Originally published on August 23, 2011 in our free BigLaw newsletter. Instead of reading BigLaw here after the fact, sign up now to receive future issues in realtime.
Two major stories rocked the large firm lateral market in July — O'Melveny & Myers, and layoffs related to rainmaker departures. It's always interesting to see how the mainstream media explains our world to the outside world. Peter Lattman wrote in the New York Times' Deal Book about the increasing activity and high stakes involved, placing a spotlight on the machinations behind Irving Picard's almost-move from Baker Hostetler.
O'Melveny & Myers: Bump in the Road or Road to Ruin?
Above the Law put it simply enough, "What's Going on at O'Melveny & Myers?" At the beginning of June, the firm had lost at least 22 partners, and then a handful more in July. Not surprisingly, these departures were attributed to a host of innocuous factors — high-profile jobs at clients, which could lead to future work; government service, which would promote the firm's brand; or a polished spin on sour grapes — that the departures were not undesirable thanks to a bad fit or low productivity.
However, observers felt something nefarious was afoot. When Bradley Butwin was appointed chair to succeed A.B. Culvahouse, AmLaw Daily reported that the firm's revenues had dropped last year, although profits per partner were up — due in no small part to reductions in the equity ranks.
There was also speculation of a rift between, depending on whom you asked, the firm's litigation and transactional departments or the legacy OMM partners (mostly litigation) and the lawyers acquired from the O'Sullivan Graev & Karabell merger (mostly corporate) a decade ago. Butwin's appointment should alleviate both of these fears. He's a litigator from OGK.
The real question is whether OMM's departures (around 60 over the past two years, according to one Above the Law commenter) represent the first sign of a troubled firm — another Howrey.
We're not convinced. These shifts seem more in line with Cadwalader in 2009 and White & Case in 2010, both of which suffered massive defections, some more intentional than others.
In 2009, Cadwalader's year got off to a horrible start. Profits per partner fell, the firm basically kicked off the layoff trend, and lots of notable partners left, including Bruce Zirinsky and John Bae for Greenberg Traurig, and John Busillo and Alan Lawrence for Arnold & Porter. But within a year, the ship had been righted and the money train was back on track.
Last year, Latham & Watkins raided White & Case for more than a dozen partners, and many more than that left over the year. Latham was specifically targeting the firm's #2 client, Saudi Aramco, but White & Case has held on after promoting a number of associates, flying in partners from other offices, and slowly rebuilding its ranks.
Similarly, keep an eye on where the Apollo work ends up. Seven of the OMM partners who serviced that huge client decamped to Paul Weiss with two others landing at Weil Gotshal.
Unlike Howrey, where it was clear early on that partners were jumping off a sinking ship (even though the firm, in an utterly classless move, tried to claim many had been pushed overboard), we would bet that OMM is just experiencing a bump in the road. The firm is much bigger and more diversified, geographically and by practice area. We don't anticipate adding it to the Dead Pool anytime soon.
Layoffs and Laterals
Layoffs and laterals sometimes go hand-in-hand — yet another underreported source of layoffs.
When partners leave, they may take a few key associates with them, but certainly not all. Those left behind find themselves in a difficult position, depending on how much work they did for the folks who left, or how niche their practice area was and whether it is something their firms will continue to support.
For example, Hunton & Williams laid off three lawyers and six staffers in London as a direct result of losing corporate partner Paul Tetlow to K&L Gates and energy partners Matthew Williams and John Deacon to Hogan Lovells.
Rara Aves: Cravath's Laterals, and Skadden's Ex-Retiree
They say three's a trend, so what else can we say but that there is a trend of lateral hiring at Cravath? The firm went 62 years without a lateral, but then brought in tax lawyer Andrew Needham from Willkie in 2005, and Richard Levin from Skadden in 2007 to start a bankruptcy practice. We liken these two Cravath laterals to the Yangtze River Dolphin — a species on the verge of extinction but at least with the possibility of reproducing in the future, unlike poor Lonesome George, the last of the Pinta Island tortoises.
Now there's a third Cravath lateral hire, with Christine Varney joining from the Department of Justice. She previously worked at Hogan & Hartson before she joined the DOJ, and was one of the people we thought was notably absent from the National Law Journal's list of the decade's most-influential antitrust lawyers. We suspect she'll make it the next time around.
Less rare, Skadden lured Sheli Rosenberg out of retirement. This was an interesting play for client development, diversity (age and gender), and mentoring.
Conclusion
As Lattman pointed out in Deal Book, lateral activity is on the rise, and the stakes are growing astronomical with $5 million+ signing bonuses becoming increasingly common. Stay ahead of the information curve with the Law Shucks Lateral Tracker.
Written by Law Shucks, which curates and analyzes data on large law firm lateral hiring.
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