleepers. I mean, maybe consumer products regulation might be less visible, but I'm not really sure I'd call it a sleeper.
LT: Are you planning to add lawyers to some of the firm's regulatory areas to deal with the expected increase in regulation?
Milch: Last year, we added individuals to the financial services regulation practice and individuals into the health care field, so that process has already started for us. We began to address what we saw as becoming some of the more active areas. We are, and will continue, to look at opportunities to add depending on where we see things going.
LT: Does the firm have plans to bring in lawyers from the outgoing Bush administration?
Milch: We are actively looking at possibilities in that regard.
LT: With increased regulation, are you expecting there to be more competition from other firms outside of Washington, D.C.?
Milch: Absolutely. Without a doubt there will be an increase in the efforts from firms, whether they're D.C.-based or not, to get involved, and we expect to see continuing activity in that regard. Having strong practices in those regulatory fields is a fundamental element now for law firms, and some of the other firms that have been here a long time have very strong regulatory practices. We don't expect that to change.
LT: Will you be moving people from other areas like the corporate practice area at the firm into the regulatory areas in the firm?
Milch: I think, as a practical matter, given the expertise clients expect from firms for their matters, I don't think that's going to be a factor for us.
HOGAN & HARTSON
J. Warren Gorrell Jr. has been the firm's chairman since 2000.
LT: Have you ramped up your hiring plans in the regulatory areas?
Gorrell: No, not really. Nothing out of the ordinary. I think we continue to feel that it's critical to have a very substantial presence in the regulatory practice, but I don't think we're doing anything special. But we are always looking to enhance our capabilities in all these areas.
LT: Do you expect more competition for regulatory work or that some firms may shift away from corporate work to focus on regulatory areas, given the economic climate?
Gorrell: I think that people might consider doing that. But in virtually all of the regulatory areas, you need a critical mass and scale. It's really difficult for somebody who's not already a player in the major regulatory areas to do that easily.
LT: What do you expect to be the hottest regulatory area?
Gorrell: I think there are several. Health care, energy and climate change, obviously taxes and financial services regulation. I think there will be a lot of activity in national security and trade. ... All of those areas have been the subject of pretty open discussion that there's going to be activity there. ... From my perspective, we have very substantial regulatory [practices] in all those areas, and we have a large legislative practice that operates as a team, so that's the way we're really approaching all of these things.
LT: Is there a sleeper area that you expect to come back to life in this new administration?
Gorrell: One area might be environmental, beyond climate change. Most of the focus that people have on environmental is on climate change ... but I think just a general focus on all the areas that sort of get swept up in environmental law could be an area where there could be a focus.
LT: Do you expect any of your lawyers to leave for the regulatory agencies now that Obama is president-elect?
Gorrel: Yes, but I couldn't tell you who. You know [partner] Christine Varney has been actively involved in the transition. Just like any other time when one party's been in control for eight years, there's always a lot of interest in people joining the government when there's change. And of course there's a huge amount of enthusiasm around Obama and that probably increases the interest.
LT: Anything else you'd like to add?
Gorrell: I just think the point about having both regulatory and legislative is an important one. Having strong capabilities in both of those, actually, is a big advantage.
LT: Do you have a particular piece or type of legislation in mind where you plan to need both of those capabilities?
Gorrell: No. Just in general, we would expect an increase in Democratic control of the Congress and a change in the administration to result in more legislative initiatives.
COVINGTON & BURLING
William Massey, chairman of the firm's energy practice, also served as a commissioner of the Federal Energy Regulatory Commission from 1993 to 2003.
LT: What are you expecting from the Obama administration on the regulatory front?
