825 Eighth Avenue
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Cravath, Swaine & Moore is one of the world's largest and most prominent law firms. Its heritage includes partners such as William H. Seward, one of the founders of the Republican Party who served as President Lincoln's secretary of the State Department. In the early 20th century, Paul Cravath created a modern institutional law firm using what became known as the "Cravath system" that many other large law firms have emulated. Cravath, Swaine & Moore represents many large corporations all over the world in financial transactions, mergers, acquisitions, tax concerns, and other matters. It also has been involved in many high-profile cases. For example, it successfully defended IBM in antitrust lawsuits that lasted from 1969 to 1982 and represented the Federal Deposit Insurance Corporation in its case against Michael Milken. The Cravath firm consistently ranks as one of the top Wall Street law firms based on its size, profitability, and its long-term reputation for high-quality legal services. Although the firm has branch offices in London and Hong Kong, the large majority of its attorneys work out of the home office in New York City. The Cravath firm is a good example of an influential law firm that has expanded internationally without opening branch offices all over the world.
The Predecessor Firms from 1819–1906
In 1819 Richard M. Blatchford began his solo practice in New York City. In the upstate New York town of Auburn, Elijah Miller retired as a judge and then formed a partnership with young William H. Seward in 1823. Both Blatchford and Seward had graduated from Union College and contended against Andrew Jackson's Democratic Party, so they had close ties from the beginning.
In 1826 the Bank of England chose Blatchford as its financial agent and counsel in the United States, which brought in many clients over the next 40 years. About the same time, Blatchford became the counsel to the second Bank of the United States. After that bank's charter expired in 1836, Blatchford became the receiver for some state banks that failed in the Panic of 1837. The Auburn firm merged into the New York City firm in 1854. From 1841 to 1858 the Blatchford firm and then the merged firm were heavily involved in litigation involving the American Trust & Banking Company.
William H. Seward was the most famous of the law firm's early attorneys. He was elected governor of New York in 1838, helped found the Republican Party, and in 1856 and 1860 tried in vain to gain his party's presidential nomination. During the Civil War, he served as Lincoln's secretary of the State Department, a connection that helped his law firm gain the famous Pinkerton security agency as a long-term client. Among his most famous acts on behalf of the United States during this time was the purchase of Alaska from Russia in 1867, which was mockingly referred to by the American public at the time as "Seward's Folly."
After the Civil War, the law firm represented various clients in litigation resulting from the conflict. Some of its postwar clients were railroads, including the Mobile & Ohio and the Pennsylvania Central, that became involved in litigation as the industry consolidated. During the depression that started in 1873, the law firm first contacted J. & W. Seligman & Co., a bank that later became a long-term client that financed railroads. Additionally, in the late 1800s the firm gained more corporations as clients. For example, it helped incorporate the American Tobacco Company in 1890 and represented that company when it acquired smaller businesses on its way to becoming one of the few big corporations in the South.
The Early Cravath Firm: 1906–45
Following the trend of other large law firms around the turn of the century, "litigation became something of a stepchild in the office" wrote Robert Swaine in his firm history. "None of the partners had much enthusiasm for litigation other than that involving corporate reorganization or financial transactions." The firm's clients from 1913 to 1920 included American Hide & Leather, California Packing, Columbia Gas & Electric, Communipaw Steel, Green Fuel Economizer, Hoboken Land & Improvement, International Harvester, New York Talking Machine and affiliated Chicago Talking Machine, James H. Rhodes & Company, and Royal Dutch-Shell Group subsidiaries in the United States. Work for Price, Waterhouse & Company led to the Cravath firm becoming counsel to the American Institute of Accountants.
After World War I, Paul Cravath continued to build his law firm but also became more involved in civic and community affairs. For example, he was a director of the New York Symphony Society, the Metropolitan Opera, and the Juilliard School of Music, and was a founder of the Council on Foreign Relations when it was started in 1921. However, Paul Cravath's main contribution to the legal profession occurred in the early 20th century when he began some innovative changes that not only transformed his law firm but also other large law firms. The so-called "Cravath system" included hiring new law school graduates, training them as associates, and, after several years, allowing the best to become partners. Lockstep compensation was the norm, with partner earnings based primarily on seniority in the firm. Although lateral hiring of experienced lawyers from other firms occurred occasionally, most growth of the big law firms relied on this system of recruiting, internal training, and loyalty to the firm.
The Securities and Exchange Commission (SEC) and new banking and union laws led to more demands for legal services in the 1930s. In his firm history, Robert T. Swaine explained what had happened in the 1920s and 1930s. "The expansion of personnel and the tendency toward specialization, which began in the larger offices of New York and other cities in the early 1920s accelerated during the boom, and, with little hesitation at the 1929 market collapse, continued as depression-induced bankruptcies and New Deal agencies engulfed business and created such demands on the profession that competent legal assistance was at a premium."
During the late 1930s, based on listings in the Martindale-Hubbell Law Directory, Cravath, de Gersdorff, Swaine & Wood at that time had 18 partners and an undisclosed number of associates. Described by Ferdinand Lundberg as a "law factory" that could "grind out standardized legal advice, documents, and services," Cravath served Ford Motor Company, Bethlehem Steel Corporation, and the Chicago, Milwaukee and St. Paul Railroads. From 1928 to 1944 the Cravath law firm worked on 16 railroad reorganizations or receiverships, a continuation of work it had started back in 1875. In 1935 the Chemical Bank & Trust Company chose the firm as its general counsel for its trust departments. The law firm also served chemical and drug companies such as American Cyanamid and Hoffman-La Roche, and its most important newspaper and magazine client starting in 1928 was Time Inc.
