Freshfields: Age against the machine
30 July 2007
9 July 2007
13 July 2007
10 October 2007
16 July 2007
18 June 2007
Happy firms are all alike; every unhappy firm is unhappy in its own way. The very public spat between Freshfields Bruckhaus Deringer and its former insolvency partner Peter Bloxham highlights this, as it is probably a story that could have happened only to Freshfields, a firm that prides itself on its history of collegiality and gentlemanly conduct.
The account of how events brewed to a litigious boiling point, laid out at Bloxham's employment tribunal hearing earlier this month, are intriguing - Bloxham, after all, spent 30 years of his professional life at the magic circle firm, only for it to end in acrimony, with both parties locked in a zero-sum battle.
He is now claiming £4.5m in damages in an age discrimination claim alleging that Freshfields' pension reforms forced him to retire early, aged 54, and therefore he was only entitled to a reduced pension. Had he been 55 he would have received a full pension.
By all accounts Bloxham was a valued member of the partnership. And yet he describes his last day of service on 31 October 2006 thus: "I attended a client function in the early evening and then returned to the office and collected a few items and left. I didn't have the opportunity to clear my office or to remove all my personal possessions and records. Since that day I haven't returned to [Freshfields'] offices."
There is an irony that the first high-value claim brought under the UK's new age discrimination laws, introduced in October 2006, has been filed against a law firm. Although perhaps that is not too surprising. The tribunal's respected chairman Thomas Ryan said early on in Bloxham's hearing that everyone involved in the case has "the misfortune of being a lawyer".
Bloxham is the first former partner to bring a claim against Freshfields in its 250-year history. However, The Lawyer (16 July) revealed that Bloxham's former partner Jo Rickard, now at Shearman & Sterling, is also currently in dispute with the firm over a withholding clause in its pension system. Her Shearman colleague and ex-Freshfields corporate partner Lois Moore is also bringing an age discrimination claim.
Moore, whose name has been prominent during Bloxham's hearing, was a key member of the Grey Panthers, the special interest group that represented older partners' interests during the pension reforms. Freshfields maintains that the group was a sufficient conduit of information from management to partners about the process.
Irrespective of his peers' grievances, Bloxham is symbolic of a type of partner who no longer belongs at Freshfields.
Perhaps one of the most telling statements to come out of the hearing was uttered by Perry Noble, Freshfields' straight-talking global co-head of finance, who first coined the description 'Size and Shape' for the firm's £55m restructuring that culled 100 partners from the equity. In Bloxham's 80-page witness statement he mentions a comment made by Noble that Bloxham's "emotional ties are with a firm that, in truth, doesn't really exist anymore".
Bloxham joined Freshfields in the 1970s, when the firm had 20-odd partners. When he left it had around 500 and was the fourth-largest law firm in the world by revenue. Out of necessity it became a firm obsessed with competition and performance and one that had no place for a costly pension scheme.
Noble said in his own witness statement: "I understood, and sympathised with, his [Bloxham's] sense of loss, as I interpreted it, which resulted from the firm being forced to modernise our culture and certain aspects of our financial arrangements in an increasingly competitive world."
A cost of Freshfields' growth was that it was no longer a firm where the leaders could casually pop by to chat with partners down the corridor. In several of the hearing's witness statements there are allusions to meetings that never materialised. Joint senior partner Guy Morton, for example, wrote: "I had tried to drop by to ask him whether a face-to-face discussion would help… Although I tried to see him a few times when I was passing, we did not manage to meet."
This was in late March 2006, when management was aware of Bloxham's dissatisfaction at how the reform process had been undertaken. It was, however, before he made any serious allegations of discrimination.
Freshfields is a firm where, also out of necessity, a more formal corporate leadership structure has taken hold. The days when two-dozen partners sat around a table to determine the firm's course for the next 12 months are long gone.
The witness statements in Bloxham's hearing show a firm within which lines of control can intertwine.
For example, Bloxham's dispute centres not around one manager, but rather a 'faceless' partnership council. This is Freshfields' supervisory board, which is made up of the firm's two senior partners and 15 elected members, plus partnership secretary Crispin Hain-Cole. It was the council that had ultimate power over Bloxham's terms of departure and also whether or not he would be granted a consultancy, and on what salary.
Bloxham recounts in his witness statement the frustration he felt at being told by Morton and by chief executive Ted Burke that they alone did not have the power to resolve issues Bloxham had raised. He even hung up on Morton at one stage, saying he was "sick of [his] casuistry" when Morton tried to probe why Bloxham felt misled. But Burke and Morton were telling the truth: authority lay with the council.
