Focus: The litigation top 50 - Wars of the world
5 December 2011 | By Matt Byrne
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How are firms measuring up to the increasingly international nature of the litigation sector?
Big-ticket litigation has never been more international and has never demanded more from the lawyers involved. Indeed, one of the key drivers behind the expansion of the world’s largest firms’ office networks in recent years has been the increasing need for litigation resources in overseas jurisdictions.
“In the past six weeks I’ve been to Antigua, Kiev twice, Barcelona, Florence, Auckland and Dubai,” says John Reynolds, head of the London commercial litigation practice at White & Case.
Reynolds was one of the lead partners in his firm’s recent victory for Unipetrol and Synthos Kralupy in a high-profile synthetic rubber cartel case that involved the firm’s lawyers in London, Brussels and Prague.
“I think I’m past a million air miles now,” he says. “I’m living proof that cross-border litigation is on the increase.”
In this year’s global litigation report we have attempted to track that growth, pinpointing the booming geographies and assessing the impact on firms’ strategies in the process.
We asked each firm in last year’s top 50, plus around 30 others just outside last year’s list, to provide a breakdown of how many of their cases involved a single jurisdiction, how many involved two and how many involved five or more.
Frankly, tracking that level of detail is not easy.
Bedevilled by the detail
Several firms contacted for this feature reported that the detail on how many of their cases involved lawyers in multiple jurisdictions was simply not recorded. Others took a more forensic approach to case-tracking (see the King & Spalding box). Most of the firms interviewed, however, confirmed an accelerating rise in the number of cross-border disputes, many stemming from the financial crisis.
In September Herbert Smith seconded an English solicitor team to Moscow. It is now working on 10 matters involving Russian parties needing English law advice. They include representing oligarch Nikolai Maximov in relation to the alleged theft of his steel company’s assets in a case that involves conflict of laws, rules of recognition of arbitral awards, Russian law and asset-tracing and which is being handled by a team of Herbert Smith lawyers from both London and Moscow.
Interestingly, this is one firm where the level of cross-border disputes has increased only marginally. It reported that in 2008 84.3 per cent of its matters were domestic and 15.7 per cent international. Last year those figures had changed to 83.3 per cent and 16.7 per cent respectively.
Across the Pond Sullivan & Cromwell, the New York firm that encapsulates the very idea of a defender of Wall Street, is representing Barclays, traditionally one of the firm’s largest litigation clients, on the mammoth London Interbank Offered Rate (Libor) litigation, with partners David Braff and Jeffrey Scott as lead counsel. The case highlights SullCrom’s decades-long tradition of acting for non-US clients.
“Barclays, BP, UBS and other clients based outside the US are part of the traditional bedrock of Sullivan & Cromwell,” says partner Bob Giuffra. “We’ve always been around 50-50 US and non-US. In the past three to four years international litigation as a proportion of the firm’s revenue has grown dramatically. It’s become much more frequent for us to hop on a plane.”
SullCrom has beefed up some of its international offices, notably in London with white-collar crime specialist Louise Delahunty, who joined this year from Simmons & Simmons. But it is not really its style to go in for legions of office openings.
In contrast, the law firm that probably best illustrates the trend towards international disputes is US litigation powerhouse – and the one named International Law Firm of the Year at this year’s The Lawyer Awards – Quinn Emanuel Urquhart & Sullivan.
Some 25-30 per cent of the firm’s matters involve multiple jurisdictions. This is particularly true in patent litigation, where it is common for a plaintiff to file litigations in multiple venues, including the International Trade Commission (ITC), a US district court and often several non-US venues as well.
“Certainly, for almost any major technology dispute you’re likely to see parallel cases in multiple jurisdictions,” says founder and partner John Quinn.
The US firm’s role in the mobile phone patent disputes, where it is representing clients such as HTC, Motorola and Samsung, is a perfect example. There are multiple lawsuits between the parties in the ITC and US federal district courts, as well as litigations in multiple European courts.
The impact on the strategy and shape of the formerly US-only firm is obvious. Quinn Emanuel, best known for IP and structured finance litigation, recently opened an office in Moscow and added firepower to its European outposts with the hire of Novartis general counsel Thomas Werlen.
The firm, which is likely to post record financial results early next year, is unlikely to stop there while its booming market is reflected in its rise of six places up the revenue table.
Pay to play
Several of the firms in this year’s list have made significant investments in their litigation platforms recently, including Dechert, which has made a string of hires from DLA Piper in London, notably joint global litigation head Neil Gerrard and Europe, Middle East and Africa corporate crime head Jonathan Pickworth.
Baker & McKenzie is another firm that has made a significant investment in improving its global disputes practice in recent years.
