Charge of the lit brigade
3 December 2012 | By Matt Byrne
12 December 2013
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17 March 2014
The Lawyer’s latest Top 50 litigation firms list shows that business for dispute specialists is roaring along while new in-depth detail reveals the winning strategies
Five years on from the biggest financial meltdown in living memory the global litigation market, largely powered by the fallout from that collapse, shows no sign whatever of losing steam.
Worldwide litigation revenues among the world’s largest practices continued to grow throughout the year. Hot areas such as international arbitration, white-collar fraud and internal investigations kept lawyers around the globe busy. And the cross-border disputes recruitment market continues to be one of the most fluid.
On top of these mega-trends there is always the occasional big one-off event (such as the Madoff affair) to keep the legal tills ringing. This year the mammoth litigation BP faced over the Deepwater Horizon oil spill came to a head, reaching a settlement last month that saw the oil company on the wrong end of the biggest criminal fine in US history as part of a $4.5bn (£2.8bn) deal. That case alone has kept legions of lawyers, notably those at Kirkland & Ellis, WilmerHale and Covington & Burling, particularly busy.
And in terms of the always busy lateral recruitment market, the collapse of Dewey & LeBoeuf has gifted a number of firms some significant talent as part of the diaspora.
The level of activity across the biggest firms is best illustrated by the revenue figures revealed in this year’s litigation top 50 - a unique measure of global litigation trends produced by The Lawyer and which has been significantly expanded this year (see methodology, page 29). During the financial period analysed by The Lawyer (calendar year 2011 for US firms and May 2011 to April 2012 for UK-headquartered rivals) the top 50 litigation practices in the world generated $23.05bn. That is an 8 per cent rise on the previous year’s total of $21.32bn.
In the present economic climate most firms would be more than satisfied with that result. Indeed, only nine of the top 50 firms registered a reduction in global litigation revenues last year. Not bad for a supposedly flat or shrinking legal services market.
Ups and downs
The largest drop in the table is posted by Bingham (down 7.9 per cent, from $471.4m to $434.3m) while other fallers include Dechert (down 6.7 per cent, from $278.9m to $260.3m); and Covington & Burling (down 6.1 per cent, from $332m to $311.6m).
On the flipside some firms showed significant year-on-year growth, with Clyde & Co, Squire Sanders and Quinn Emanuel Urquhart & Sullivan growing their disputes revenues by 38.2, 37.2 and 31.5 per cent respectively. Healthy increases all, but not in the same merger-fuelled ballpark as Norton Rose’s game-changing 155 per cent boost, from $164m to $418.3m.
DLA Piper also upped its litigation revenue significantly last year, growing it by 28.9 per cent, from 2010’s $784.4m to $1011.1m. The increase propelled it to the pinnacle of the revenue table, dislodging Skadden Arps Slate Meagher & Flom (which posted $974.2m, securing it second place) and in the process helping DLA Piper become the first firm since The Lawyer began ranking firms by litigation revenue to break through the billion-dollar barrier for disputes-related fee income.
While DLA Piper secured the top spot in terms of total revenue, the sheer number of lawyers it took to generate that $1bn-plus income plus the firm’s global office network is reflected by the level of fees generated on average by each person. By extension, this metric also offers a clue to the relative level of the profitability of a firm’s litigation practice overall and the complexity of the matters involved.
Indeed, what is immediately apparent is the extent to which the ranking changes when firms’ results are ordered by revenue per litigation lawyer (RPLL). On this ranking the table is dominated by the elite US firms, with Skadden reclaiming top spot and DLA Piper falling to 41st place.
DLA Piper’s RPLL was $720,000. Skadden’s was more than double that, at $1.69m. The firm in third place in the main total revenues table, Jones Day, looks much closer in terms of practice profile to DLA Piper than the firm it sandwiches, Skadden. At Jones Day, RPLL was $780,000, while revenue per litigation partner (RPLP) was $2.3m (roughly similar to DLA Piper’s $2.6m but strikingly different from the $7.7m at Skadden).
