TechnoLawyer: Law Office Management

Today's issue of TL Answers contains these articles:

Ay Uaxe, How to Migrate From GroupWise to Exchange: Two War Stories

Steven Silberman, Review: Dragon NaturallySpeaking From a Solo's Perspective

Kurt Walberg, A Fan of Multiple Monitors Offers Some Tips

Richard Schafer, Review: SimplyFile for Archiving Client-Related Email

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Originally published on August 30, 2011 in our free SmallLaw newsletter. Instead of reading SmallLaw here after the fact, sign up now to receive future issues in realtime.

With Hurricane Irene just recently having rumbled her way through my adopted home state of North Carolina — including making a mess of our beautiful Outer Banks and eastern regions — disaster preparedness (or business continuity to use a popular euphemism) is on my mind. Watching Irene's progression up the east coast and the trouble she wrought en route, I imagine it must be on some of your minds too.

When we talk about technology, we often engage in a facile and glib debate over operating systems, Angry Birds, and coolness. God knows, I'm a card-carrying member of that club — new and cool is my red meat as regular readers of my SmallLaw columns well know.

But in deference to all the law firms who are digging out from Irene, I want to use this issue of SmallLaw to address how to get your firm as ready as possible for the next Irene Mother Nature throws your way. Below you'll find my top five tips.

1. Go Paperless

The discussion over going paperless in a small law firm often centers on efficiency, collaboration, ethics and mobility, all of which are important facets of the decision.

However, it's not until you wake up one day, however, and your entire office suite is under six feet of water and your paper files have turned to pulp that paperless' importance as a disaster preparedness measure become clear.

Sure, you may only need offsite digital copies of everything once in a career — but the day you need it, you really need it. Offsite backup is a good start, but if only 25% of your key data is digital, you are still sunk when the high waters arrive.

2. Sever Your Servers With Hosted Communications

Floods and natural disasters are good reasons to consider embracing hosted communications — meaning both your email and your phone system. If your communication hubs run out of server boxes in your office and they're under water, they're useless. Sure, some backup strategies can help mitigate this porblem, but if I were running a small firm today, I'd get rid of all my servers — applications, email, documents, telephone — the whole shebang. With Hosted Exchange, Google Apps, and VoIP phone systems, it has never been easier.

3. Centralized Document and Practice Management

According to the ABA's 2011 Legal Technology Survey, the adoption rate of document and practice management software in small law offices remains dismal.

Anecdotally, in my work, I find that law firms regard this software as somewhere between an unnecessary expense and a "nice to have." Much like the decision to go paperless and host your communications, if you imagine having to run your firm the day after a disaster (with all of your employees working remotely from their homes), the decision to centralize document and practice management is not a luxury, but a necessity.

Frequency of need is not the same as degree. You only need an emergency room once in a while, too, but if you didn't have one nearby the day you needed it, you'd be in big trouble.

4. Laptops Over Desktops Plus Smartphones and iPads

I frequently talk with lawyers who debate whether to buy their staff laptop or desktop computers, citing that desktops are cheaper and more powerful. A disaster should convince you that mobility trumps the marginal cost savings and power of desktops.

Laptops have another advantage. When the power goes out, they continue running for a few hours. But even laptops have their limits. Smartphones (and 3G iPads) tend to have a much longer battery life, and can access the Internet via your carrier. Some smartphones can even serve as a mobile hotspot. Law firms have issued smartphones to their lawyers for many years. Some have begun to issue iPads as well.

5. Home Office Essentials

For your lawyers and staff to be productive working from home while your office is underwater, in addition to a laptop they will need an internet connection robust enough to run their VoIP phones, a headset with a microphone, a printer, and a scanner.

Whether you provide this equipment for your staff or require that they provide it for themselves is a matter of your compensation and training systems. Either way, if you want your staff to work rather than just watch Sports Center until your office reopens, they will need the tools to perform their work.

Conclusion

I hope you and your firm survived Hurricane Irene with nary a puddle. But I also hope this article prompts you to prepare for the unthinkable.

Written by Erik Mazzone of Law Practice Matters.

How to Receive SmallLaw
Small firm, big dreams. Published first via email newsletter and later here on our blog, SmallLaw provides you with a mix of practical advice that you can use today, and insight about what it will take for small law firms like yours to thrive in the future. The SmallLaw newsletter is free so don't miss the next issue. Please subscribe now.

