The year kicked off in sensational fashion as The Lawyer revealed (10 January) that a group of sacked German Linklaters partners were threatening to sue the firm. The partners claimed they had been removed from the firm in breach of the partnership agreement, and instructed solicitors and counsel for advice.
In France, Clifford Chance was also facing legal action from within the firm as junior assistant Avi Bitton defended his right to act as a trade union representative. Bitton had been dismissed over performance issues, but claimed his job was protected by two union roles. The saga continued, with Bitton eventually getting the nod to keep his job in March.
On 17 January The Lawyer disclosed that Richards Butler was in merger talks with New York firm Proskauer Rose. The talks ultimately foundered in June.
Slaughter and May found itself under fire for acting for two parties in the fight for the London Stock Exchange. Ironically, in 2004 Slaughters dramatically injuncted Freshfields Bruckhaus Deringer from acting on Philip Green’s bid for Marks & Spencer (M&S) due to conflicts. That particular affair came back to haunt Freshfields after the firm was excluded from the M&S panel review (7 January).
Lawrence Graham began February by making the first steps towards putting the Michael Fielding scandal behind it, after property company London & Regional’s (L&R) decision to settle its £30m negligence claim against the firm and Fielding on the first day of the trial. Fielding stole £2m from L&R’s account and fled to the US only to eventually return to face trial. He was found guilty and sentenced to eight years’ imprisonment.
Meanwhile, the cracks began to appear at Hammonds, when on 2 February it was revealed that the firm was to slash partner drawings by 12 per cent. The firm’s troubles were further compounded later in the month when it dumped its auditors and ordered its current and former equity partners to repay £3m in overpaid drawings.
Herbert Smith also fell on difficult times, when a spat between the firm’s litigation and corporate practices broke out. While the latter had been touting itself to Lloyds TSB for work, the litigation arm was accepting instructions from the Mahme Trust Reg in ongoing High Court proceedings against Lloyds. The power struggle between the two practices had been brewing ever since litigation chief David Gold won the senior partner election battle over corporate partner Richard Fleck in October 2004.
Panel reviews were all the rage in March. Abbey unveiled its first formal panel (7 March) following the takeover by Banco Santander Central Hispano. The bank split its advisers between City, specialist and national panels, with Ashurst, Clifford Chance and long-term adviser Slaughters bagging the City spots. Meanwhile, Deutsche Bank continued its ongoing panel review by examining the potential of a rebate system.
On 21 March, Eversheds‘ client management skills were slammed by Honda as “superficial” as the firm lost its place on the company’s panel. There was better news for DLA Piper Rudnick Gray Cary, McDermott Will & Emery and Wragge & Co, which were all appointed to Honda’s panel for the first time.
Herbert Smith finally opened its in-house advocacy unit by bagging 11 Stone Buildings’ Murray Rosen QC and Ian Gatt QC of Littleton Chambers. The project had been in gestation for 18 months and followed the appointment of litigation head Gold as the firm’s senior partner.
Denton Wilde Sapte (DWS) and DLA Piper hogged the headlines in April. DWS new chief executive Howard Morris launched a review of the firm’s controversial discretionary bonus system in an attempt to stop a partnership exodus and followed that up by announcing he was to investigate a UK merger.
DLA Piper, meanwhile, was busy in talks to acquire EY Law’s four CIS offices ahead of a push into Eastern Europe – the beginning of a particularly acquisitive year for the firm.
Back in the UK, DLA Direct chief executive Andrew Bennett was replaced by chair David Medcalf in a bid to improve performance. The volume business – which operates separately from DLA Piper – had already gone through a period of restructuring and redundancies.
Herbert Smith and Italian independent Gianni Origoni Grippo & Partners both netted monster fees for their part in very different deals. Herbert Smith earned almost £10m from the Department of Trade & Industry for its role on the launch of the Nuclear Decommissioning Authority. In Italy, Gianni took the lion’s share of the €100m (£67.4m) paid in legal fees following the collapse of dairy group Parmalat.
Preliminary figures for the UK’s biggest practices released early in May showed that the mid-market firms were tearing up the charts. Berwin Leighton Paisner‘s (BLP) average profit per equity partner (PEP) rocketed 34 per cent to £570,000, on the back of a 40 per cent rise the previous year.
