As we close out the year, it’s only natural to reflect on the past 12 months before forging onward to take on a whole ‘nother 365 days of undertakings.
Big Law Business launched on March 5. Below are the most noteworthy stories we’ve published to date, which reflect an editorially selected mix of trend stories, breaking news and video.
For Dentons, the year 2015 marked the most transformation the law firm — or the industry as a whole, for that matter — has ever seen. The firm kicked things off in January when it announced that it would merge with China’s largest law firm, Dacheng Law Offices, to create what would become the largest law firm in the world by headcount.
After Dacheng, Dentons acquired firms in Australia, Singapore and McKenna Long & Aldridge in the United States. Next up: a new project to invest in technology that influences the practice of law. Not done there, they brought on Newt Gingrich and threw a party for their new public policy group where Howard Dean already practiced. In October, the firm hired 21 lawyers in Italy from DLA Piper, in November it picked up a 34-lawyer law firm in Luxembourg, and this month, Dentons announced that it had added firms in Mexico and Colombia.
Altogether, the firm is slated to have 7,400 lawyers around the world when its most recent Latin America tie-ups finalize in early 2016. Compare that to the beginning of the year before its Dacheng tie-up, when it had 2,600 lawyers.
On Oct. 19, three former executives of the failed New York law firm Dewey & LeBoeuf avoided prison terms after a jury failed to agree on whether they lied to investors in the run-up to Dewey’s demise, the largest law firm bankruptcy ever. The three-year-old case was closely watched in the legal community because it revealed details about factors that influenced the firm’s downfall, including the accounting methods and broader business decisions made by the three defendants: Dewey’s executive director Stephen DiCarmine, chief financial officer Joel Sanders and chairman Steven Davis. The hung jury was a rare conclusion after an unusually long trial of five months. Opening arguments began in May and the mistrial was declared in October, after a number of lawyers and jury members involved in the trial suffered from fatigue. The most recent reports from earlier this month indicate that prosecutors are working toward a resolution with Davis, while they would still like to retry DiCarmine and Sanders if they don’t accept plea deals.
One of the most popular videos we published was that of Richard Rosenbaum, chair of Greenberg Traurig, who told us in October that “today, some firms are doing the same thing” as the Dewey defendants, referring to their financial management of the firm, including paying out pricey pay guarantees to partners irrespective of performance. The comments came at a critical time, as the Dewey jury deliberated and many in the industry eagerly awaited news of a verdict. At the time, Rosenbaum suggested that Dewey was “just unlucky” before allowing only that “maybe they made a number of extra bad decisions.” He told Big Law Business’s Josh Block that “if they did 10 things wrong, there are plenty of firms today doing eight of them.”
The legal tech community was buzzing about the November acquisition of litigation analytics company Lex Machina by Lexis Nexis. One source familiar with the deal told us that Lex Machina had been shopped around the market for months and was looking to be bought between $30 and $35 million, with annual revenues of between $5 and $8 million. We caught up with Lex Machina co-founder Mark Lemley who said that the company is looking to expand its analytics capabilities, which has traditionally focused squarely on IP litigation, to other practices such as bankruptcy, labor and employment and securities. It isn’t often that tech acquisitions cause a stir in the legal community, but this one did. The estimated size of the transaction, in the tens of millions, speaks to the narrow market for legal tech services.
One of the biggest legal business stories of the year is one that never ended up happening: Pillsbury Winthrop Shaw Pittman, which has been on the lookout for a merger for years, re-engaged talks with Chadbourne & Parke of Manhattan. The development was significant because Pillsbury had experienced considerable changes throughout the year, starting in March, when a large group of corporate lawyers in its New York office joined Winston & Strawn. In May, the firm announced that James Rishwain, who had led the firm as chair for more than a decade, would step down in 2016. In September, the firm announced that it had named David T. Dekker as the firm’s next chair.
After news broke of a potential union with Chadbourne in September, sources went quiet for several months and finally, two people who had direct knowledge told us in November that the deal was off. However, that doesn’t mean that the two firms won’t be back at the negotiating table in the new year. After all, Jami McKeon of Morgan Lewis & Bockius told Big Law Business in November that her own firm had entered, exited, and then re-entered discussions with Bingham McCutchen before completing its asset acquisition of the Boston firm last year. Will these two firms follow the same trajectory?
In a December feature story, Big Law Business told the tale of how some law firms that sustain departures or financial slowdowns are feeling the heat from negative media coverage, which can exacerbate a firm’s woes. This fall, after the Boston Business Journal published a story on dozens of lawyers who have exited Locke Lord Edwards, the firm’s chair Jerry Clements wrote a scathing letter to the editor that accused the publication of having “a very narrow, unsophisticated and uninformed perspective.” Big Law Business offered more details about a tumultuous merger that led up to the wave of exits. We also interviewed Clements and others in the industry about the role that media plays in such a situation. “If you’re not careful, even if you have really good business, market perceptions can affect you, just like they affect companies’ stock market evaluations every day,” explained Nixon Peabody CEO Andrew Glincher. “You need to be mindful of that.”
Remember this summer when K&L Gates saw more than 90 partners hit the exits? What was the upshot of that? K&L Gates chairman Peter Kalis told us in July that the turnover was the result of a firm strategy to promote a large number of associates into a robust rank of non-equity partners, while also giving “rational” performance evaluations that can lead to high turnover within the non-equity group. So basically, a lot of non-equity partners were being bumped out, while a new army of associates were being transitioned into the non-equity class, according to Kalis. We followed up on that train of thought with Harvard law professor David Wilkins, who studies the legal profession. He said that the two-tier partnership model has been coming under pressure recently: “When the market went in the downturn, firms found themselves with a lot of non-equity partners who had very little incentive to actually go out and get business, who were being paid a lot of money.” Sure enough, there have been other firms that have scrapped the two-tier model and the law firm BakerHostetler in July said that it would do away with its own.
To reduce overhead, many big law firms have opened back-offices to staff administrative personnel in one consolidated, low-rent hub. But law firm leaders must weigh the large capital outlay to open such a center with the long-term savings. Bingham McCutchen chair Jay Zimmerman pointed to its back-office expense as one factor that contributed to the now-defunct Boston firm’s poor financial results in 2013, placing its business decision to invest in the Lexington, Kentucky back-office under sharp review. We spoke with a number of real estate experts and law firm leaders about the pros and cons about such an investment. At the time, we counted that out of the top 25 most profitable law firms, Latham & Watkins appeared to be the only one that had moved to launch a back-office to place support staff. But Mark Klender, a consultant at Deloitte who now writes for Big Law Business, told us that the fate of Bingham’s Lexington, Kentucky office should not be factored into any analysis of other law firm leaders considering such a move.
In March, the California Supreme Court admitted Hong Yen Chang to the bar, almost 90 years after his death and 125 years after it first rejected his application on racial grounds. But what, if anything, was the purpose and value of this posthumous admission? Jeffrey Bleich, a Munger Tolles & Olson partner who helped file a petition for Chang’s admission, said that California has an important economic relationship with China.
There is no way to track exactly how often technology-assisted review is being used in eDiscovery, internal investigations or due diligence, but by all accounts it grew increasingly popular as more software companies upgraded their products and boasted about predictive coding capabilities. In March, U.S. Magistrate Judge Andrew Peck wrote that “the case law has developed to the point that it is now black letter law that where the producing party wants to utilize TAR for document review, courts will permit it.” (To view the opinion on Bloomberg Law, click here.)