Originally published on August 2, 2011 in our free BigLaw newsletter. Instead of reading BigLaw here after the fact, sign up now to receive future issues in realtime.

From Ocean's 11 to X-Men, great teams consist of a diverse cast with unique skills. You can't make a team of quarterbacks any more than you can make a team of linemen or even shortstops with 3,000 hits. But in large law firms there are no formal positions. To help you build a 1998 or better yet a 1927 Yankees from the law students wrapping up their summers, the midlevels flooding your human resources department, and the partners at competing firms dropping hints at your squash club, this issue of BigLaw identifies the five types of lawyers you need among your ranks to win that championship ring — and boost your profits per partner.

1. The Commander

A leader is anyone with a big enough office or tall chair, but a Commander actually makes the trains run on time. If your junior associates have to ask basic questions like research deadlines, someone at the top is not doing his job. Good Commanders foresee and immediately put an end to potential problems, believing they are responsible when a subordinate fails.

Where to Find Them

Look for straight talk and a lack of ambiguity. When you ask about leadership positions they've held, they'll talk less about the organization and more about what they accomplished.

Potential Problems

The Commander needs to be able to issue marching orders without approval of a committee or anyone's blessings. Make it clear who is in charge of a matter, what authority they have, and then step back. Mixed signals and confused leadership hurt morale and turn simple projects into quagmires.

2. The Strategist

In litigation, the Strategist is a master of procedure and evidence, able to predict the opposition's strategy. On the corporate side, they will spot pitfalls in a deal structure or poor executive incentives. In estate planning, they can sniff out who needs a pre-nuptial agreement, and when sibling rivalries will put the family business in jeopardy.

Where to Find Them

Strategists love games, but hate leaving things to chance or other people. If he's a poker player, he doesn't think in terms of the hand in front of him (too much luck involved), but how his playing style will hold up over the next five years. Chess enthusiasts can be a red herring — the rules are too esoteric and the skill doesn't always translate to other strategic situations.

Potential Problems

Strategists seek out high level competition, which can leave them vulnerable to seemingly inferior strategies much like a Cold War military machine is vulnerable to guerillas. A behavioral economics background will make this debility less likely, but don't be afraid to bring in the second-string to play defense while the strategist plays offense.

3. The Super Genius

An LSAT score of 167-168 automatically qualifies one for Mensa membership. Virtually everyone at a top law school is a "genius." The Super Genius is a different species — the same way 6'2" is tall, and then there's Shaq.

This person combines top-notch analytical skills with a memory like a sponge, enabling them to dig through information and concepts to amazing depths your average smarty-pants can barely fathom. Judges quote these lawyers in their opinions (see e.g., Eugene Volokh).

Where to Find Them

Super Geniuses exist in every field. But in the humanities it's unclear who's who. The 170 and 120 IQ English majors earn the same 4.0. Improve your odds at landing a Super Genius by looking for people who excelled in chemistry, computer science, math, physics, and perhaps biology if you're desperate.

Potential Problems

Super Geniuses have a terrific work ethic, but not for mundane matters other lawyers can handle. They need to be on the cutting edge. If you don't have an appellate case for the Super Genius to work on, don't assign her to a document review. Instead, give her an article or amicus brief — or send her to an advanced NITA course. The prestige she brings your firm will offset her lower billable hours.

4. The Puck

Despite the negative stereotypes it perpetuates, there are times when you will need to frustrate opposing counsel, derail a deposition, or make a witness succumb to a case of word salad on the stand. The person you want for these necessities is The Puck. Think Bud White in LA Confidential — but with a law degree.

There are bulldogs, jerks, and a whole lexicon of colorful terms for people who rely on blunt force. They can win cases, but it's messy and potentially disastrous. Pucks never need to explain to the judge the foul language in a deposition transcript; they're the ones who tricked opposing counsel into the filthy rant.

Where to Find Them

He is equally social and competitive. While some people tout their accolades or win-loss records, Pucks are in it purely for the fun of a good challenge. When asked about his interests, he'll discuss process more than results.

Potential Problems

Avoid giving him busywork or false deadlines. He has the ultimate BS detector. Rather than appreciate the extra billable hours and experience, he'll sow discontent among his peers.

5. The Workhorse

The Workhorse is the type of person you don't have to ask to pull an all-nighter updating a filing that isn't due for a week. Instead, she stays at the office until the entire firm's workload is cleared, or she's ordered to leave. She likes to work weekends. Don't ask why, just count your blessings.