“One of our goals is to get [our RPLL] up,” says Bob Mathias, joint global leader and US chair of DLA Piper’s litigation practice. “In fact, at our litigation practice group conference a few weeks ago that was one of the things [Mathias’ co-head] Steve Sly and I talked about.”
These metrics are eloquent in what they reveal about the types of work being handled by the firms in the top 50, as well as the variety of strategies on display. At DLA Piper, for example, the firm’s US average revenue per lawyer (RPL) is $900,000, significantly higher than that of its UK LLP which has spots of higher leverage, numerous low-billing centres in Central and Eastern Europe, and proportionately more commoditised litigation work. In its litigation group as well as firmwide, the drive is on at DLA Piper to increase the quality of the matters it handles and of the lawyers it employs, a strategic shift it hopes will eventually be reflected in higher RPL figures across the firm as a whole.
It is a similar story at DLA Piper rival Jones Day.
The difference in these numbers is principally driven by the fact that a firm like Jones Day has offices all over the US while a firm like Skadden has a greater concentration of lawyers in higher-charging centres such as New York. Jones Day’s national US practice, for example, has four offices in Ohio. Charging a higher proportion of New York rates by having more of a firm’s lawyers based there is what pushes revenue per lawyer up. The same is true of London.
In the US, the world’s biggest litigation market and where the majority of firms on this list make their money, it is those with this element that will score high RPLL figures.
On the flipside, they will also be the ones with a proportionately higher cost per litigation lawyer.
The million-dollar dozen
It is worth highlighting that of the top 10 firms ranked by RPLL only two - Paul Weiss Rifkind Wharton & Garrison and Quinn Emanuel - do not feature in The Lawyer’s annual Transatlantic Elite ‘Sweet Sixteen’ group.
In total, 12 firms posted RPLL figures of $1m or more, with Freshfields Bruckhaus Deringer being the sole UK representative among the million-dollar dozen.
Global M&A powerhouse Skadden secures top spot on this ranking with an RPLL of $1.69m, up from $1.65m last year. Paul Weiss takes second place, with each of its 274 litigation lawyers generating an average of $1.57m.
At the other end of the scale, new entrant Clydes takes 50th place on the RPLL metric with $540,000, its $316.4m total litigation revenue being generated by 590 lawyers worldwide. Clydes does, however, make the table this year for the first time while other UK-headquartered firms, notably Allen & Overy and Linklaters, disappear.
Among the other new entrants, US West Coast technology specialist Cooley appears with a 2011 litigation revenue of $254m, some 45 per cent of its practice. Best known for its Silicon Valley hi-tech expertise (Cooley was counsel for Facebook in the high-profile patent infringement suit brought by Yahoo! in the Northern District of California, which settled in July this year), in October this year Cooley ramped up its East Coast litigation credentials when it hired the former co-chair of Chadbourne & Parke’s litigation practice, Scott Balber, as its head of financial services litigation. The move underscored Cooley’s - and the world’s top litigation firms’ - continuing appetite for a slice of the New York disputes action.
Other new entrants to the top 50 table include Steptoe & Johnson, which appears for the first time, with a litigation revenue of $285.3m, while Texas firm Vinson & Elkins puts in an appearance in 49th place, posting litigation revenue of $249m.
This year’s report contains more detail than ever before on the key sectors of the global litigation market. For most of the firms in the top 50 it is clear it is the sector that just keeps on giving, in terms of litigation dollars, is financial services. Mega-cases such as the Libor debacle have kept teams of litigators busy throughout the year.
“Financial institutions litigation and regulatory defence remain extremely active,” says Paul Weiss chairman Brad Karp, who combines his management responsibilities with a highly active litigation practice. “The activity in this space seems to be accelerating, if even possible, and I don’t see this trend abating any time soon.”
Certainly, Karp’s firm has made hay while the litigation sun has been shining. As one partner at a rival firm puts it, “Paul Weiss has risen with the financial sector’s collapse”.
