The Bear necessity

The Bear necessity Barclays’ decision last week to pull its New York lawsuit against Bear Stearns must be utterly galling for Linklaters.

The magic circle firm took a risk when it accepted the Barclays mandate to sue Bear Stearns, and as The Lawyer revealed (23 June), Linklaters lost out when Bear Stearns’ acquirer JPMorgan banned it from its panel. It was, and still is, a big deal for Linklaters – JPMorgan accounted for a quarter of the billings of the firm’s finance department.

But the Barclays-Bear Stearns case has broader significance for litigators. Exactly where is this welter of bank-on-bank actions that so many people ­predicted? Nowhere; and not likely to happen any time soon.

This has taken some firms by surprise. Clifford Chance’s decision to make 20 US litigators ­redundant last year was based entirely on the ­realisation that bank litigation wasn’t revving up. As we reported this year (5 January), a large proportion of the biggest cases of 2008 settled before reaching the doors of the court.

The basic risk-reward analysis that any corporate makes when deciding whether to take legal action has become hugely complicated over the past couple of years. In the old days the lawyers would weigh up the legal cost, the merits and the value of the claim. Nowadays it’s equally about franchise issues, ­reputation, shareholders and the press.

So where does it leave litigators? For those such as niche firm Edwin Coe, which has a track record in acting for disgruntled shareholders, there’s a steady stream of work. Anyone else touting around for bank litigation mandates is only guaranteed work if they have trusted adviser status with financial insitutions.

This in turn has repercussions for the sort of teams the firms are fielding.

Even with the residual need for initial investigatory work, this requires partner-level advice. It’s yet another brick taken out of the ­traditional partner-associate-paralegal pyramid that has sustained both career and charging structures over the past decade and a half. That pyramid model has been the basis of all law firm thinking since the last major recession of the early 1990s; yet another signal that leverage may be on the way out.

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