“Whether creating our European competition litigation unit, beefing up our team of former prosecutors in the US, hiring Marc Litt [the former lead prosecutor in the Bernie Madoff case] or empowering our arbitration lawyers to get more involved, such as Vladimir Khvalei, a partner in our Moscow office who’s vice-president of the ICC [International Chamber of Commerce], we listened to clients and they’re coming to us for high-stakes litigation all around the world,” states Bakers global dispute resolution practice group chair Gary Seib.
The firm’s global footprint is clearly of significant benefit in capitalising on the growth of cross-border disputes, and Bakers is indeed one of the few firms to have offices in all of the seven key locations The Lawyer has tracked this year, with its biggest growth coming in Washington DC.
The trend towards more cross-border litigation is reflected in the reduction in the number of Bakers’ cases that involve lawyers in single jurisdictions, from 80 per cent in 2008 to 75 per cent in 2001, and the growth in cases that involve lawyers in between two and four jurisdictions (up from 18 to 23 per cent). The level of cases that involve five or more jurisdictions has remained static at 2 per cent.
Another long-time international player, Cleary Gottlieb Steen & Hamilton, reports that approximately 50 per cent of its cases involve more than one jurisdiction, with around 10 per cent involving more than five.
While much of the Madoff-related litigation the firm is handling is US-based, Cleary’s role for numerous banks (notably HSBC) in defending claims against them has seen it take a leading role in coordinating the development of a global litigation strategy in the UK, Luxembourg, Italy and other jurisdictions.
Hire and hire
The growth of big-ticket litigation that requires resources in several jurisdictions is throwing up some hefty issues for the world’s top firms. Clearly, the primary task is to ensure that when a client comes knocking with a cross-border dispute, you are well-placed to tell them how you are going to staff the matter and with whom.
Consequently, the recruitment market for top-tier lawyers in hot areas such as internal investigations, financial services and international arbitration has never been more active.
Tracking the lawyers working on cross-border cases has become particularly important to firms such as King & Spalding, which has expanded internationally partly because of the growth in its litigation department.
Best known for investor state disputes, the firm was short of commercial arbitration specialists until it embarked on a hiring spree a couple of years ago.
In Paris the firm brought in the former secretary general of the ICC International Court of Arbitration Eric Schwartz along with partner James Costello from Dewey & LeBoeuf, while in London this May –the US firm recruited Steptoe & Johnson solicitor-advocate and partner Tom Sprange, a lawyer who also adds a High Court practice.
“We haven’t had a significant international presence until recently, but it’s important that we can represent our clients in all facets of a litigation,” says Houston-based King & Spalding partner Reggie Smith, one of the driving forces behind the firm’s recent expansion. “It’s a priority of the firm to add depth on cross-border litigation in London and we’re actively engaged in looking at opportunities.”
Smith says the detail his firm collects on cross-border staffing not only assists with compensating partners appropriately, but also helps to encourage lawyers to export work to the appropriate geographical location.
“The level of cross-border work’s certainly accelerated at our firm, particularly in international arbitration,” adds Smith.
The right fit
Skadden Arps Slate Meagher & Flom, powered by cross-border cases such as Alfa-Access-Renova’s battles over BP’s attempt to form a $16bn (£10bn) strategic alliance with Rosneft; the Slovak Republic’s dismissal of a e1bn (£860m) claim brought by Dutch company HICEE; and Orascom Telecom Holding (Egypt)’s $1.6bn Geneva-based arbitration dispute against France Telecom, maintains its position at the head of this year’s revenue ranking, with a disputes revenue of just under $1bn.
Skadden London partner Bruce Macaulay and counsel Penny Madden confirm that the increased number of of cross-border cases their firm has witnessed is requiring a more strategic approach to the management and staffing of matters.
“Clients want more transparency about who’s on the case and are very focused on the endgame results and enforcement, which means there’s more of a need for us to be strategic in our thinking,” says Madden. “They’re looking to us to manage cases across several jurisdictions. That’s the way you gain the upper hand over the other side, although at Skadden that doesn’t mean throwing lots of bodies at a case. We prefer a lean, dedicated team.”
In other words, there is not only competitive advantage to be gained from having the resources to staff a matter adequately, but also the ability to give the client the best possible service at the best possible price (see costs box, page 18).
Among the biggest risers in this year’s table is Kirkland & Ellis, a firm whose outstanding all-round financial performance in 2010 saw it rocket 19 places up the revenue charts, from 20th to second.
Headline cases for Kirkland recently have included the landmark Pliva Inc v Mensing (2011), in which partner Jay Lefkowitz represented Teva Pharmaceuticals in a closely watched Supreme Court case that ruled generic drug companies, unlike brand manufacturers, may not be sued for traditional failure-to-warn claims.