Considerable work for the Cravath firm came from securities issues. For example, it represented Kuhn, Loeb & Co.; Bancamerica-Blair Corporation; J. & W. Seligman & Co.; and Union Securities Corporation on securities and bonds issued in the 1930s and early 1940s for General American Tank Car, Armour of Delaware, Consolidated Oil, Douglas Aircraft, General American Transportation, Polaroid, International Business Machines, Coca-Cola Company, Pacific Gas & Electric, and many railroads and other businesses listed in Swaine's book.
The Cravath firm grew in the 1920s, with new offices started in Washington, D.C. and Paris. However, the Paris office closed in 1934 during the depression, and the Washington office also was later closed. In 1944 the firm consisted of 72 lawyers and 118 clerical workers.
Post-World War II Practice
By 1948 the Cravath firm had expanded to 97 lawyers and 166 staff. Economic growth in the 1950s brought even more expansion. To meet client expectations, Cravath lawyers worked very long hours. In 1958, Hoyt A. Moore, the firm's oldest active partner in the 1950s, said in Fortune magazine that he did not need any extra help. "That's silly. No one is under pressure. There wasn't a light on when I left at two o'clock this morning." Similar work patterns continued in the decades ahead at the Cravath firm and some other big law firms.
Cravath, Swaine & Moore was ranked as Wall Street's second biggest law firm, based on the total number of lawyers. As of December 1957, Cravath included 116 lawyers, and only Shearman & Sterling & Wright with 125 lawyers was larger.
One of Cravath's notable achievements after World War II was helping IBM withstand a series of antitrust lawsuits that threatened its breakup. Initiated by the federal government in 1969, the case was finally ended in 1982 when the government admitted that its case was "without merit." Cravath also helped IBM prevail during those years in lawsuits filed by Memorex Corporation, Telex Corporation, Control Data, Greyhound Computer Corporation, California Computer Products, and Transamerica. "The Cravath approach in IBM has become the model for complex litigation at nearly every other major firm," concluded James B. Stewart in The Partners: Inside America's Most Powerful Law Firms.
To represent IBM, the Cravath firm sent as many as 80 attorneys to work at IBM's offices in White Plains, New York, near its corporate headquarters. Associates laboring for three or four years on the case sometimes became discouraged and left the firm. "The loss of associates was far in excess of normal turnover because of dissatisfaction with the narrow experience," wrote Erwin Cherovsky in 1991. Although the law firm gained about $20 million a year in revenues, it was forced to hire outside attorneys, so-called lateral hires, in a move contrary to its firm culture. Cherovsky concluded, "the long, arduous litigation placed a severe strain on Cravath and the institutional basis of its organization."
In addition to the IBM case, the firm handled other high-profile suits. In the 1970s the Cravath firm successfully defended CBS when it was sued for libel by General William Westmoreland, the head of the U.S. Army in Vietnam. It also helped Royal Dutch/Shell Group successfully defend itself against antitrust allegations.
The firm grew from 263 attorneys in 1986 to 305 in 1990. Its gross revenues also increased, from $119 million in 1986 to $213 million in 1989. According to surveys in The American Lawyer, the Cravath firm in 1988 and 1989 led the nation in profits per partner with $1.6 million and $1.8 million respectively.
The Firm in the 1990s and Beyond
In the 1990s big law firms grew even larger, in part because of the growth of their multinational corporate clients and an increasingly globalized economy stimulated by declining trade barriers from agreements such as the North American Free Trade Agreement. However, law firms disagreed on how to provide services for the growing number of cross-border business deals. A few like London's Clifford Chance chose to create a global firm by consolidating with other law firms, resulting in numerous offices worldwide. On the other hand, the Cravath firm and most New York law firms chose to work with local lawyers in joint ventures without creating so many international offices. In 2000 the Cravath firm maintained just two small foreign offices in London and Hong Kong and said it planned no new branches. Cravath's London branch included lawyers who practiced only United States law, while Clifford Chance and some American law firms in London had attorneys qualified in both American and British law.
That lack of foreign offices did not seem to dent Cravath's international growth. In fact, in 1998 most of Cravath's work in mergers and acquisitions was with overseas clients. In the 1990s Cravath assisted in major mergers, including WorldCom acquiring MCI, the Conrail/Norfolk/CSX deal, the AT&T/Lucent transaction, Boeing's acquisition of McDonnell, the Westinghouse/Infinity deal, and the merger between Morgan Stanley and Dean Witter. In 1999 the Cravath law firm ranked as the world's seventh largest merger/acquisition law firm, with a total of 97 deals worth $451.3 billion.
According to The American Lawyer's annual listing of America's largest law firms, the Cravath law firm was ranked number 20 based on its 1999 gross revenue of $350 million. It was also ranked third in the nation for its 1999 profits per equity partner of $2.1 million, and one of the "Winners of the Nineties" from its 37-percent growth in profits per partner since 1990. With its historic record of excellence combined with this recent performance, Cravath, Swaine & Moore seemed well prepared to compete in the rapidly changing globalized economy of the new millennium.
Principal Competitors: Davis Polk & Wardwell; Simpson Thacher & Bartlett; Sullivan & Cromwell; Cleary, Gottlieb, Steen & Hamilton; Wachtell, Lipton, Rosen & Katz.
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