Where to Find Them

Socially awkward without any intriguing or compelling qualities, she works hard but lacks ambition. Look for extracurricular activities with no top leadership positions.

Potential Problems

After billing 27,000 hours in eight years, she'll come up for partnership. But, odds are she lacks leadership and management skills. Make sure she always has a more senior partner above her running the show.

Conclusion

Each of these lawyer types is extremely rare, possessing knowledge or skills beyond the typical law review editor. Though seemingly mundane, even the Workhorse's endurance makes her an outlier. That's the point though. You're not interested in a wild card wonder 1997 or 2003 Florida Marlins, you're building a dynasty. Not everyone at your firm needs to fit into one of these types nor should they. But you need a few of each. And as hard as it is to find someone who fits one of these molds, it's even harder to mentor them and keep them at your firm. Good luck. You'll need it.

Written by BL1Y of Constitutional Daily.

How to Receive BigLaw
Many large firms have good reputations for their work and bad reputations as places to work. Why? Answering this question requires digging up some dirt, but we do with the best of intentions. Published first via email newsletter and later here on our blog, BigLaw analyzes the business practices, marketing strategies, and technologies used by the country's biggest law firms in an effort to unearth best and worst practices. The BigLaw newsletter is free so don't miss the next issue. Please subscribe now.

Originally published on September 21, 2011 in our free BigLaw newsletter. Instead of reading BigLaw here after the fact, sign up now to receive future issues in realtime.

Partners and associates alike hate the drudgery of tracking their billable hours. Clients hate paying exorbitant hourly rates, always wondering whether that associate really spent 1.6 hours composing a letter, or 23 hours reviewing documents. We all agree that hourly billing stinks — except that all other pricing models (known as "alternative fee arrangements") seem to stink more — at least from the perspective of large law firms.

As some industry insiders have pointed out, fixed or flat fees present two concerns — whether the fee is too high, and whether the fee is too low. And, of course, the risk of the latter "concern" makes the thought of fixed fees a source of terror for partners. No one wants to become the next Brobeck or Howrey. Lawyers hate risk so despite its flaws, the billable hour is a soft, fluffy guarantee that in the unfortunate event a CD of documents ends up taking 200 hours to review instead of 100, the client will assume most of the cost of the extra time.

Enter the Internal Hedge Fund …

Fear not! Some of the great minds here at BigLaw have developed a way to make flat fee billing work for your firm, giving you a devastating competitive advantage over your rivals in an increasingly zero sum game.

We call it the "Internal Hedge Fund" (although, technically, it's more like "My Law Firm's Proprietary Trading Desk"). This new though admittedly not rocket science business model kills two birds with one stone.

The First Bird: Offsetting the Risk of Flat Fee Arrangements

Let's start with a few basics — what exactly is a hedge fund? I asked Michael Nelson who practiced law at Willkie Farr & Gallagher, moved in-house, switched gears and worked at a proprietary trading desk, and now manages hedge fund Thea Capital.

"The definition of a hedge fund has become very broad," says Nelson. "Traditionally, a hedge fund employed a strategy that literally 'hedged' investments so that, for example, if you were short on one position, you would be long on another. Nowadays, the term is used to describe a huge variety of funds, trading in just about anything, that are very actively managed."

Nelson contrasts the various hedge fund strategies with the "buy and hold" position usually taken by mutual funds. In addition, he says, hedge funds are characterized by a certain fee structure, which is usually "2 and 20," or a formula that compensates managers 2% of the assets under management and 20% of the fund's profits for the year.

As you may have gathered from news coverage of our current economic climate, a certain degree of mystique surrounds hedge funds. One reason could be their history of opaqueness. According to Nelson, hedge funds were once subject to very little oversight, although the regulatory environment is changing. In addition, hedge funds can be very risky, but also extremely financially rewarding.

But the sexiest facet of the hedge fund, perhaps, is its exclusivity. "The hardest thing about starting a hedge fund is raising the money," says Nelson. Traditionally, this meant that the hedge fund was the province of the uber-wealthy, or anyone talented enough to drum up the capital required to play high-stakes investment poker.

Enter the Internal Hedge Fund for large law firms. In our model, clients pay fees for litigation and other hard-to-price legal services up front, thereby supplying your firm with lots of cash. Maybe you price to perfection, maybe you underprice, maybe you overprice. No matter. Your money (i.e., the fees that your clients pay up front) is already hard at work being actively invested by the small team of experienced hedge fund managers with a proven track record working full-time at your firm or if you prefer at their own hedge fund with your firm as the sole or principal investor.