The firm’s key client Citigroup has kept it, and Karp, busy over the past few years, while its success for Citibank has had a positive knock-on effect, allowing it to expand its defence practice to other clients such as UBS that traditionally may have gone elsewhere (in particular in the case of UBS, Davis Polk & Wardwell).
Elsewhere a raft of other firms have been kept busy on other major financial services disputes in recent months including the landmark $25bn settlement between federal and state attorneys and five banks (JPMorgan Chase, Ally Financial, Bank of America, Citigroup and Wells Fargo) over so-called ‘robo-signing’, a practice by which employees approve legal documents without reviewing their contents.
Debevoise & Plimpton partner Andrew Ceresney played a key role in the outcome, ultimately acting as lead liaison between the five banks, the US Justice Department and the state attorneys-general throughout the complex and protracted process. That said, Debevoise’s litigation head John Kiernan downplays the role financial institutions play in his firm’s practice.
“Of Debevoise’s 20 biggest matters for the last month only two are directly related to the fallout from the financial crisis,” reveals Kiernan, though he adds that those two cases are both worth in the region of $25bn each.
Latham & Watkins New York litigation chair Richard Owens is another who agrees that the hottest sector in town is financial services.
“Predictions of the death of credit crisis-related litigation and investigations were premature,” jokes Owens.
A former assistant US attorney in the Southern District of New York, who served as chief of its securities and commodities fraud task force, Owens knows as well as anybody that much of the current litigation action is centred on internal investigations, corporate fraud and regulatory matters. To that end Latham is looking to broaden its appeal to potential clients. Earlier this year the firm hired the former chair of Dewey’s white-collar practice Chris Clark, a colleague from Owens’ days in the US attorney’s office, as a partner. Clark’s arrival helped prompt a strategic rethink at Latham, with the firm looking to ramp up its activities on the buy side of distressed investments and potential regulatory matters.
“Obviously, we can’t be adverse to our client base on the sell side but we’re really making a push on the buy side because of our strengths in the regulatory area,” says Owens. “My gut prediction for 2013 is that we may see the first litigation and regulatory activity under the Dodd-Frank provisions relating to derivatives trading.”
One of the chief reasons for the continuing boom in financial services-related litigation - other than the obvious - is the increasing prominence of law firms on the other side of the table.
“The reason the plaintiff firms have grown so big is that the best firms are conflicted out,” snipes one defence-side New York litigation partner, somewhat disparagingly. “There’s been a rise in opportunities for litigation boutiques because of conflicts and firms like Quinn Emanuel and Boies Schiller are trying to cement the opportunities they’ve got. So you see Quinn Emanuel bring in [the former dean of Stanford Law Schooland chair of its national appellate practice] Kathleen Sullivan, which gives them the veneer of having an intellectual appellate practice.”
Paul Weiss’ Karp is less dismissive but in equal agreement when he says that several of the plaintiff firms are now much bigger players with generally higher quality lawyers.
“A new reality is that the plaintiffs’ bar has been attracting high quality lawyers from traditional ‘defence’ firms, many of whom have independent relationships with significant institutional players. As a result,” says Karp, “the recent wave of litigations targeted at financial institutions has been led by highly sophisticated plaintiffs’ lawyers representing highly sophisticated and well-heeled institutional plaintiffs.”
This has been a boon to a firm like Paul Weiss which, increasingly, is on hard-pressed GCs’ speed dials.
Quinn Emanuel New York partner Peter Calamari, the lead lawyer for MBIA over its multibillion-dollar claims against Bank of America arising out of collapsed residential mortgage-backed securities, largely agrees with some of these points. However, he qualifies them, pointing out that while his firm does handle a great deal of plaintiff work in the area of financial services “we also represent many traditional institutions, although we tend to be adverse to the banks”.
“There’s no doubt that the number and quality of plaintiff firms has greatly increased,” agrees Calamari. “As they say, the quality on ‘this side of the V’ has greatly increased in the past 10 years. And not just in terms of the amount of litigation or litigators, but also in terms of quality and respectability. There used to be a certain askance look at someone who brought a case rather than defended it, but that’s changed.”
