Clifford Chance fiddles with lockstep to win Brobeck team

Clifford Chance's decision to go ahead with the biggest lateral hire in the history of the legal profession and take on up to 21 partners from Brobeck Phleger & Harrison to open on the West Coast is massive news.
First revealed on Wednesday 29 May on Grapevine - part of The Lawyer's weekly email news service - the news was just the latest twist in a dramatic saga. But like any move of this size, it is bathed in controversy, not least because of the acrimony between ex-Brobeck chairman Tower Snow and his former firm, which sacked him following the revelation that he was behind a staged exodus.
However, it was not plain sailing on the Clifford Chance side either. The deal may have gone through, but it should not be forgotten that the plug had to be pulled the first time round when it became obvious that the vote, originally planned for 17 May, could not go ahead because the number of Brobeck lawyers kept fluctuating.
London partners needed to be sure that in the medium to long-term, the deal would impact positively across the firm. The key to making the deal work is a successful integration process and partners had to believe that it was possible. In Clifford Chance's hastily-convened partnership meeting last Wednesday (29 May) at the Barbican Cinema, questions were raised over the thorny issues of integration and pay.
It seems as if history is repeating itself. Five of the incoming partners have been brought in off-lockstep. It is ironic that these five are being brought in just as the firm loses its off-lockstep contingent in Italy, following the departure of Vittorio Grimaldi and four of his partners (The Lawyer, 27 May). It is also out of sync with the firm's strategy on the East Coast, where last year it brought all partners into its lockstep except two of the Rogers & Wells "super pointers", Kevin Arquit and Steven Newborn.
Snow, former Brobeck managing partner Jim Burns, head of securities litigation Michael Torpey and two others - understood to be Chris Vejnoska and Karen Johnson-McKewan - will have potential access to a pool of 200 points, which will be allocated to them according to merit. That pool is currently worth some £1.65m, which shared out between the five will presumably sweeten the pill.
Chief executive officer-elect Peter Cornell argues that the Brobeck contingent has nevertheless essentially been bought in to lockstep. "There's a transition period of less than two years where five or six of them will have additional units," he says. "But there's no guarantee of that - it's entirely at our discretion whether there's been proper integration, personal fit," he said.
Brobeck, like most West Coast firms, offers its lawyers huge performance-related financial incentives - a strategy that many argue encourages lawyers to "eat what they kill". According to Clifford Chance's UK rivals, this is where the integration process is likely to fall down.
Admittedly, the Brobeck partners have a number of loyal clients, including Cisco, Intel and Sun Microsystems, which will almost certainly follow them to Clifford Chance. This is what has attracted a number of London sceptics in Clifford Chance to the contingent. One Clifford Chance banking partner says that the move was positive for his practice as it could be used as a springboard to new high-tech clients in Europe. "It gets us into the boardroom of West Coast high-tech companies," he said.
Equally, these relationships would be expected to exit with the same ease if Snow and other key partners leave. It is understood that one of the sticking points with Clifford Chance partners was concern that Snow would not stay long enough to see through the whole integration process.
Cornell says that most of the incoming partners have spent their whole career at Brobeck. "I get the impression that when they do this, it'll be their last move. They're not interested in creating an autonomous standalone practice under the umbrella of Clifford Chance. They're interested in integrating it. Tower and Burns are both in their 50s and they're desperate to make it work," he told The Lawyer.
The concern over the integration process is heavily weighted towards Clifford Chance and Burns admits that for Brobeck it is more simple. "I know that Clifford Chance sees integration as very important, but I don't see it as a big problem," he said. "We want to get our clients into an international network and into using Clifford Chance lawyers all over the world. Already we have a very strong relationship with them in New York and we expect there to be a great deal of cross-fertilisation of work."
Clifford Chance Rogers & Wells has 17 securities litigation partners in its US practice and they predominantly advise underwriters. The West Coast practice, on the other hand, will represent issuers, which on a positive note will make it easier for the firm to cross-sell its services.
However, it is worth noting that because East Coast and West Coast practices focus on different clients, it is unlikely that there has been much referral work in the past. So while Brobeck's West Coast clients may want an international network, the link-up will not immediately consolidate their legal advisers.
Brobeck is losing nearly half of its securities litigation team, which in the current economic climate and with securities litigation on the rise, is far from good news. However, market opinion, which includes the views of some of the partners leaving the firm, is that Brobeck can bounce back - though Snow's contingent is thought to be taking a book of business worth anything up to £45m, according to sources within Clifford Chance.
Torpey, who has already nailed his colours to the Clifford Chance flag has a warning for his former colleagues at Brobeck. He said that the challenge is for them not to lose any more lawyers. "The cultural bond that connects you is the thing that holds a firm together in difficult times. Brobeck needs to articulate its values and vision to everyone at the firm," he said.
According to Torpey the original problems stem from the management style and fall in profitability. However, the high-profile sacking of Snow, who has to some extent been an icon of the firm, will have done little to restore morale.
There is no doubt that Clifford Chance's arrival on the West Coast will cause a splash. The global giant will enter the market with an office staffed by more partners than any of the main New York players. Its closest rival in terms of size will be Skadden Arps Slate Meagher & Flom, which is far more committed to the West Coast than any of its top-tier rivals.
Skadden Arps' San Francisco head Kenton King clearly sees it as a vindication for out-of-town firms. "It also demonstrates the maturation of technology and Silicon Valley. There is increasingly a sense that in order to service any of the companies here, you need to have not only a national but an international capability," he said.
Torpey takes the argument one step further. He says that the move has the possibility of dramatically changing the international legal landscape. "This is going to further compel the law firms of the world to think about how they're positioned and how they're going to compete with Clifford Chance," he said.
Clearly he has a point. Despite what rivals might say, Clifford Chance has brought something new to the West Coast market. Apart from Baker & McKenzie, it is the only firm there to have a broad international network. On top of that, it offers financial stability and a secure platform on which to build a new practice.
Other magic circle firms can play down the significance, but the fact remains that Clifford Chance has once again done what it likes best: it got there first.