Massey: It's pretty clear the big emphasis will be on climate change legislation and the confluence of climate change legislation with green technology proposals. The administration is proposing a $150 billion program, which it's characterizing as a jobs program for renewables and green technologies to build out the transmissions grid. So there'll be a lot of activity in the area of renewables. [Obama] says he will propose aggressive renewable portfolio standards for utilities. Renewables and biofuels will be very hot, especially advanced biofuels. So we can expect a good deal of activity on Capitol Hill in the energy-environment space, and a fairly sharp shift from the proposals of the Bush administration.
Regarding energy regulation, and with more focus on the FERC, my view is that the movement to perfect competitive electricity markets will continue. Markets are the national policy for wholesale power, and I expect that to continue. Whoever serves at FERC under President-elect Obama I expect to focus on continuing improvements in markets to produce more consumer benefits, especially more gains in efficiency. I expect to see continuing work to integrate renewables into the grid.
But I expect the FERC agenda to be steady as she goes, except I do think the commission will move in the direction of making sure that our nation's aspirations with respect to green power can be met. We need to have the infrastructure in place and the rules and policies to incentivize that, and actually I think that program works very well with well-structured electricity markets.
LT: How is your practice group preparing for this change in emphasis, or what you refer to as that "sharp shift" from the Bush administration's policies?
Massey: Any lawyers who work in the energy field have to focus on the elephant in the living room, which is climate change and climate legislation, because climate policy and energy policy are joined at the hip. So we're all starting to get smarter on climate policy, at Covington and at other firms as well.
LT: You say biofuels will be a hot area; how are you preparing for that?
Massey: Well, we're trying to get smart on biofuels. There are some pretty aggressive targets for biofuels. President-elect Obama's position papers during the campaign spoke of the importance of the continuing march towards biofuels. So it's a very interesting area, and very interesting from a legislative and regulatory perspective. And I think there will continue to be startups and existing companies that will be focused on developing the new advanced biofuels of the future. And I think those fuels raise a variety of issues that a diversified practice can advise on.
LT: Will you be hiring more lawyers?
Massey: We expect our practice to grow and it is growing, not only in traditional energy regulation but also in the sharp intersection of energy and environmental policy. We are attracting green technology clients who want to understand what's coming and who will thrive in the energy economy that comes along with the Obama administration. And of course in the midst of this, we're all aware that there is less capital available in the world since the financial crisis, and I expect the energy industry will have to compete for that along with other industries but I expect the energy industry will do quite well in attracting that capital.
LT: How many lawyers do you expect to hire in your group in 2009?
Massey: I can't give an estimate but it's certainly growing. We're really focused on those lawyers with traditional energy regulatory skills but also those with expertise and gravitas in the green industry.
LT: Against the backdrop of the financial crisis, and a downturn in the corporate practices, do you expect to see increased competition for regulatory work?
Massey: It really depends on the law firm's model. At Covington, our great strength is that we're so diversified in terms of the range of practices we cover. Covington has its early foundations in very strong regulatory practices, which provide very strong industry expertise that can then be accessed by its corporate lawyers when working on transactions. The firm has a very solid bankruptcy practice and a very active litigation practice. I think that law firms that are well-diversified like Covington will continue to do fine in a down economy. And in the energy practice, we are very excited about what we expect to be the coming legislative and regulatory proposals in the energy and environmental areas. There'll be a lot of activity and we believe we are well-positioned to attract clients in those areas.
LT: Will your firm move lawyers from the corporate practices to regulatory practices?
Massey: I think both will work hand in hand, as we always have. Our corporate lawyers that handle transactions have quite a knowledge about regulatory and vice versa. We put together teams on transactions, depending on what that transaction requires. Last year, for example, we worked on the TXU transaction [where two private equity groups, Kohlberg Kravis Roberts & Co. and Texas Pacific Group acquired TXU Corp. in the largest leverage buyout in U.S. history] and secured all the regulatory approvals needed for that transaction and gave considerable environmental advice, and introduced Capitol Hill to the transaction. We put together teams of lawyers, and frankly I would not expect corporate lawyers to move to regulatory or vice versa because we simply work closely together.
