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3 June 2002
Wouldn't life be wonderful if law firms adopted the Ronseal slogan and did 'exactly what it says on the tin'? If Clifford Chance was following this nugget of wisdom, its West Coast practice would by now have at least 100 lawyers, a hefty score of laterals and still be scaring the hell out of those rival firms which were apparently "absolutely terrified" when the magic circle giant first opened for business on 1 July 2002.
Yet here we stand, nearly a year and a half on, and the deafening roar of head-spinning hype that accompanied Clifford Chance's Californian launch seems to have dwindled into little more than a squeak.
So just what has been going on out there on the West Coast? Is the practice delivering on its many ambitious plans? Has it reached its goal of integrating into the rest of the magic circle firm? And, most tantalisingly, where is Tower Snow, the Pied Piper figure and ex-Brobeck Phleger & Harrison chairman, who led 16 partners and a clutch of associates to Clifford Chance last year?
Ironically, the pre-merger Clifford Chance would not have dreamed of landing on the West Coast.
Before the Rogers & Wells deal, Los Angeles firm Latham & Watkins was one of a number of firms mooted as a potential merger partner. But despite its successful East Coast operation, Latham at that time did not quite tally with Clifford Chance's New York ambitions.
In fact, it was a small group of legacy Rogers & Wells partners, led by the then managing partner for the Americas region James Benedict, that carried a torch for the West Coast.
"It was done for a number of reasons," says one source. "The opportunity came up, New York was very keen and London felt that it gave the US more oomph. But at the same time it gave the East Coast an ally. The thought was that getting into the West Coast at a low price would trade up New York's position."
During the financial year that the deal with Snow was being brokered, Clifford Chance US (ie New York and Washington DC) turned over £240m. That is equivalent to a quarter of the firm's overall revenue for 2001-02. Yet the US still lagged behind the firm's biggest-billing office, London, which that year reported £412m in turnover.
With a book of business reputedly worth £45m, Fortune 500 technology bellwethers Intel and Cisco as clients and the much talked about Zen-like charisma of Snow, the West Coast haul gave New York leverage.
One partner says: "The strategy did and still does make sense. California is the fifth-largest economy in the world. It expanded the firm's US presence, and while technology is down at the moment, it's still a good sector to be in."
As well as this, the core group of ex-Brobeck securities litigation partners, with their expertise in acting for issuers, fitted snugly with New York's underwriter-led practice.
Bringing up the rear of the East Coast supporters was London managing partner Peter Charlton. It has always app- eared that Clifford Chance's Californian dream was the brainchild of Charlton.
While Charlton undoubtedly brokered the deal, the firm's global head of corporate David Childs was originally handed the mandate from Peter Cornell, then the firm's chief executive officer. (The title was later changed to 'managing partner' to reflect the firm's step away from corporate newspeak.)
The timing of this turn of events could not be more fascinating. Cornell had just won out against Charlton in a hard-fought election for the firm's top spot.
According to well-placed sources, Childs was Charlton's chief supporter during his election campaign, and as a lawyer told The Lawyer: "Childs ran a very anti-Cornell line at the time."
Since then, Childs' role as Cornell's right-hand man has been formalised when, in a volte-face on previous anti-corporate branding, the global head of corporate was named chief operating officer.
However, in early 2002, fresh from the election, Cornell brought Childs to the US to peruse the initial stages of the West Coast move.
Childs, though, became caught up in acting for Philip Morris, alongside Wachtell Lipton Rosen & Katz, on the $5.6bn (£3.29bn) merger of Miller Brewing Company into South African Breweries.
It was at this point that the mandate was handed to Charlton.
"That's always puzzled me," says one lawyer. "[Charlton] is a very good lawyer and a very smart cookie. Did Cornell do this as an insurance policy: if it succeeds it shows that he chose the right person to delegate it to, but if it goes wrong it's that person's fault?"