Coudert Brothers executive board member Edward Tillinghast flew into London in a bid to save its disintegrating London presence after the entire London partnership jumped ship to Orrick Herrington & Sutcliffe, along with the three remaining Moscow partners. The mass exodus has been widely touted as a key trigger for the firm’s formal disbanding announced in August.
White & Case‘s London head Neil Upton resigned on 31 May after just nine months in the role following a radical shake-up of the firm’s London management. At the same time, the firm unveiled the creation of a five-partner executive committee, with corporate head Peter Finlay voted into the newly created post of London senior partner.
In May the industry’s gaze turned to The Lawyer Euro 100. This exclusive research revealed that the magic circle had suffered a ropey 2004, as average profits at the UK/European big four slipped across the board. The UK cemented its position as the biggest and most profitable legal economy. Of the firms in the Euro 100, 54 per cent are headquartered in the UK.
June began with Barlow Lyde & Gilbert and Maclay Murray & Spens on the receiving end of a £3m negligence claim brought by oil giant BP and 26 insurance companies over a shipping insurance claim.
Clifford Chance hinted it might become an all-equity partnership as part of its ongoing, arduous global lockstep overhaul. Led by real estate head Cliff McAuley, the plan would have seen salaried partners abolished, however, this was met with a mixed response, causing the working group to come up with a new, more flexible, salaried partner system in October.
Coudert entered full crisis mode in June, as a swathe of exiting partners demanded the dissolution of the firm. The firm’s Berlin, Frankfurt and San Francisco offices were closed in a week, with other offices haemorrhaging partners. However, the firm’s management continued to claim the “slimming down” was all in the aim of securing a merger, although talks with Baker & McKenzie ultimately failed.
June saw The Lawyer toast the country’s most pre-eminent lawyers and firms during its annual awards ceremony. The biggest cheer went to Slaughter and May for a bumper 2004- 05, including its defence of Marks & Spencer against Philip Green’s £9bn hostile takeover. Nigel Knowles was also applauded for taking DLA’s global expansion to new heights, even before the firm’s merger with Piper Rudnick and Gray Cary was implemented from 1 January 2005.
July began with a bang for Weil Gotshal & Manges‘ London office. The firm was hit with a $100m (£56.5m) claim from Greenwich NatWest and National Westminster Bank, in what was thought to be the first time a firm had been sued for its involvement in the structuring of a collateralised debt obligation.
Lovells unveiled radical plans to boost profitability after its PEP plummeted by 21 per cent in 2004-05. The changes included introducing a new financial system to measure the profitability of matters and clients, in the aim of encouraging partners to work on more lucrative deals.
Addleshaw Goddard, meanwhile, ditched its London bonus in an effort to smash the North-South divide in its equity partnership. All of the firm’s new equity partners now join on the same entry level of points.
Hammonds’ troubles worsened still in July. This time a group of former partners announced that they were gearing up to sue the firm after auditors discovered an £8.1m revenue shortfall for the 2004 financial year. It was revealed this amount would be clawed back from partner profits, in addition to the £3m of overdrawings already revealed in February.
August kicked off with troubled Hammonds senior partner Richard Burns stepping down. It was also rumoured that managing partner Chris Jones would follow Burns out the door. He managed to hang for an extra month before succumbing to the inevitable.
The long saga that was to become the SJ Berwin senior partnership election started in August. Five names came to the fore to replace outgoing David Harrel, with nominees including subsequent winner head of private equity Jonathan Blake and managing partner Ralph Cohen.
Freshfields embarked on its own senior partner election, which concluded last week (see page 3), while Lovells managing partner David Harris took an axe to the firm’s international executive by reducing it from 14 to 11 members.
A swathe of firms looked to widen their international horizons in August. The Lawyer revealed that at least six were preparing to launch in Dubai, including Ashurst, DLA Piper and Linklaters. Meanwhile, the UK braced itself for an invasion of US firms, with Cooley Godward, Goodwin Procter, Heller Ehrman White & McAuliffe, Nixon Peabody, Proskauer Rose and Ropes & Gray all on the merger trail.
But the biggest news of the month came on 18 August when the struggling Coudert finally threw in the towel after a 152-year history. In a conference call to the firm’s partners, it was agreed that the firm would officially disband, after its merger talks with Baker & McKenzie collapsed. However, Baker & McKenzie was quick to cherry-pick the firm’s heavyweights, picking up 25 partners from the firm’s US practice in September.