Given the potential returns, the risk — or reality — of offering legal services a little more cheaply than you would have liked is offset by the benefit of having all that paid-up-front "straw" to spin into hedge fund gold.

What About Ethics Rules?

But wait, you say — is this model ethical? Can you collect an up-front fee for deposit directly into your firm's internal hedge fund trading account before having performed a single legal service? The ethical ramifications of alternative fee arrangements have certainly been (and continue to be) explored, but our model contains an added wrinkle in that it contemplates completely bypassing retainers and client trust accounting.

According to legal ethics maven Eric Cooperstein, the answer is a definitive "maybe." "It depends on the jurisdiction," explains Cooperstein. For the most part, he says, lawyers can take a flat fee for certain kinds of defined services. In fact, it's routine in practice areas like bankruptcy and criminal defense. Charging up front for a specific service or a "package" of services should not be problematic Cooperstein adds, as long as the fees are "reasonable" under the factors defined in the ABA's Model Rules governing billing arrangements.

Hedge fund manager Nelson points out a few additional ethical pitfalls for adopters of the the internal hedge fund model to avoid — don't allow clients to direct investments, don't forget to thoroughly vet your internal hedge fund managers … and so forth. In fact, says Nelson, having the law firm vouch for the sterling credentials of its fund managers might greatly benefit the "branding" of the fund if you decide to invite others to invest.

The Second Bird: Put Underemployed Associates to Better Use

Nelson ends our interview with a clever idea. Your firm could make use of some of those underemployed associates, thereby killing the second bird.

"Lots of associates sit around at times twiddling their thumbs," Nelson notes. "Instead, they could conduct equity research." Think of it as the large firm equivalent of timesharing a jet. Your firm has lots of talent, some of which simply lies fallow in a down economy. Why not put it to good use? The downside — could these assignments result in higher attrition as associates given a taste of Wall Street leave the law to pursue a career in finance? It's hard to say, but we're hedging our bets.

How to Receive BigLaw
Many large firms have good reputations for their work and bad reputations as places to work. Why? Answering this question requires digging up some dirt, but we do with the best of intentions. Published first via email newsletter and later here on our blog, BigLaw analyzes the business practices, marketing strategies, and technologies used by the country's biggest law firms in an effort to unearth best and worst practices. The BigLaw newsletter is free so don't miss the next issue. Please subscribe now.

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.

How to Receive BigLaw
Many large firms have good reputations for their work and bad reputations as places to work. Why? Answering this question requires digging up some dirt, but we do with the best of intentions. Published first via email newsletter and later here on our blog, BigLaw analyzes the business practices, marketing strategies, and technologies used by the country's biggest law firms in an effort to unearth best and worst practices. The BigLaw newsletter is free so don't miss the next issue. Please subscribe now.

Originally published on September 20, 2011 in our free BigLaw newsletter. Instead of reading BigLaw here after the fact, sign up now to receive future issues in realtime.

August is usually a quiet month for large firm laterals, but this year it was hot, hot, hot. We'll highlight two trends — law firms entering new markets overseas and beefing up their talent in hot practice areas.

Kirkland's Hong Kong Coup and More International Expansions

The four big UK Magic Circle firms (e.g., Slaughter & May) and American firms like Baker & McKenzie and White & Case have long believed in having local presences around the world. We may be seeing a renaissance in that mindset as firms look at opportunities. And they're not necessarily playing nice about it.

The headline move for August was certainly Kirkland's grand entry into Hong Kong. In one fell swoop, Kirkland rounded up three corporate partners from Skadden (leaving eight), three from Latham, and one from Allen & Overy (along with a senior associate who is joining as a partner). Kirkland's bold move instantly gives the firm a significant presence in the market.

Kirkland immediately caused ripples as Skadden turned around and lured banking lawyer Clive Rough out of his recent retirement from Freshfields and moved in M&A partner John Adebiyi from London. Skadden has stated that it remains committed to the Hong Kong market, so additional moves should not surprise anyone. But as we noted last month, associates who aren't taken along with their departing partners need to be on layoff alert.

Other firms targeting international expansion include:

• Locke Lord and Troutman Sanders in London.

• Dewey & LeBoeuf in Kuwait (the firm already has four offices in the Middle East).

