Originally published on October 18, 2011 in our free BigLaw newsletter. Instead of reading BigLaw here after the fact, sign up now to receive future issues in realtime.
Law firms, lawyers, and recruiters all expect the best in any lateral move. The firms expect a superstar with a massive portable book. The lawyers expect a better platform — broader footprint (better technology, stronger cross-selling, etc.) on which to display their talent. Recruiters expect fat commissions, usually in the neighborhood of 25% of the moving lawyer's projected total annual compensation.
But sometimes lateral moves don't work according to plan. This month, we thought we'd catch up on recent lateral moves gone awry. And to make this task more challenging, we've avoided the low-hanging fruit. Suits over placement commissions are a dime a dozen. The stories below address some of the more-novel aspects of lateral moves gone wrong.
Look Before You Leap
Chris Gilbert's career was going swimmingly at K&L Gates, but he was happy to field a cold call from recruiter Diane Caldwell who told him he needed to escape from K&L Gates' lockstep compensation structure and move to a firm where his skills would truly be appreciated. According to Gilbert, she spun a tale of becoming a practice leader and making more money. According to Caldwell, he was a big boy — a partner no less — capable of making his own decisions.
Starry eyed, he left K&L Gates for Patton Boggs, but it didn't work out. Gilbert doesn't provide too much detail in his complaint of what went wrong, but the relationship didn't last long. He's now at Bryan Cave and has sued Caldwell for fraud, negligence, breach of contract, etc. She denies any responsibility.
Runaway Bride
Sometimes taking that extra day to think about a move causes a sea change in expectations. Much like a runaway bride, Stephen Kon just couldn't make that walk down the aisle. The SJ Berwin EU and competition boss was all set to move to Milbank Tweed, but at the last minute, he and partner Cameron Firth called the whole thing off. Kon and Firth were pretty well down the path, having tendered their resignations and been voted into the Milbank Tweed partnership.
SJ Berwin has a pretty good reputation, and is well within the top 20 UK firms, but Milbank Tweed is a global behemoth, which would have been quite the culture shock. Kon, as one of the founding partners of SJ Berwin, probably had more of an emotional attachment to the firm — although he was also one of the leads in the aborted merger discussions with Proskauer Rose. Kon is now likely one of the strongest contenders to take over as senior managing partner in the spring elections.
You Can't (Usually) Take It With You
Lawyers, perhaps because we write the rules, enjoy some unique benefits in our mobility. Unlike other professions where non-competes of various strictness may be enforced, lawyers have largely unfettered rights to take their files with them, all under the guise that the client's right to counsel of her choice shouldn't be restricted.
Some limits exist though, so departing lawyers have to make sure they're playing by the rules. Not surprisingly, spurned firms already feel insecure, which can cause them to react angrily when the files, and fees, walk out the door. Just ask Hunter Shkolnik who was sued by his former firm, Rheingold, Valet, Rheingold & McCartney.
Even more rare than seeking a TRO for the return of files as Rheingold Valet sought is an injunction against a lawyer's practicing for a period of time. Philadelphia personal-injury firm Kline & Specter recently sought one against an associate, claiming he had failed to give the required notice. An associate's departure might be one of the few cases in which a court could convince itself that the client still had access to the partners, although this case certainly seemed like a close call.
Making Them Pay
While we can't restrict our clients' access to the counsel of choice (notwithstanding the cases above), firms have figured out one way to keep wanderlusting lawyers around — cutting their retirement benefits. That's what Stroock & Stroock & Lavan did to Michael Perlis, a 20-year partner. Just weeks after taking his securities litigation team to Locke Lord, he sued for the retirement benefits the partnership agreement purported to cause him to forfeit.
Conclusion
Other than personal bonds and loyalty, both of which are apparently in short supply at many law firms these days, very few tools exist to keep a partnership together. It's no surprise that firms like Stroock have created contractual attempts to prevent departures.
Partner departures individually tend to have very little effect on large firms, but they are often early indicators of firms in trouble, and can become self-fulfilling prophecies. Looking back, early departures from firms like Brobeck and Howrey signaled something wrong beneath the surface. Then, people started connecting the dots and speculating. Partners started looking at their own options, worried they'd be left holding the bag, which kicked off the vicious cycle that led to the demise of these firms. One of the benefits of this BigLaw column and the Lateral Tracker is that they enable you to spot these trends early.
Written by Law Shucks, which curates and analyzes data on large law firm lateral hiring.
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