September saw the magic circle opt for a series of management changes. Freshfields overhauled its corporate practice, restructuring along four sector lines instead of the previous seven. Meanwhile, Clifford Chance launched its biggest strategy review for years, with strong indications that it would commit more resources to the US and would make a push into China.
The battle for Coudert stars continued, with DLA Piper chief executive Nigel Knowles and Orrick chairman Ralph Baxter getting into a scrap over who owned what was left of its prized China practice. Both sides eventually claimed they won, although Knowles stepped things up a notch in October when he claimed his firm was the biggest in Singapore and, more importantly, in China.
September also witnessed one of the most high-profile partner moves in 2005. Heavy-hitting leveraged finance partner Tony Keal quit Allen & Overy (A&O) to join Simpson Thacher & Barlett following a series of clashes with the magic circle firm’s management.
Towards the end of the month, Equitable Life settled its £2.6bn claim against Ernst & Young (E&Y) – an agreement heralded as a massive climbdown by E&Y lead counsel Mark Hapgood QC of Brick Court Chambers. Claims against individual directors continued, but settled sporadically during the remainder of the year.
The Lawyer UK 100 Annual Report was published in September. Now the benchmark for financial comparisons between law firms, it revealed that 2005 has been a year of recovery. The biggest sighs of relief came from the magic circle. Average profit per equity partner for the big four was up by 13.5 per cent.
October saw a revolt by associates. A swathe of associate-level departures at A&O led the firm to review its partnership track after it was revealed that the firm suffered from an assistant turnover rate of 25 per cent. The firm also announced an inflation-busting 20 per cent pay hike for associates (17 October).
Herbert Smith’s litigation department was revealed to be suffering from a similar associate exodus, losing 25 associates in nine months. Head of litigation Sonya Leydecker claimed to be taking steps to address the issues, but obviously not fast enough, as five more left before the end of October.
High Court judges also began threatening a mass resignation over proposed changes to their pension rights (24 October). The matter quickly escalated with The Lawyer exclusively revealing that senior judges had instructed counsel in anger at the Judicial Pensions Bill (7 November).
Meanwhile, Freshfields was revealed to have paid out £4m in severance packages in the first quarter of the 2005-06 financial year, as the firm embarked on sweeping reforms of its partnership.
On 2 November, The Lawyer was the first to break the news that the liquidators of BCCI had dropped the £850m misfeasance claim against the Bank of England. The extraordinary events in court that morning brought an end to 256 days of tour de force speeches and aggressive cross-examining by lead counsel Gordon Pollock QC and Nicholas Stadlen QC, for the liquidators and the bank respectively.
Litigation proved to be the month’s focus. On 21 November, it emerged that religious law barrister Paul Diamond was suing Bar Council chair Guy Mansfield QC along with other council officers for unlawful prosecution. Diamond had also complained to the police, prompting an investigation into the council’s prosecution methods.
In other news, Clifford Chance dropped its single lockstep review vote, postponing a decision on the status of junior partners. And half-year figures showed a dramatic upturn in revenues for many firms.
November heralded The Rising 50. For the second year in a row, The Lawyer shone the spotlight on 50 of the UK’s up-and-coming firms biting at the heals of the UK 100. Overall, the monetary value of the group was £623.4m for 2004-05. Scottish midsizer Biggart Baillie took the top spot, followed closely by Liverpool’s Silverbeck Rymer and Newcastle’s Watson Burton.
Christmas came early for 18 lucky firms, including BLP and Norton Rose, who were appointed to the London Development Agency’s (LDA) legal panel. The firms will start their three-year tenure next year as the agency gets to work on initial planning for the 2012 Olympic Games.
DWS demonstrated a bullish lack of regret as it lost most of its leveraged finance capability to Herbert Smith. Meanwhile, in the Netherlands, Nauta Dutilh introduced a bonus element into its remuneration system, while De Brauw Blackstone Westbroek affirmed its commitment to lockstep.
December has seen the end of the road for commercial set 199 Strand, which announced its dissolution after a number of departures affected critical mass. The set’s collapse surprised and saddened the bar, but not enough to stop rival sets from leaping in to recruit 199’s now homeless members.