Calamari adds that there is also a growing trend for a number of traditional defence firms to move over and start acting for plaintiffs, citing Patterson Bellknapp and DLA Piper.
“The emergence of litigation involving complex financial products traded between institutions rather than individuals who are simply buying and selling stocks is changing the playing field,” claims Calamari, adding the insightful comment that the growth of the biggest litigation shops such as Quinn and Boies Schiller is analogous to the hostile takeover-driven growth of corporate giants such as Skadden in the 1970s.
Hot out East
This year’s report contains more detail than ever on the key jurisdictions for litigation and arbitration. For each, The Lawyer has included the leading firms, the number of litigation lawyers each has in that location (plus, where possible, the year-on-year change in headcount) and an estimate of the revenue generated by the firm’s disputes practice.
Few places are hotter in respect of cross-border disputes and international arbitration right now than Hong Kong and Singapore. Our analysis of both markets reveals why. It also flags up who the current crop of leading players locally - among our top 50 global firms - are.
As Skadden’s Asia litigation and arbitration group head Paul Mitchard QC puts it: “both Singapore and Hong Kong are well accepted by international parties that are not from the Asian region as arbitration seats, and it is seldom the case now that a party from the US or Western Europe will insist on arbitrating disputes with an Asian party in its home jurisdiction”.
The disputes practices at a significant number of firms in The Lawyer’s top 50 are powered by weighty international arbitration groups. Indeed, some of the firms at the lower end of the total revenues table, notably Debevoise, are among the best-known names in the global arbitration market.
Shearman & Sterling, which failed to make the top 50 purely on revenues, has one of the best-regarded arbitration practices in the world. It is also one of the largest, with around 35 per cent of Shearman’s total $225m disputes revenue (or $78.7m) accounted for by arbitration, one of the highest proportions of any firm in the main table.
Major arbitration matters for Shearman recently include representing the Dow Chemical in an ICC arbitration in London against Petrochemical Industries Company arising from a collapsed $17bn joint venture to create the world’s largest polyethylene manufacturer. The case, which featured New York partner Henry Weisburg, Richard Kelly in London, Jonathan Greenblatt and Christopher Ryan in Washington and in Paris, and Shearman star Emmanuel Gaillard, underlines the cross-border nature of arbitration.
Debevoise was another firm that received numerous recommendations from its peers for the strength of its arbitration practice (for the first time, The Lawyer invited firms to nominate the firms considered to be leaders in litigation). On 5 October New York partner David Rivkin (along with Carmen Martinez of Covington & Burling) concluded a major arbitration for Occidental Petroleum Corporation against the Government of Ecuador, his second major case for the oil company in recent years.
The bilateral investment treaty (BIT) award, believed to be the largest ever, is expected to amount to $2.3bn with interest. It also follows a 2004 case in which Debevoise - and Rivkin - also successfully represented Occidental in a BIT arbitration against Ecuador in which it was obliged to pay Occidental approximately $170m, with interest.
The Lawyer’s full litigation top 50 report also includes a focus on other industry sectors that have proved at least as remunerative as financial services.
Take the wars over smartphones. Quinn Emanuel has been one of the firms at the heart of these epic battles, acting against Apple in a string of matters for the likes of Google, Samsung, Motorola and HTC. Indeed, Quinn served as lead counsel in more than 50 of these cases in US and German civil courts as well as before the ITC. It also helped co-ordinate additional cases in the UK, Australia, Italy and the Netherlands.
Staying with TMT but away from smartphones, Sullivan & Cromwell scored a win for one of its biggest clients after seven years of litigation (involving two trips to the Fourth Circuit Court of Appeals) and a nine-week trial late last year in Salt Lake City that ended in a hung jury.