Certainly, Charlton's task was not without its difficulties. The original vote on 17 May was pulled because the number of Brobeck lawyers slated to join Clifford Chance kept oscillating wildly. From a reported figure of 35 Brobeck partners, the actual number on which Clifford Chance lawyers were asked to vote was much less. (Eventually, 17 partners were voted into the firm.)
Even after the vote took place, Charlton was faced with salving nagging issues such as integration, pay and, as reported by The Lawyer (3 June 2002), concerns over whether Snow would stay long enough to see the thing through (see box). With worries about Snow stemming predominantly from London partners, the lawyer did what he does best: he launched a blistering charm offensive, during the course of which he won over the perennially cynical UK contingency.
So far so good
Although the two-year point is expected to be a watershed for the West Coast, the office has already posted its first set of results: for 2002-03, it reported around £30m in revenue.
That level of revenue after just three-quarters of a year is impressive, especially given that much of the first three months were spent on more practical matters, such as securing space for its four offices in San Francisco, Palo Alto, San Diego and Los Angeles.
The West Coast certainly helped buoy up US revenues. Taking out California, US turnover for 2002-03 reached £205m, signalling a 15 per cent drop on the previous year. But including the West Coast contingent, the fall was a less alarming 2 per cent.
West Coast managing partner and a member of the Americas management Jim Burns declined to comment on the offices' financial results, but did say: "In the first year we started up and running from a dead stop in July. I think the progress we've made is remarkable."
How the revenue has translated into profits is less clear. What is known is that a 200-point profit pool that certain West Coast partners were entitled to upon reaching budgetary and integration benchmarks was not paid out. Based on figures published in The Lawyer 100, the pool would have been worth £1.5m.
It is understood that Snow, Burns, co-head of securities litigation Michael Torpey and securities litigation partners Chris Vejnoska and Karen Johnson-McKewan were entitled to the bonus.
Also in terms of remuneration, the West Coast is a top-heavy group. Of the original 17-strong Brobeck group (two Clifford Chance partners have since relocated to the West Coast), between five and six partners are at plateau (ie 100 points).
At least another three partners are paid at 80 or more points. In addition to that is payment for the offices' 52 associates, administrative staff, property, IT and the potential that the West Coast may have had to stump up a percentage of firmwide costs - it all starts to add up.
One source close to the firm said that other partners were jittery about costs associated with the office, which in the first four months of operation were said to be high.
However, the progress that the West Coast has made since then, say sources, means it was not dilutive to the overall bottom line.
What is staggering about the West Coast practice is the sheer volume of deals its lawyers there have been working on. Naturally, securities litigation dominates; and true to its word the firm has worked with the likes of Intel as well as scoring a high-profile case defending Nike.
In terms of cross-selling, Burns said there have been more than 100 situations where work has either been referred to or from the rest of Clifford Chance.
But why a previously very vocal office seems to be keeping so quiet about the amount of work it is doing is a mystery. Clifford Chance West Coast should be shouting it from the rooftop. On cultural and client integration, Burns says: "We're still working on it. We have certain goals we still want to achieve. This firm is so spread over the globe that it isn't a simple task. It's more than we anticipated, but we're working the East Coast with Europe and with Asia, where we're doing a lot with China."
Corporate, as well as intellectual property, remain a priority for the office. At present it does have two corporate partners in San Diego-based Faye Russell and Maria Sendra, and they are winning work that has included an initial public offering, which is a scarcity for any law firm at the moment.
But the truth is that the office has not yet made any laterals. The lockstep issue has been mooted as a possible barrier to recruiting M&A heavyweights, for example.
But as Burns points out, Clifford Chance does still have a provision to award additional points on top of plateau for the right lawyer, something that was endorsed last week (28 October) when, overall, partners at the firm voted in favour of awarding extra point status to US partners. (The finer details of the partner compensation review, in which Torpey is involved as a member of the committee, still have to be tweaked after the management narrowly missed gaining a two-thirds majority from legacy Clifford Chance partners.)
Burns says: "We do want people, but we want to grow in the right way. Our goal is to grow with quality." A profitable venture
Compared with profits per partner at other leading West Coast firms such as Orrick Herrington & Sutcliffe and Wilson Sonsini Goodrich & Rosati, which reported averages of £513,000 and £472,000 respectively, Clifford Chance was significantly ahead at £644,000.