• Sheppard Mullin in Beijing by hiring a Squire Sanders partner.

Bird & Bird may or may not have been actively looking to expand in Germany, but the opportunity to pick up the Hogan Lovells Hamburg media team couldn't be passed up. That firm has been hemorrhaging lawyers in certain markets since last year's merger.

Another firm that saw an opportunity it couldn't resist was Linklaters, which made its first Paris lateral hire in four years, picking up a capital markets partner from Gide Loyrette Nouel. As we saw last month with Cravath's hire of Christine Varney, even the firms that have traditionally avoided lateral hires have reconsidered that strategy.

Serendipitously, LegalWeek just published a retrospective on Proskauer's foray into the London market, which highlights just how difficult it can be to break into a developed market (subscription required).

The Patent War Results in a Talent War

The HogLove merger was more opportunistic than anything, but Google's $12.5 billion acquisition of Motorola Mobility in August demonstrates why firms constantly seek partners in big-ticket practice areas.

Only Google knows all the reasons for its acquisition, but patents certainly played a role. As Bloomberg noted, when companies spend that much money on patents, smart law firms spend big bucks on patent lawyers.

Unfortunately, these firms must also compete with the technology giants' inhouse legal departments, which can offer options, better working conditions, and the opportunity to boss around former colleagues. Apple recently created a position for a head of IP litigation, which it filled with a former Sun lawyer. Apple also hired a new chief patent counsel from HP.

The Ghost of Ma Bell

Getting closed out of deals has always been a compelling reason to change firms — or, as David Boies most notably did, start your own. Rather than share fat telecom-deal fees, Carl Northrop decided to hang his own shingle, along with some of his former Paul Hastings partners, creating Telecommunications Law Professionals.

Much like Boies' frustration with Time Warner keeping him out of doing a deal for the Yankees, Northrop and company were none too happy about not being able to go up against the $39 billion AT&T/T-Mobile merger, which is spewing off tons of antitrust work now that it's been opposed (the FCC hired Renata Hesse from Wilson Sonsini in May to oversee the matter).

Low Margin Practice Areas and the Super-Boutique

On the flip side, once in a while a firm decides that it has a practice area it no longer wants to support. Not surprisingly, it's never M&A, IP, regulatory, or the like. It's always something far more plebeian and lower margin. CMS Cameron McKenna is exiting the immigration business, jettisoning 15 lawyers to Fragomen "an international firm specializing in immigration law." If you missed the link in BlawgWorld, read Jordan Furlong's take on this move, which he dubs the "rise of the super-boutique."

We've always felt that large firms only maintained immigration and similar practices as favors for high-net-worth individuals and major international corporate clients. These folks have finally realized that the help they need shouldn't be at the rates they're forced to pay.

Conclusion

Large firm moves aren't always about interpersonal relationships. They're often about the same economic drivers that motivate the business world — seeking out untapped markets, be it geographic or new services. This profit-driven model of law firms is also driving similar attitudes in partners, as they're constantly on the prowl for the BBD (Bigger, Better, Deal). This business first mindset results in a lot of churn as firms and partners try to maximize their profits with little long-term commitment.

Written by Law Shucks, which curates and analyzes data on large law firm lateral hiring.

How to Receive BigLaw
Many large firms have good reputations for their work and bad reputations as places to work. Why? Answering this question requires digging up some dirt, but we do with the best of intentions. Published first via email newsletter and later here on our blog, BigLaw analyzes the business practices, marketing strategies, and technologies used by the country's biggest law firms in an effort to unearth best and worst practices. The BigLaw newsletter is free so don't miss the next issue. Please subscribe now.

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.

How to Receive BigLaw
Many large firms have good reputations for their work and bad reputations as places to work. Why? Answering this question requires digging up some dirt, but we do with the best of intentions. Published first via email newsletter and later here on our blog, BigLaw analyzes the business practices, marketing strategies, and technologies used by the country's biggest law firms in an effort to unearth best and worst practices. The BigLaw newsletter is free so don't miss the next issue. Please subscribe now.

Originally published on September 6, 2011 in our free BigLaw newsletter. Instead of reading BigLaw here after the fact, sign up now to receive future issues in realtime.

I recently received an assignment from BigLaw editor Neil Squillante: "The recent volatility of the stock market may prove a harbinger of another recession. In fact, some pundits think a recession has already begun. How will large law firms handle a double dip?"

