Sacked partner takes US firm to court over unrealistic billing expectations.
The news that former Edwards Angell Palmer & Dodge corporate partner Stephen Connoni is suing his former firm, alleging that it fired him without the vote of the firm’s partnership and without paying monies owed to him, has highlighted the enormous pressure partners are under as the financial crisis continues.
Boston-based Edwards Angell hired Connoni in 2007 from K&L Gates, only to fire him a year later. The firm claims that the partner breached the terms of his agreement with the firm in regards to the business and revenue that he would generate.
It is understood that an agreement was made between Edwards Angell co-managing partner Terrence Finn and Connoni when the latter joined. This said Connoni would be paid $625,000 (£380,500) in 2008 so long as he generated $1.9m of new business and collected fees totalling $800,000. Edwards Angell maintains that Connoni did not keep his end of the bargain.
The case, which will be heard in New York on 4 August and which represents the first time a dispute such as this has been played out in public and in the courts, throws considerable light on the issue of revenue expectation during a recession. Consequently it will be among the most closely watched court battles of the year, at least in legal market circles.
Are we likely to see other partners take a similar path when evicted from the partnership due to poor performance?
“There’s a much larger issue here,” argues legal commentator Bruce MacEwen. “For firms that are evaluating partners on a performance basis this is relevant. It asks a lot of questions about expectations and what partners can realistically deliver during the downturn.”
Connoni’s case demonstrates an interesting point. Can firms truly expect partners to reach meaty revenue targets when the markets they service are in such disarray? And should they be able to penalise them when the downturn means those targets are missed?
“Clearly it depends on the type of firm that you work for,” says one Manhattan-based partner. “If you work at an ‘eat what you kill’ firm and you’re hired on the basis of bringing in a certain level of revenue, firms are more likely to consider your relevance to the firm if you’re not delivering.”
Connoni’s dispute is a very public affair. But since the collapse of Lehman Brothers last September US and UK firms have been culling associate and partner ranks behind the scenes ruthlessly in an attempt to remain profitable in spite of the downturn.
“Firms aren’t likely to admit that they’re stripping back the partnership so ruthlessly,” states one New York partner. “But that’s what’s been happening across the US legal market. It could be that more partners will turn to the courts if they feel they’ve been unfairly dismissed.”
Lateral partners at eat what you kill firms hired just before the crisis took hold are more at risk. Those hired on the basis of a significant book of business could be in danger of being edged out of the partnership.
“It really is a question of law firm practices changing,” reveals a US partner. “We need to adapt the way we manage practice groups and revenue generation from our partners. How can you expect them to bill to the same level?”
Not all US firms are being so strict with revenue generation. Chicago-headquartered firm Mayer Brown has been quite open about its lateral hiring strategy during the credit crisis.
The firm is the midst of building up its corporate and finance capabilities on both sides of the Atlantic and its management appears to be more realistic than at some of its competitors. London partner Jeremy Clay is clear that his firm is searching for partners skilled at business development in preparation for the future, when activity returns to more healthy levels.
It is an approach approved by impartial observers, at least.
“Asking for excessive revenue at the moment is like asking a labourer if he can lift 200lbs by himself,” insists MacEwen. “It can’t be done.
“On the face of it, it seems the guy [Connoni] has a point. What can you do under these market conditions?”
If Connoni’s claim in the Edwards Angell’s test case is successful, one can expect similar legal action levied against firms where other partners have also been culled as a viable course of action.
The full details of this case are yet to be revealed. But from a law firm management perspective, surely looking to the future and rebuilding is a more constructive strategy than punishing partners who have failed to meet pre-crisis targets?