Kirkland is also among the players involved in a variety of litigations relating to BP’s Deepwater Horizon disaster (Kirkland partners Richard Godfrey and Mark Filip are advising longstanding client BP on matters ranging from civil litigation to House of Commons select committees and government investigations, with Arnold & Porter also working closely with Kirkland on several of these matters). SullCrom is representing BP in securities-based cases and Employee Retirement Income Security Act (Erisa) litigation, while WilmerHale is defending the oil giant on criminal and related inquiries arising out of the spill.
Elsewhere, Covington & Burling, where partner Mike Brock is lead trial counsel to BP in spill-related litigation, is also representing the company in two insurance coverage actions in Louisiana related to the Deepwater Horizon case.
Kirkland’s most recent recruitment drive has been in Hong Kong, where it has recruited more than 25 associates since July, while at the same time taking eight partners from top-tier rivals Allen & Overy, Latham & Watkins and Skadden.
“The hires were principally in corporate and M&A, but we’re already seeing a significant amount of internal referral work from that group, such as internal investigations and FCPA [Foreign Corrupt Practices Act] work,” reveals Lefkowitz.
Another firm that gets a turbocharged push up the rankings this year is legacy Hogan & Hartson, although this is primarily thanks to its merger with Lovells.
“Prior to the merger we had 35 lawyers in New York, which frankly was a pimple on the bum of the US legal market,” admits Patrick Sherrington, head of the firm’s litigation, arbitration and employment practice. “Now we have a mega national litigation practice. The merger has given us much more scope for winning large-scale work and we’re now doing work in the UK for clients of the Hogan legacy firm that it could never have done. It also allows us to focus on strategic areas we want to strengthen, such as international arbitration, fraud and investigations, financial services and energy.”
The firm has also brought in some star names to strengthen its practice, including Neal Katyal, the former acting US solicitor general, who joined as a partner and co-head of the firm’s appellate practice, alongside partner Cate Stetson, in the DC office this September.
“[Katyal] is a young guy, in his 40s, and hopefully he’ll lead the appellate practice in a way that will stand to our benefit for many years,” adds Sherrington.
Internationally, however, Sherrington admits that there is still work to be done.
Currently 46 per cent of Hogan Lovells’ revenue is generated by the US and 46 per cent by Europe (split evenly between London and the Continent), but only around 8 per cent is derived from Asia and the Middle East, even though Hogan Lovells has around 250 lawyers there, representing some 10 per cent of the firm.
“So we’re not yet a truly balanced global firm,” Sherrington concedes. “And we’re not yet deployed to the full in Latin America, although that’s on the horizon. Litigation and arbitration are central to our growth plans in these regions.”
Lean, but meanHogan Lovells, like many of the firms in the table, can call on its office network as a major sell to clients. But not every firm that makes the list takes the same approach.
At Paul Weiss Rifkind Wharton & Garrison, which scored a multibillion-dollar victory for top client Citigroup against London-based private equity firm Terra Firma last year, the vast majority of its lawyers sit in Manhattan.
But, as chairman Brad Karp points out, the lack of an office network to match those of the largest firms has not put the block on Paul Weiss serving its clients internationally.
“The litigation story in the US remains the fallout from the financial crisis,” says Karp. “The tentacles of this crisis continue to spread, frequently in unanticipated directions, and virtually all of our litigators have become conversant in the world of RMBSs [residential mortgage-backed securities], CDOs [collateralised debt obligations] and CLOs [collateralised loan obligations]. Our litigation and regulatory practice has never been busier and we see no sign to suggest the pace of activity will ease any time soon.”
Karp says it is Paul Weiss’s “powerful track record as trial lawyers” that sets it apart.
“Once the arbitral hearing begins, clients want the best possible advocate to persuade the tribunal of the merits of their claims,” adds Karp.
The firm, which inched four places up The Lawyer’s revenue table, is likely to post another set of record results early next year, buoyed by its position defending financial institutions against meltdown-related claims.
Similarly, Debevoise & Plimpton has a lean office network compared with some, although it has made moves recently to strengthen its position internationally, particularly in Asia.
One of the firm’s best-known litigators, Lord Peter Goldsmith QC, who recently won a multijurisdictional battle for Norilsk Nickel, is now spending significantly more time in Hong Kong, having been appointed recently to the Hong Kong International Arbitration Centre.
“We’ve always been in the market in Asia, but we wanted to provide a better point of contact and service,” admits Goldsmith. “It’s a question of convenience as well as providing the right level of expertise and skills. But I don’t think you necessarily need an office to be present in a market. We do a lot of work in India, Korea and Singapore without having an office. We just spend time there. I do regard Debevoise as a global firm in that we deal with cases globally. That’s one of the reasons I joined.”