Burns also argues that with Clifford Chance's top of lockstep, which last year reached £734,000 ($1.2m), the firm is challenging other firms in the region in terms of remuneration.
But one source close to Clifford Chance says: "Lockstep at Clifford Chance has become an icon to not talk about other things."
So what other impediments are there? Does the sheer size of Clifford Chance, for example, mean it is difficult to get partners voted in quickly?
"I don't see that as a problem," says Burns. "We have firms in California where you have to meet every single partner. It's exhaustive."
Could it be the recent multimillion-dollar law suit launched against Snow and Clifford Chance by former Brobeck members that is giving potential laterals the collywobbles?
Or could it simply be, as Burns says, that the firm is holding out for quality?
The fact remains, though, that Clifford Chance has failed to attract a single lateral since opening 16 months ago.
Whatever the reason, this is just one of a number of issues that is overshadowing an office that has clearly made progress. Although the firm concedes that it still has some way to go, highly praised individuals such as Burns and Torpey are nevertheless credited with pulling it in the right direction.
The next step must be to cast off any anchors that are dragging down the West Coast and let the achievements of the many talented lawyers shine through.
|They seek him here...|
| Tower Snow has enjoyed a prolific career on the West Coast. From 16 years at Orrick Herrington & Sutcliffe, where he served as head of litigation, he then left to establish the San Francisco branch of New York's Shearman & Sterling. In 1995 he moved across to Brobeck Phleger & Harrison, where he became chairman after just three years. |
Snow's eventual exit from Brobeck was dramatic; it came when he was expelled from the partnership as news of the Clifford Chance deal permeated the market.
If Clifford Chance partners did initially have worries over how long Snow would stay at the firm, as reported in The Lawyer last year, it appears these fears have been quelled. There are rumours that Snow (and possibly other members of the Brobeck team) signed an agreement that would see him stay at Clifford Chance for two years. Whether this deal, if it exists, was a pure lock-in deal or a guaranteed-profits package is not clear.
Jim Burns, managing partner of the West Coast practice and member of the Americas management group, declined to comment on any "internal arrangements". He does say, though, that the end of the two-year period is a benchmark for the office. "We plan to be here for much longer than two years," he says. "But two years signals the ramp-up phase in establishing and reaching the initial build-out of the office."
Ironically, it seems relations between the Brobeck faction and its original East Coast champions hit a bump in the road relatively early on.
A seminal point, say sources, was the reported lunch that Snow convened with a room-busting group of around 20 legal recruiters.
In the true spirit of Clifford Chance, this lunch was Snow's own grand gesture. But not only was he throwing down the gauntlet to his West Coast rivals by hiring an army of headhunters, Snow was also sending out a signal to his East Coast partners that said: "I've arrived."
However, this broad-brush, and some would argue crude, approach to hiring did not, it seems, go down well with his East Coast cousins. They favoured a more personal one-on-one method of recruiting. The view was that Snow was flooding the market and effectively 'siccing' the headhunters on each other.
As one lawyer says: "I think that [Snow] is a visionary and a fine lawyer, but I'm not sure that his priorities were the same as Clifford Chance's. I think his priorities differed." Curiously, Snow's role at the firm seems to have morphed compared with when he first joined.
In Clifford Chance's original press release, dated 30 May 2002, announcing the Brobeck laterals, it read: "The new West Coast practice will be led by Tower Snow."
And yet internally, the line is that Snow is now taking a more back seat role at the firm. "I don't see it as that," Burns emphasises. "[Snow's] role is different here than it was at Brobeck. He's still visible."
In recent weeks, Snow has been visiting the firm's New York offices and some of the Asia-based practices, as well as carrying on his duties in introducing Clifford Chance to new clients. It is also understood that Snow has gone back into fee-earning - a sensible move given Clifford Chance partners' ever-shortening fuse concerning individuals' billing rates.