Claims that Kaye Scholer is ‘reeling’ are wide of the mark

Rarely has the exit of a single partner polarised opinion as much as that of former Kaye Scholer bankruptcy star Margot Schonholtz, who jumped ship for Willkie Farr & Gallagher last month.

“Kaye Scholer’s reeling from the departure of Margot,” claims one well-placed New York source. “She was their biggest biller last year and the third-biggest the year before. She almost singlehandedly kept the firm busy, feeding its real estate, litigation and corporate teams. There was no one bigger.”

In contrast, a former colleague of Schonholtz during her time at Clifford Chance highlights that, while it is “interesting that she left her entire former team behind”, Schonholtz had “hit her five-year window”.

That barely concealed dig refers to her stint at Clifford Chance between 2000 and 2005, when she left the magic circle firm for Kaye Scholer. According to this former partner, “when she left Clifford Chance her extra units were coming to an end and she could leverage off her previous year’s comp”.

As they say, it is all in the timing. Schonholtz’s boss at Kaye Scholer Barry Willner also says there is something curious about the ­timing of her most recent move. “It’s an odd time to go, as bankruptcy work’s declined generally,” he argues.

That may be so, but the ­management at Willkie are not known for being mugs. And in Schonholtz the firm has not only snared itself one of the biggest names in US bankruptcy circles, but also a partner capable of ­generating well over $20m (£13.51m) a year in fees.

What should be more worrying for Willner and his partners than the exit of a couple of lawyers (Schonholtz left with junior partner Ana Alfonso) is what it says about the health of Kaye Scholer.

“The real concern is, what is Kaye Scholer’s future?” says one New York source. “The senior ­partners don’t seem willing to hand the reins over to the next generation, while the remaining partners in the bankruptcy team just don’t have the business that Schonholtz had.”

It is not a pretty picture, but Willner for one appears unconcerned. “Obviously we wish Margot well,” he says, “but she left with one very junior partner. All of the partners who joined with ­Margot remain. They maintain their practice and very much the same clients, while the practice maintains clients that are ­institutional firm clients.”

Mark Liscio, now co-chair of Kaye Scholer’s 35-lawyer business reorganisation and creditors’ rights practice group, has “very deep client relationships”, according to Willner, while Liscio’s fellow co-chair Mike Solow also ­maintains “a very large practice”.

“There’s no need to go and seek a direct replacement for Margot,” claims Willner.

Liscio’s promotion to co-chair is not the only senior management change at Kaye Scholer. In ­February the firm appointed Solow as co-managing partner alongside Willner. Do not hold your breath, though, for Solow’s assumption to the top job.

“I’ll continue to be co-managing partner and a co-chair of the ­management committee for the foreseeable future,” confirms ­Willner. “Transition’s always good, so at some point in time Mike will take over - there is such a thing as mandatory retirement. But there’s no date as yet.”

Until then Willner, an executive committee member since 1996, is confident that the firm is in good shape, notwithstanding the ­departure of last year’s biggest rainmaker. Our financial results were terrific last year and I can tell you that, judging by where we are now, we’ll definitely have an even better year this year,” he states.

Last year Kaye Scholer’s revenue fell by 4 per cent to $432m, but average profit rose by 2.5 per cent to $1.42m. These might be ­”terrific” results, but even if profit rises again next year, Schonholtz, now ensconsed at the $2m-per-partner Willkie - is unlikely to be concerned.

matt.byrne@thelawyer.com