International eye: US

Gemma Westacott on the month in the US:

  • Freshfields’ management distances itself from Morton’s US merger statement
  • Retired partners and creditors glum over prospect of Coudert payouts
  • US firms in London report £1.1bn combined revenue
  • White & Case ponders management overhaul structure for post-Wall era

Gemma Westacott on the month in the US:

Moser’s Freshfields US tie-up warning rings true

While Reed Smith‘s transatlantic merger with Richards Butler grabbed the attention last week, Freshfields Bruckhaus Deringer appears that much further away from a US tie-up.

As reported by The Lawyer (27 March), former Freshfields China managing partner Mike Moser, who has jumped ship for O’Melveny & Myers, took a parting shot at the magic circle firm for its failure to build a viable US operation.

“I enjoyed my time at Freshfields, but to be honest I’d become frustrated by the lack of a US platform at the firm,” Moser said. “There was always a lot of talk, but it never realised itself.”

The comments come after Freshfields’ new co-senior partner Guy Morton boldly announced to The Lawyer (30 January) that he was aiming to achieve a US merger before the end of his five-year term.

But sources close to the firm claim that Freshfields’ management is now scrambling to distance itself from Morton’s very clear statement.

As one lawyer explains, Freshfields is facing “increasing resistance within the partnership” over a transatlantic merger and has entered “damage control”.

Moser’s prediction looks likely to come true after he stated that Freshfields was unlikely to achieve a US merger in the near future. “I doubt it will happen in my career,” he said.

Coudert set to disappear into cash black hole

Coudert Brothers‘ troubles also look far from over. Despite the firm having just one US lawyer left in its New York office, the fight for what is left of the defunct firm’s assets is only just heating up.

As first revealed by The Lawyer (13 March), Coudert is staring down the barrel of a multimillion-dollar cash black hole and looks unlikely to be able to return any partner capital or pay their pensions, despite clearing almost $11m (£6.4m) in debts with secured creditors JPMorgan Chase and Citibank to less than $2m (£1.2m).

Coudert’s unsecured creditors are now lining up for payment, including a number of the firm’s international landlords and its retired partners, or those nearing retirement.

But a former Coudert partner warned that there was “not enough funding to cover all of that”, as payment of the bank debt had reduced the amount of outstanding receivables to “substantially less than $100m [£58m]”.

“Much of that is very old and not collectable. We’re not going to get our capital back,” said the ex-partner. Partners had paid between $100,000 (£58,000) and $300,000 (£173,900) into the firm.

The firm’s retired or retiring partners look to be in an even worse position. Coudert owes an estimated $60m (£34.8m) to more than 40 retired or nearly retired partners, but they will have to wait until all claims made by the firm’s landlords are finalised before knowing how much of their hard-earned nest eggs they will receive.

Under Coudert’s final salary scheme they are entitled to a maximum of $120,000 (£69,500) annually for 14 years, but former partners warn that they could see as little as 10 per cent of that – if any at all.

US firms steal a march on UK rivals – again

The publication of The Lawyer’s exclusive research on the top 30 international law firms in London (3 April) is sure to have sent a chill through their UK rivals.

A quick calculation reveals that the top 30 international firms, which admittedly are all headquartered in the US, deprived their UK rivals of total revenue worth more than £1bn for the second year running.

In fact, the international firms, increased their overall combined turnover in the UK by 10 per cent to report total revenue of more than £1.1bn, up from just more than £1bn in 2004.

Almost all of the top 30 US firms had solid years, but it was Debevoise & Plimpton and LeBoeuf Lamb Greene & MacRae that reported truly astounding performances last year. Debevoise was the biggest success story, reporting a staggering 67.5 per cent increase in UK revenue to reach $56m (£32m). Meanwhile, LeBoeuf reported a similarly astounding 43 per cent increase in UK turnover and an even more astonishing 67 per cent increase in UK profit per equity partner (PEP).

Only Covington & Burling struggled, with the London office’s revenue dropping from £17.2m in 2004 to £15.9m in 2005. But London managing partner John Rupp was quick to clarify the dive, claiming that it was a simple case of the office suffering “from the exchange when converting into sterling”.

White & Case aims for smooth transition

White & Case has taken a leaf out of Sullivan & Cromwell‘s book in the succession planning for managing partner Duane Wall.

Wall exclusively revealed to The Lawyer (20 March) that the firm has entered consultation over his replacement two years before the fact. Wall, who has held the role of managing partner since 1 April 2000, will stand down in March 2008.

Although this is not quite to the extent of Sullivan’s appointment of real estate star Joe Shenker as chairman Rodgin Cohen’s successor four years ahead of time, it should ensure a smooth transition – although this also depends on the outcome of a shake-up of White & Case’s governance structure, which is being run in conjunction with its succession planning.

Wall explained that there were concerns within the partnership that the firm’s eight-member management board was not sufficient for a firm of White & Case’s size.

He candidly told The Lawyer: “We probably need more than one person devoted full time to the management of the firm, or we need several people who are at least expected to devote a certain percentage of their time.”

The firm is considering a number of changes, including whether to introduce a senior partner role, a two-tier management board and an extended network of regional management, and/or whether to introduce a non-lawyer into a management position.

Any changes would require the approval of 85 per cent of the firm’s equity partners, with the approved changes set to be introduced by 1 April next year.

International roundup Coming up: Europe: 1 May asia: 8 May Europe: 15 May US: 22 May