By July 2006 Bloxham was desperate to know whether or not the council had approved his request to retire. As a 54-year-old he needed its consent to leave the firm with his Schedule 2 pension intact, albeit with a 20 per cent reduction. The last day of July was the deadline for such a partner to officially retire with a Schedule 2 pension.
On 7 July 2006 Bloxham emailed council member Hain-Cole to ask about the status of consent. Soon after Hain-Cole had to apologise to Bloxham after mistakenly informing him that his retirement had been approved; managing partner Peter Jeffcote reminded Hain-Cole that a decision by the council had merely been deferred.
"I had a handsome apology from Crispin, but it was the second time I'd been misled by him," Bloxham said under cross-examination at the tribunal.
As Blackstone Chambers' Dinah Rose QC for Freshfields recounted, Bloxham then forwarded Hain-Cole's response to London head of finance Bob Charlton and Noble, suggesting that the mistake be taken up in Hain-Cole's next performance assessment. Bloxham's email to his team leaders said he was "more likely to believe in a conspiracy theory than in a sudden attack of amnesia".
Three days later the now infamous email between Charlton and Bloxham occurred, in which Bloxham flatly refused what Charlton maintains was a consultancy offer.
Along with the odd choice nugget of information - such as when Bloxham commented: "Like many large London firms, the question of a possible merger with a US firm is also regularly under review, even if it may be a theoretical prospect" - slurs have been flung from both sides during the tribunal hearing.
Freshfields' disclosure documents allege that, by the time of Bloxham's September 2006 meeting with Burke, Bloxham was ready to do a "rough and ready horse deal" that could be kept confidential: he wanted a £1m-plus-per-year consultancy plus his full Schedule 2 pension.
However, this contradicts Bloxham's own testimony. "I took a dim view of the consultancy concept, at least insofar as it related to me…" wrote Bloxham. "Papers circulated among the partners had clearly contained references to doing a number of individual consultancy deals with retiring partners. To me, this evidenced the confusion between these issues and the 'Size and Shape' restructuring. I therefore expressed my view that I would not be prepared to collaborate with the management team in undoing the perverse consequences of the Schedule 2 reform by doing a 'deal'."
It is vital for Freshfields that its pension reforms and 'Size and Shape' restructuring are seen as discrete. Jonathan Sumption QC of Brick Court Chambers, who advised Freshfields on the legality of the pension reforms and transitional arrangements, said that any confusion of the two would be illegitimate.
Legally, Freshfields could not push out expensive plateau partners under the guise of pension reforms. Under cross-examination by Tim Pitt-Payne of 11KBW for Bloxham, Morton did admit that the 'Size and Shape' restructuring was a consideration, if not a motivating factor, of the pension reforms.
The concept of division is also a thorny one for Freshfields. It still holds itself out to be a lockstep firm, despite now having four classes of ostensible 'partner' as of 2006: fixed-share partners (FSPs), consultants on 40 points for six months, consultants on 40 points for a year or longer and equity partners.
One revealing comment during the hearing is that Morton thought the introduction of FSPs was "not ideal", while Noble thought that having two classes of consultants working together would be "divisive".
On this point they agree with Bloxham's (initial, at least) position. In the first few pages of his witness statement Bloxham wrote: "Partners in the Respondent's London office professed a pride in its special culture, perceived to be due, in a large part, to the nature of the respondent's lockstep. Lockstep was regarded as an asset in itself and not lightly to be abandoned."
There appears to be continuing ill-feeling surrounding Bloxham at Freshfields. Some days into the hearing Burke, Charlton and Noble were sat at the back of the tribunal waiting for their turns to be cross-examined when a break was called. As Bloxham walked past Burke, he quite purposefully said: "Hello, Ted." Perhaps Burke did not hear, but he did not break his conversation to return the greeting.
One high-level partner told The Lawyer: "Peter was a gentleman and a good lawyer. But I'm cross with him. What the f**k is he doing washing dirty laundry in a Holborn employment tribunal?"Both sides maintain it was the other that has ensured any denouement will be in the public domain. Bloxham alleges that Freshfields initially told him his grievance would be heard in November 2006, which it then decided it had no obligation to do.
"I regret that the opportunity to seek to resolve this issue in private was thrown away by the respondent," wrote Bloxham. He later stated: "I very much regret, both from my own point of view and that of the respondent, that the end of my career there has been clouded by this dispute."
There are regrets all round. Freshfields has been understandably busy with the bigger picture in the past five years. One hundred partners have left the equity, while only one so far has seen the firm in court.
So will the firm do anything differently now that it has had its first claim brought by a former partner? The general consensus from within Freshfields is no, but that may change, dependent upon the outcome of tribunal chair Ryan's judgement, which has currently been reserved indefinitely.
