The management at Coudert Brothers entered a series of crisis meetings last week as exiting partners demanded the dissolution of the firm in an attempt to extract capital they fear will be lost if the firm disintegrates.
The firm axed three offices last week, while others and associated firms are now reconsidering their relationships with the Coudert network.
The Lawyer understands that Baker & McKenzie (B&M) and DLA Piper Rudnick Gray Cary are battling it out to cherry-pick any remaining desirable practices.
The Lawyer can also reveal that departing partners will be forced to wait for up to three years for their capital contributions, which are repaid quarterly over a 36-month period. Thirty-six partners have fled Coudert in the last three months, leaving the US firm with the prospect of repaying up to $10m (£5.5m) in capital contributions.
The firm’s financial woes could have been eased by Orrick Herrington & Sutcliffe, which offered to buy Coudert’s London office, including its lease, but the offer was spurned by Coudert.
The Berlin, Frankfurt and San Francisco offices were closed last week, with the firm claiming that it was concentrating on its core European strengths in Brussels, London and Paris; although following the exodus to Orrick the firm currently has no London-based partners.
On its Russian practice, a spokesperson for the firm said: “Richard Dean continues to lead the firm’s industry-leading Russia practice, which is serviced out of multiple Coudert offices.”
Executive board member Ed Tillinghast told The Lawyer: “The slimming down process is not just about securing a mergerÃ¢Â€Â¦ The firm grew a great deal in the late 1990s and the process that we’re going through now is to focus on where we’re doing well now.”
Tillinghast acted swiftly and ruthlessly last week, phoning Germany out of the blue and telling it to find a new home.
“We were meeting with headhunters just a week ago to add laterals following a decision at Coudert to build Frankfurt as one of the firm’s key strategic pillars, next to New York and London,” said German managing partner Michael Magotsch.
B&M and DLA Piper refused to deny that they were in talks with Coudert. A spokesperson at B&M said: “Like all leading law firms, we’re continuously studying and exploring the market for strategic growth opportunities. At any given time, we may be in discussion with a number of individuals, practice groups or firms around the world.”
The entire London office of Coudert is due to join Orrick Herrington & Sutcliffe today (20 June).
Coudert made last-minute offers to four corporate associates and four support staff last week in an attempt to retain a London presence. All of the firm’s associates and support staff were due to join Orrick under the Transfer of Undertakings (Protection of Employment) Regulations, following eight partners who resigned in May. Despite threatening to sue the partners and Orrick, Coudert backed down.
Executive board member Edward Tillinghast, Singapore corporate partner Oliver Wright and Sydney corporate partner John Chrisman have all pledged to spend a “substantial portion” of their time in London.
Coudert is left with just three offices in its homeland – New York, Washington DC and Los Angeles (LA). It closed the San Francisco office last week following a series of partner defections and a failed property deal that cost the firm almost $3m (£1.7m).
San Francisco partners William Herbert and James Topinka were abandoned just two months after Topinka declared that he was comfortable with the departures of three partners in June and that the office had enjoyed its first profitable quarter for almost two years.
Coudert closed its unsuccessful San Jose office two and a half years ago and in January it closed Palo Alto. It is left with around 100 lawyers in its New York HQ, approximately 20 in DC and 30 in LA.
Coudert is to focus its European practice on the London, Paris and Brussels offices.
The 23-partner Brussels practice – one of the firm’s most profitable – has been in discussions with management to overhaul its remuneration system to reflect the strength of its contribution.
The fate of Coudert’s Russian practice is hanging in the balance after the departure of its entire partnership to Orrick Herrington & Sutcliffe. The Russian operation has seen a wave of departures in recent months, including the exit of a five-lawyer team to CMS Cameron McKenna and the departure of highly-rated senior associate Derek Bloom for Golden Telecom. The future of the firm’s 17 Russian lawyers was uncertain at the time of going to press, with some mooting the continuation of a local presence through the promotion of senior associates to the partnership.
Coudert is to close its six-partner Frankfurt office and single-partner Berlin arm later this year, bringing to an end its presence in Germany.
Coudert was delighted after beating Pinsents (now Pinsent Masons) to snare top Frankfurt firm Schürmann & Partners in 1999. But Coudert’s German practice has since been dogged by flagging profitability and a constant exodus of partners. In January 2004, Coudert lost the bulk of Munich to US rival Dechert, forcing it to pull out of the city. Despite the catalogue of departures, though, Coudert remained committed to rebuilding its German practice until just last week.
“We did not make the right choice. We were ready to sign with Pinsents and that would have been much better,” said a former Coudert and Schürmann partner.
Asia Pacific and Australia
Coudert’s seven-office Asian arm is relatively strong. Indeed, the Chinese practice is the jewel in its crown and would be attractive to raiders. However, cracks are beginning to show and, according to one source, the firm’s 11-year-old Bangkok office is now in discussions with management over its future.
Coudert boosted its presence in Thailand in November 2004 after picking up two partners and a team of associates from Freshfields Bruckhaus Deringer‘s defunct Bangkok office.
Meanwhile, disquiet over Coudert’s strategy and management has seen no fewer than five partners quit the Sydney office in the last eight months. Nevertheless, Sydney, one of Coudert’s largest operations, retains an impressive real estate capability.