Have large law firms learned from Great Bloodletting of 2009-2010? Are they better equipped to handle another downturn? Or will they again resort to the scorched-earth layoff strategy that resulted in 10,000 or so top-of-class law school graduates becoming a lost generation?

Well, who better to pose these questions to than Bruce MacEwen, a master of law firm economics and the erudite thinker behind Adam Smith, Esq. and JDMatch? Like a Federal Reserve chairman, MacEwen takes a measured view of the situation.

We Do Not Control Our Destiny

"The kind of volatility we're seeing in the stock market is, I believe, perfectly rational" (he says professorially), given that "we're being buffeted by good news and bad news of great magnitude on what seems like an accelerating time-frame." That said, he adds, "I would not take whatever the stock market does any given week or any given month as meaning it has any unusual forecasting prowess. There doesn't seem to be a solid trend established and until that comes I think it's predicting nothing but uncertainty, which we're acutely aware of already."

As to whether disaster lurks around the bend, MacEwen delivers an informed maybe. "Six months ago I would have said a double-dip recession was extremely unlikely," he notes. "Now I think it's a 50/50 bet." Why? Well, among other things, lots of Americans are still underwater on their home mortgages, and unemployment is not only historically high, but appears poised to remain that way. We face perhaps a decade of 'supra-normal' unemployment," MacEwen says. "Many lost jobs are simply not ever going to come back."

What does this mean for law firms? According to MacEwen, "the most important thing to remember about our industry is that we do not control our destiny." Thus, "when consumers stop buying and businesses stop investing in growth and hiring, our clients are hurt," both by the decline in top-line revenues, and the simple reality of decreased workloads, which result in a decreased demand for legal services. And, of course, that also means that, if they go into a second recession, "we will inevitably go with them."

What About Large Firms Jobs?

Even if growth declines, we probably won't see "stealth layoffs," or the kind of bloodletting we saw a few years ago, right? Wrong according to MacEwen.

If a second recession comes our way, MacEwen believes, more layoffs are bound to follow. "Large firms are certainly better equipped to weather a recession now than in 2007," he opines, "but they have also learned the virtue of quickly paring capacity to match demand, and that's a lesson no one has forgotten." The pressure to maintain profits per partner is on, he points out, and law firms will do what they must to keep numbers up.

But doesn't that mean law firms are leaner, meaner, and better at staffing nowadays?

"Firms are as lean as I've ever seen them," MacEwen says. "Partly this was because the recession forced them to address deadwood which they had the luxury of letting accumulate in richer times. They won't be that undisciplined again, I predict." In addition, he notes, firms are configuring themselves to be more responsive to economic flux by exploring "all kinds of different career models" — beyond just outsourcing and the use of temporary attorneys.

MacEwen lists non-partner track associates, flex-time, and "onshoring" (the use of lawyers in inexpensive cities like Dayton, Fargo, and Wheeling) as staffing alternatives that many previously bloated firms now use to stay lean and nimble.

At the end of the day, however, MacEwen reminds us of the bleak truth. "Nothing will prevent layoffs on whatever scale it takes to get capacity in line with demand," he says. "We have lost our virginity on that score."

A Postscript Arrives at the Same Conclusion by Another Means

Apparently, my questions touched a nerve in MacEwen. After my interview and upon further reflection, he published an article — A Double Dip Recession? — in which he changed his analysis though not his conclusion. MacEwen now believes that although the last recession officially ended according to the National Bureau of Economic Research, other metrics suggest we're still in a recession. Thus, a double dip recession won't have any impact among large firms. In other words, welcome to the new normal — don't expect large firms to allow capacity to exceed demand even if that means layoffs, stealth or otherwise.

How to Receive BigLaw
Many large firms have good reputations for their work and bad reputations as places to work. Why? Answering this question requires digging up some dirt, but we do with the best of intentions. Published first via email newsletter and later here on our blog, BigLaw analyzes the business practices, marketing strategies, and technologies used by the country's biggest law firms in an effort to unearth best and worst practices. The BigLaw newsletter is free so don't miss the next issue. Please subscribe now.

Originally published on July 26, 2011 in our free BigLaw newsletter. Instead of reading BigLaw here after the fact, sign up now to receive future issues in realtime.

For most, June in the large law firm world means the arrival and settling in of summer associates. But for partners, it is often the culmination of a quarter taken exploring opportunities and finalizing plans to move on. Client work tends to slow down slightly, partnership distribution checks have cleared, business plans for the year are finalized (and ready to be slapped into a headhunter's marketing package), so thoughts turn to moving on. Let's see who couldn't resist the spring wanderlust.