Being thereYet the lure of a physical international network is proving irresistible to many. Freshfields Bruckhaus Deringer has made huge investments in its litigation, arbitration and global investigations practice in recent years, a trend that is reflected by the fact that the number of five-plus-jurisdiction matters on which it is involved has grown from around 10 to 15 per cent of the total three years ago to some 20 per cent. It is also reflected in its position as the highest-ranked UK-headquartered firm (in total six UK-headquartered firms made the list, not including DLA Piper and Hogan Lovells).
“Nobody else has the depth and breadth we have,” claims the head of the firm’s dispute resolution group Chris Pugh.
Freshfields’ 2010-11 litigation revenue, when litigators from groups such as IP and antitrust are included, reached £324m. Much of that was driven by the growth of multijurisdictional cases and the firm’s international platform.
Pugh says that three years ago a significantly lower proportion of litigation revenue came from the US and the Middle East, an issue since addressed by some significant hires in both regions.
“Europe’s often neglected in this, but it’s incredibly important and we’ve grown significantly there, particularly in Germany, France and Italy,” adds Pugh. “It’s been a mix of growing in the financial centres and places with aggressive regulators.”
Recently Freshfields relocated two of its German lawyers to Munich in the shape of Michael Rohls, who was promoted to the partnership this year, and senior disputes partner Rolf Trittmann.
In the US, says Pugh, the growth spurt of the past couple of years has been followed by more measured expansion, which recently saw the hire of Kramer Levin Naftalis & Frankel partner Tim Harkness in New York.
“We’re all seeing similar changes in the market and recognise that we have to offer a more international service,” says Pugh. “But every firm’s starting from a slightly different position.”
The challenge being addressed by firms such as Debevoise – starting position: a fabulous but primarily New York practice with some quality outposts – is to leverage that to build the practice internationally.
“They have to invest in litigation in Europe and Asia through Hong Kong,” says one rival partner. “The market’s moving away from having teams that fly in – clients want people on the ground. Their challenge is to get enough people in the right places.
They’re in a transitional phase.”
Debevoise might not agree entirely with this assessment, but as an overarching comment about the state of the global disputes market as a whole, it is bang on.
King & Spalding: on the move
“Approximately what proportion of the firm’s cases last year involved lawyers in a single jurisdiction only? How does this compare with three years ago?”
King & Spalding said:
“In 2008 we had 4,169 litigation matters. 3,413, or 81.9 per cent, were handled by timekeepers out of a single office. In 2010 we had 3,947 litigation matters. Of these, 2,932, or 74.3 per cent, were worked on by timekeepers out of one office.”
“What proportion involved at least one other jurisdiction?”
King & Spalding said: “[In 2008] 630, or 15.1 per cent, were worked on by timekeepers out of two offices. [In 2010] 725, or 18.4 per cent, were worked on by timekeepers out of two offices.”
“What proportion involved five or more jurisdictions?”
King & Spalding said:“[In 2008] eight, or 0.2 per cent, were worked on by timekeepers out of five or more offices. [In 2010] 33, or 0.8 per cent, were handled out of five or more offices.”
Arbitration: booming all over
Ask any of The Lawyer’s top 50 firms what the busiest area of their disputes practice is and the chances are they will reply “international arbitration”.
“The explosion of international arbitration is a true global phenomenon,” says Lord Peter Goldsmith QC of Debevoise & Plimpton. “It offers international businesses the chance to go to a neutral venue. It’s Cardiff Arms Park.”
As another well-known litigation partner puts it: “It’s the only sensible dispute resolution mechanism you have when you’re dealing with companies in places like Kazakhstan - you’re not going to submit to Kazakh courts.”
So the demand for top-quality arbitrators has never been higher. And yet, despite the activity, some firms may be missing out on the action.
“My take on international arbitration in the US is that much of the work in New York and Washington DC is treaty-related cases coming out of South America,” says Herbert Smith global head of dispute resolution Sonya Leydecker. “Quite a lot of it’s still not very sophisticated and many US firms - with some notable exceptions - haven’t woken up to the fact that you need specialists.”
Leydecker says that, privately, lawyers at some US firms have admitted to her that their arbitration practices are not specialist enough and that it is general litigators who also handle arbitrations.
But that may be changing.
“I think some US firms have recognised this and are trying to do something about it,” adds Leydecker. “I think you’ll see a big shift in the next two or three years.”
In this year’s litigation report we asked our top 50 firms to break out revenues generated by arbitration from the total generated by disputes last year.
Of the firms that answered this question, White & Case topped the list, with 28 per cent of its total $421.7m (£273.2m), or $118.1m, generated by arbitration.
Shearman & Sterling, which just missed out on a spot in the top 50 after a significant increase in activity, saw litigation revenue reach $221.1m last year (30 per cent of 2010’s $737m firmwide revenue). A full quarter of that total was generated by its international arbitration practice.