Byrne in the USA: Latham protected by US reach

Latham takes credit crunch hit in its stride

The latest criticism levelled against Latham is that it may be more exposed to the negative effects of the credit crunch than many of its rivals because of its large debt finance practice.

As one New York partner put it last week: “Latham has done an excellent job in the past two years, but it’s one of the firms that looks as though it could suffer most from the credit crunch. Its history is that it’s built on the debt markets. Potentially it could be in for a real bumpy period.”

Yet last week Latham got the nod from a different tier of the legal spectrum, when DLA Piper‘s ambitious new global chair of corporate and finance Roger Meltzer claimed it was the Latham model he was looking to emulate in order to build his team in New York (The Lawyer, 8 October).

How does Latham respond to these compliments, backhanded or otherwise, and criticisms? Its global co-chair of M&A Chuck Nathan for one takes them in his stride. Coming off the back of a string of meaty deals and third-quarter league tables from Thomson Financial, which put the firm top for global M&A by value, he can probably afford to.

Nathan knows that with around 350 lawyers in New York, compared with more than double that at, say, Skadden Arps Slate Meagher & Flom, Latham is still seen by Wall Street’s giants as relative small fry. But that discounts Latham’s ace in the hole – its office network that feeds it mega-deals from around the country.

“Later this year our Washington DC office should surpass Los Angeles as our second-largest office, then there’s San Diego, Orange County and Silicon Valley,” says Nathan. “Purely on New York business we’re not there yet, even though we’ve doubled in size in the past six years. But our business model is different. Add it all up and we’re a top-tier firm.”

So although Latham’s rivals claim it does not appear on the largest deals in New York (although it did act for BC Partners on its $16.9bn (£8.27bn) acquisition of Intelsat), outside New York it represented Harrah’s Entertainment on its $28bn (£13.7bn) leveraged buyout, featured in the $12bn (£5.87bn) merger between Chicago Mercantile Exchange and CBOT and acted for The Carlyle Group on the $10.3bn (£5.04bn) acquisition of HD Supply. Not a bad hit list.

Nathan also claims it is not just Latham’s geographical spread that is diverse. It is, he claims, far more of a diversified practice than people think. It may have been built on debt, but more than 50 per cent of the practice is litigation. When the deals really start to go sour, watch Latham’s finance lawyers flip into restructuring mode. Nathan even takes the criticism about the firm’s potential debt market exposure on the chin.

“That’s probably a fair comment,” he says. “We may be harder hit in that market. But we still think we have a pretty good strategy.”

The word, I think, is unfazed.

Stoneridge class action has everybody acting

A securities law case that has dragged in what appears to be every lawyer in town reached the Supreme Court last Tuesday (10 October).

The case, Stoneridge Investment Partners v Scientific-Atlanta, is a class action that centres on whether shareholders should have the right to sue a company that does business with one that is found to have committed fraud. The case is widely seen as having explosive implications for businesses outside the US should the court find for the petitioners.

As one UK magic circle partner puts it: “If this comes out the wrong way it will significantly affect the way companies do business with companies listed in the US.”

At the case’s heart is a St Louis cable company, Charter Communications, which was found guilty of accounting fraud between November 1999 and August 2002 by artificially inflating its earnings via sham deals with suppliers. It was fined almost $150m (£73.41m) in an earlier class action.

The current case began when one of Charter’s shareholders, Stoneridge, sued Motorola and Scientific-Atlanta (now owned by Cisco Systems), which were third parties to the original fraud and, in Stoneridge’s opinion, also guilty of fraud.

The defendants claimed that a third party could not be found liable for “aiding and abetting” fraud if they had no duty to disclose, relying on a 1994 Supreme Court decision, Central Bank v First Interstate Bank. Although a federal judge, and later a federal appeals court, agreed, leave was granted for the appeal, which began last week.

At this stage it might be easier to list the lawyers that are not involved in Stoneridge. In the months leading up to the trial both sides have embarked on campaigns to garner as much support as possible, with some 30 amicus briefs filed. In no particular order, these include former chairmen of the Securities and Exchange Commission (for both the petitioners and respondents), 19 university professors (again, split between both sides) and seven high-profile New York corporate lawyers, including Skadden Arps Slate Meagher & Flom legend Joe Flom. In this case all seven are for the respondent, or what the magic circle partner above called “the right way”.

Early indications last week were that the Supreme Court would come down on the “right” side and not extend legal liability for shareholder actions of this kind. But it will be several weeks before anyone knows for sure.

Bingham’s Oriental express

So, Bingham McCutchen. Two Japanese mergers in less than six months: has it gone crazy? we ask.

Apparently not. In fact, not only has Bingham not gone international takeover mad, it’s been planning its rampant Asian expansion for years.

Way back in the mists of the 1990s, or 1997 to be exact, Bingham (then the much smaller Boston-based Bingham Dana & Gould) merged with one of the top Japanese firms in the US, Marks & Murase.

Ten years down the line and the time was right for Bingham to have its own people on the ground in the country, hence this year’s deals with New Tokyo and Tokyo International Law Office.

All of which points to one thing, encapsulated perfectly by the managing partner of one of Bingham’s rivals. “Mid-sized firms such as Bingham have figured out that the world is closing in and the question is, what are they going to do about it?” he muses.

Heller skelter

Last month (The Lawyer, 24 September) we reported that Heller Ehrman was planning to open in Shanghai. When it opens there later this month it will be the firm’s third office in China and its fourth in Asia.

The move came only months after Heller opened in London (The Lawyer, 22 January). The message was clear: Heller is in growth mode.

Then this: last week Heller slashed 65 support staff jobs. What’s the story? The reality is this. The cuts were all in the US – none overseas – and not only coincided with a period of unprecedented growth at the firm, but reflected it.

Heller’s recent strategy has been to expand across the US and the globe. And the firm’s managing partner Robert Hubbell says it remains committed to doing so.

Hubbell maintains that the cuts do not indicate any retrenchment in the US and do not affect the international part of its business.

Sometimes, unavoidably, you need to prune to continue growing.