Staying in the Family

In our view, some of the most interesting moves are those within the large firm ambit. Two of June's finest intra-moves were Michael Fitzgerald bringing about a dozen corporate and securities lawyers from Milbank to Dewey & LeBoeuf, immediately providing the firm with the Latin America presence it has lacked. Dewey is about twice as big as Milbank, but Milbank had comparable profit-per-partner and probably a broader international footprint, albeit without the depth.

Of course, these moves don't always come down to money. Personal relationships are, in part, responsible for Fitzgerald's move to Dewey. The firm's former chairman, 92-year-old Leonard Joseph, is his father-in-law. Also, Fitzgerald's son, Reid, spent three years as a college intern at Dewey, and will attend Columbia Law School in the fall.

At the end of June in a trend that continued in July, O'Melveny lost three regulatory partners in DC to Allen & Overy, which was quite a surprise because Magic Circle firms have never been known for strong DC presences. The halls of power in our nation's capitol have traditionally been trod only by the whitest of shoes, so the addition of Charles Borden, Chris Salter, and Barbara Stettner shows some groundbreaking expansion.

Feeding Frenzy

When the large firm belly can't get fed by its own denizens, it goes searching farther afield for choice fare. Boutiques are plum targets these days for two types of acquirors — large firms looking to snag talent on the cheap or to shore up an underserved market (geographic location or a practice area), and small- to mid-sized firms trying to find safety in numbers.

Cozen O'Connor gutted IP litigation boutique Cohen Pontani Lieberman & Pavane, taking 19 of the NY firm's 27 lawyers. Five former Cohen Pontani lawyers came aboard as partners: Thomas Langer, Lance Lieberman, Martin Pavane, Thomas Pontani, and Edward Weisz. No word on what happened to the eight men out, although the firm was expected to dissolve, and its Web site now redirects to Cozen O'Connor.

Saul Ewing is also in "go big or go home" mode. It acquired five partners and one associate from Boston's Dionne & Gass. Dana Lanzillo, Don Lussier, Sally Michael, Richard Gass and Joanne Robbins joined as partners. Even for a boutique, that seems unbelievably highly leveraged, so we'll keep an eye out for word of associates not included in the deal. The fate of those left behind is another trend that we'll hit next month for its tragic repercussions.

Greener Pastures

For some, a large firm is no longer the right fit. The classic move out is the Jump In(House). At partner levels it's either a top legal job or out of law entirely to the coveted investment-banking world, as Cleary's former managing partner, Mark Walker did last month, when he joined Lazard in Paris.

The newest trend shows that lawyers may not be as risk-averse as believed. Weil Gotshal IP studs Matthew Powers (despite some recent rough patches) and Steven Cherensky have decided to blaze their own path, leaving the security of the GM Building (yes, we know they didn't sit in NYC) for their own startup practice, Tensegrity Law Group. They'll focus on contingent-fee plaintiff work, although at some point they may go fully over to the dark side, a la John Desmarais, the former Kirkland & Ellis partner who last year founded his very own patent troll by buying a bloc of patents and selling covenants not to sue.

The Revolving Door of Government Work

Another macro trend to keep an eye on this quadrennium is the inflow/outflow of our brothers and sisters in public service. We're about a year out from another election cycle, so quite a few people will be leaving who don't plan to stick around for the next term. Six lawyers left government in June for partnerships at major firms, but we expect that number, and their profiles, to rise in coming months. And, of course, there are some earlybirds. Kathryn Ruemmler will join the administration from Latham & Watkins to serve as White House Counsel.

Another large firm alum who could have a significant impact on that election cycle is Anthony Herman, the Covington partner who was recently named GC of the Federal Election Commission.

Conclusion

As alluded to above, July has some alarming trends, which I'll report on soon here in BigLaw.

Written by Law Shucks, which curates and analyzes data on large law firm lateral hiring.

How to Receive BigLaw
Many large firms have good reputations for their work and bad reputations as places to work. Why? Answering this question requires digging up some dirt, but we do with the best of intentions. Published first via email newsletter and later here on our blog, BigLaw analyzes the business practices, marketing strategies, and technologies used by the country's biggest law firms in an effort to unearth best and worst practices. The BigLaw newsletter is free so don't miss the next issue. Please subscribe now.

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