Peter Bloxham: Partner at Freshfields for 23 years, where he founded the European insolvency practice. In 2006 he brought a £4.5m age discrimination claim against the firm - the first in its 250-year history.
Ted Burke: Chief executive since a month before the Schedule 2 reform vote.
Bob Charlton: London head of finance, under which Bloxham's insolvency group fell. Gave evidence that a July 2006 email had constituted a basic offer of consultancy to Bloxham.
David Ereira: Banking partner, now at Linklaters. Led a group named the Grey Panthers, which represented the interests of older partners during the pension reform process. Bloxham was not a member of the group, although he was in contact with it.
Peter Jeffcote: Managing partner who led the working group overseeing the reform of Schedule 2, the firm's unfunded lifetime pension that was eventually scrapped in favour of Schedule 2a in April 2006. Gave evidence that there is no less discriminatory a pension scheme than 2a, which is index-linked and less generous.
Lois Moore: Corporate partner now at Shearman & Sterling. A member of the Grey Panthers, who is now bringing an age discrimination claim against Freshfields.
Guy Morton: Co-senior partner who gave evidence that changing the demographics of the firm had been a "foreseeable consequence" behind pension reforms, but not their motivation.
Perry Noble: Global co-head of finance and Bloxham's official line manager. Coined the term 'Size and Shape' for the firm's £55m restructuring, which culled 100 partners from the equity.
Jo Rickard: Former co-head of disputes, also now at Shearman. Currently in dispute with Freshfields over the non-compete clause in her pension.
April 2003: Freshfields managing partner Peter Jeffcote heads a Schedule 2 working group to review the pension scheme. Deloitte assists in modelling alternatives.
2004: The £55m 'Size and Shape' restructuring that ultimately culled 100 partners from the equity launches, first in Asia.
12 August 2005: Schedule 2 pension scheme reforms kick off with a consultation paper, the first put to partners with concrete proposals.
20 October 2005:The Grey Panthers representative group of older partners sends a note to the partnership council stressing the need to give retiring partners time to put plans in place.
3 November 2005:Grey Panthers makes an alternative proposal to the council, suggesting smaller reductions, which is deemed too expensive by the council.
11 December 2005: Bloxham makes a contingent request to retire, pending a proposal on the reforms. He is told on 2 January 2006 that there is no objection to this.
2 March 2006:Final proposals on Schedule IIa are sent to partners prior to voting.
14 March 2006: Bloxham confirms to London head of finance Bob Charlton his intention to retire in October 2006 if the reforms go through.
29 March 2006: Freshfields' partners vote in the pension reform, with 78 per cent polling a 'yes' vote. Bloxham votes 'no', along with 23 per cent of 50 to 54-year-old partners.
30 April 2006: Schedule 2 closes, replaced with Schedule IIa, an index-linked, less generous pension. Partners aged 50-55 have until 31 October 2006 to retire to take advantage of Schedule 2.
22 June 2006: Bloxham submits an official note to the Partnership Council with allegations of a lack of fiduciary duty.
28 June 2006: Bloxham writes to global co-head of finance Perry Noble and Charlton stating that 25-point consultancy offers made to others are "insulting". Freshfields partners vote in the introduction of fixed-share partners, scrapping the all-equity partnership for the first time.
5 July 2006: Bloxham submits an unconditional request to retire at the partnership council meeting.
7 July 2006: Charlton phones Bloxham to update him on council's decision to award 40-point consultancies. Partnership secretary Crispin Hain-Cole erroneously informs Bloxham that the council has consented to his retirement, but quickly corrects his mistake.
10 July 2006: Charlton emails Bloxham the council's new plans for 40-point consultancies. Bloxham replies: "In a word, no." Freshfields maintains this was a consultancy offer to Bloxham, which Bloxham refutes.
26 July 2006: The partnership council consents to Bloxham's retirement with his Schedule 2 pension.
31 July 2006:The deadline to give notice for those who wish to retire with an old Schedule 2 pension.
11 September 2006: Bloxham writes a statutory grievance letter to chief executive Ted Burke alleging age discrimination. Burke makes it clear that no consultancy offer can be tabled while Bloxham is threatening to bring claims against the firm.
31 October 2006: Bloxham retires from Freshfields with his 20 per cent-discounted Schedule 2 pension. This currently amounts to £175,000 per annum for life.
27 November 2006: The date slated for a grievance hearing passes.
July 2007: The nine-day tribunal hearing. Bloxham's acting firm Dawsons instructs Tim Pitt-Payne of 11KBW, while Lewis Silkin for Freshfields turns to Dinah Rose QC of Blackstone Chambers. No judgment date is handed down at the end of deliberations, with all parties due at least a six-week wait.