By the time you read this, US law firm Dewey & LeBoeuf may no longer be with us. As Lawyer 2B went to press, the firm was scrambling to unload its London trainees to other City firms, while half the senior management in the US had already jumped ship.
Dewey in the doldrums
The recriminations will go on for a long while. How on earth could a $935m (£580.77m)-turnover firm fail? And if Dewey can fail, can others? Should prospective trainees be worried about their futures in an increasingly precarious industry?
Don’t panic. Dewey is a special case. It was the product of a merger between two major Wall Street firms, but the merger hid the size of the debt that the Dewey side had been piling up through its pension scheme. When the recession hit, its revenue slumped, but it continued to pay huge amounts to newly hired partners on a guaranteed basis – all of which was a recipe for disaster.
Fundamentally, the collapse of Dewey was based on bad management decisions, such as continuing to recruit senior personnel on expensive packages.
Big firms think small
Over the past couple of months both Clifford Chance and Herbert Smith have made associate redundancies. Clifford Chance has axed 13 associates in capital markets and Herbert Smith 51 jobs, with 23 fee-earner jobs in corporate alone.
The line from Clifford Chance is that it would normally have lost mid-level associates through natural attrition. But of course, it makes economic sense to retain the cheaper newly-qualifieds.
Readers of TheLawyer.com were cynical, with one posting: “The sheer hypocrisy is startling. CC demands teamworking skills and a desire to work in a collegial environment from its applicants and then it fires a bunch of associates because cheaper labour is available.”
On the face of it, this looks like good news for the current generation of trainees. However, the moves made by Clifford Chance and Herbert Smith hint at a more profound structural change taking place.
“Large trainee intakes are premised on a bullish market,” comments another poster. “Currently, business does not match trainee intake levels and associate attrition remains low due to economic uncertainty. Yet firms still need a large number of trainees to provide cheap labour as associate salaries are unsustainable. The whole system is rotten.”
In other words, getting a job offer from a top City firm does not mean a safe career path. Keep your eyes open.
Collyer Bristow in Rangers wrangle
Lawyers and the media make a combustible mix, but a combination of lawyers and sport can surpass all narrative expectations.
City firm Collyer Bristow has been spending the past couple of months in a face-off with Duff & Phelps, the administrators of Rangers FC. Duff & Phelps has accused the firm of ”deliberate deception” in relation to the advice former partner Gary Withey (who was also Rangers’ company secretary) provided on businessman Craig Whyte’s unsuccessful bid for the club. However, Collyer Bristow has reacted furiously to these claims and is standing by its former partner.
This dispute is bitter, protracted and very, very public. Don’t expect a resolution any time soon.
Government loses rag with hack attack on Harbottle
Most of the media attention on the House of Commons Culture, Media and Sport select committee’s phone-hacking report in May was focused on Rupert Murdoch being described as unfit to run a public company.
However, the report made for fascinating reading for many of the legal players involved.
The committee discussed extensively the roles played by News International’s (NI) former legal manager Tom Crone and London law firm Harbottle & Lewis.
Harbottle was employed by NI in 2007 to review internal emails following the claim of former royal reporter Clive Goodman that hacking was widespread. In August last year Murdoch himself criticised Harbottle for making a “major mistake” in underestimating the scope of the scandal. The firm hit back immediately with a public statement, saying: “The firm rejects News International’s self-serving view of the firm’s role in events.”
For a law firm to slam a former client is rare indeed, but then being involved in the phone-hacking inquiry is something that could put your corporate reputation on the line.
Harbottle argued that the remit of the original mandate, to review the emails, was drawn too narrowly for it to be able to investigate the wider implications. The select committee agreed with the firm. “The letter sent by Harbottle & Lewis to News International at the conclusion of the review is […] tightly worded and does not suggest the granting of a clean bill of health,” the report said.