Microsoft’s long-running antitrust lawsuit brought by Novell, which sought $3.9bn in damages (after trebling) came to an end in July 2012 when US district court Judge J Frederick Motz, sitting by designation in the District of Utah, granted the technology company’s post-trial motion for judgment as a matter of law, thereby dismissing Novell’s claim that Microsoft had engaged in anti-competitive conduct.
In the global energy and infrastructure market numerous firms handled headline-making cases. These include Baker Botts (which represents the Russian Federation in multiple proceedings relating to the former Yukos Oil Company); Vinson & Elkins (which represents Enterprise Products on the dismissal of complaint alleging breach of fiduciary duties over two deals worth more than $10bn); and Akin Gump Strauss Hauer & Feld which, in October this year, secured the first-ever favourable settlement for a foreign company in a US court under the Racketeer Influenced and Corrupt Organisations Act, winning a $447m settlement for its client Aluminium Bahrain against Alcoa.
While the sectors that are hot or not vary from year to year, one thing never seems to change, whatever the vicissitudes of the market or the identity of the firms in the top 50 table.
“One of the key questions for any firm is the extent to which they have English law capacity,” says the co-chair of Debevoise’s litigation department John Kiernan. “Now so many deals are being done with English law governing that for a US firm to compete effectively it really needs both US and English law capacity.”
Don’t bet against seeing Debevoise beefing up its English law capability in the coming months.
But there is also a mirror of this trend among some of the UK firms in The Lawyer’s top 50 list. Among the more obvious is the move by Herbert Smith Freehills (HSF) to open up in New York on the back of the hire of a group of litigators from Chadbourne. The six-partner team, which includes Chadbourne litigation chief Tom Riley, launched HSF’s New York office on 1 October.
Or take Freshfields. Since it launched its US litigation practice almost four years ago the firm has been steadily ramping up its capabilities on the other side of the Atlantic. Its most recent major hire was former Sullivan & Cromwell partner Michael Locavara, who joined this summer, while last year it brought in former Kramer Levin Naftalis & Frankel partner Tim Harkness.
“In three and a half years the group has gone from zero to 10 partners,” says Freshfields’ New York-based litigation partner and head of the firm’s global financial institutions litigation group Aaron Marcu of his firm’s US white-collar fraud and civil litigation practice. “The whole [US] litigation group is now 13 partners including international arbitration. Now, we want to grow the [12 lawyer, two-partner] Washington DC base - we need a deeper bench. We’re working on diversifying the practice.”
Put simply, the appetite for hiring top-tier cross-border litigators has never been stronger.
The Lawyer’s top 50 litigation firms: overview and methodology
The Lawyer’s top 50 firms by litigation revenue ranking is compiled by taking to the firmwide turnover of each firm’s most recently completed financial year and applying to this the proportion of revenue that was generated by litigation and arbitration across all groups and departments.
In most cases that proportion has been provided by the firms. In the remainder it was estimated.
This year The Lawyer is reflecting the continued growth
in litigation globally with a significantly expanded top 50 report. Today’s feature will be followed next Monday by a full Top 50 report available in PDF format that will look in more detail at the world’s litigation market and the lawyers that are playing the leading roles on the key cases.
It will include a focus on some of the key disputes centres around the globe (Geneva, Hong Kong, London, New York, Paris, Singapore and Washington); a round-up of the key cases in the most active areas such as TMT, energy, antitrust and international arbitration; and a focus on the clients that pay the bills of the firms in the table, with thoughts on litigation trends from in-house lawyers at some of the world’s top clients including Siemens, Nokia and Shell.
The full report also includes key data to help track the leaders in the world’s litigation market. This includes an expanded Top 50 table that includes the global litigation headcount for each of the firms, allowing The Lawyer to produce a revenue per litigation lawyer and revenue per litigation partner metric for each of the top 50 firms. Similarly, the report includes jurisdiction-specific headcount for 2010 and 2011 (where possible), illustrating which firms have been growing - or shrinking - their disputes resource as well as an estimate of the total disputes revenue each firm is generating in the seven key locations.