A Seven-Figure Payday for Boies Associates?
Quite possibly. From the American Lawyer (via NYLawyer.com (subscription)):
[David] Boies, the founder of Boies, Schiller & Flexner, loves the thrill of placing bets both at the casino and on big contingency cases.In November one of those bets paid off when Visa Inc. agreed to pay his client American Express Co. as much as $2.25 billion to settle an antitrust suit. The payday for Boies and his partners should be huge. For associates who worked on the case... their share of that fee depends on how each decided to roll the dice.
A thumbnail sketch of the compensation scheme:
The associates who worked on the American Express matter were offered a choice each year at bonus time. They could take the conservative route and have their annual bonus include the hours they devoted to this case. That way they'd be assured of getting some credit for those hours. The downside was that those hours aren't counted toward the contingency fee. One lawyer familiar with the matter says the firm offered this bonus option to appease associates worried that the case might lead nowhere.Plan B allowed associates to roll their hours over to the next year. If the case paid off, they would receive a share of the contingency fee proportionate to those hours. Ka-ching!
According to Boies, somewhere between a quarter and a half of the associates opted for the more risky approach. In hindsight, it was the right choice:
A young lawyer who placed her bets on the contingency fee could be richly rewarded. According to one former lawyer at the firm, an associate's share of such a fee is tied to hours billed. The firm takes the percentage of hours the associate contributed to the case, divides by five and applies that fraction to the fee premium. Boies confirmed that this formula is "basically right," although other factors could increase the associate's share. A hypothetical example: If an associate contributed 5 percent of the overall hours to this case and the premium fee (the amount above normal billing rates) were $100 million, the associate would get 1 percent of $100 million -- which is $1 million.
Now that's what we call a bonus. Seven figures makes even Wachtell bonuses look paltry.
As noted in Susan Beck's article, the case was filed in 2004, so it was kicking around for several years. But even if you spread $1 million out over four bonus cycles, it still comes out to a nice chunk of change. And presumably some of the BSF associates who worked on the AmEx matter also worked on other cases, making the AmEx bonus just a part of their total compensation.
Gamble Pays Off for Some Boies Schiller Associates [The American Lawyer via NYLawyer.com (subscription)]
(58) Comments
fizzles
Everything in hindsight looks clear. Since we never make choices in hindsight, there is only one way to judge choices- within the context of the circumstances in which they were made. Perhaps some of those associates didn't want to stick around for a 10 year appeals process.
That's fine, 2:32, but it's cool that Boies even gives this option to its associates. Quinn has made its partners very rich with contingency cases over the past 3-4 years, and associates aren't seeing any of it.
Doooooonnnnn't yooooouuuuu beeellllliiiieeeevvvveee ittttt!
Who the fuck would begrudge a partner for saying, "would you like to roll the dice on this one"? Shit, even on a 100K case, it would be fun. Oh yeah, 2:32 is an ass.
I was one of those associates. Needless to say, I'm quite happy since I spent a good deal of my work on this matter the last 2 years.
2:35, i agree. i'm sure that case was...demanding, and it's nice to see Boies spreading that fee around a little. for a fee like that (itself a pretty sweet deal for Amex), throwing a few mil to the associates that bought into the case seems like a wise investment. good for them.
You won't see a dime for a very long time.
2:48 - Are you a boy or a girl, gay or straight? Are you single?
Holy. Shit. That is awesome.
Congrats 2:48. Buy yourself somewhere nice.
I like this and hope more firms might do this.
Sure there are a lot of risk adverse lawyers (based on this 50-75%), but the option to bet on yourself with some portion of your money is great.
2:48, could you provide some ballpark numbers? are you looking at seven figures?
2:32, it took you three sentences to say exactly nothing.
As great as a seven figure bonus sounds, that's what I-Bankers and various finance types make on a regular basis during decent years. and all of those people who had pre-IPO stock options (think, the Google and Microsoft millionaires) -- this is chump change.
goes to show - if you want to be a lawyer for the big bucks, you're an idiot. if you're in it for the paper and the minutiae.. you've made the right choice!
2:32, it took you three sentences to say exactly nothing.
As great as a seven figure bonus sounds, that's what I-Bankers and various finance types make on a regular basis during decent years. and all of those people who had pre-IPO stock options (think, the Google and Microsoft millionaires) -- this is chump change.
goes to show - if you want to be a lawyer for the obscenely big bucks, you're an idiot (plaintiff-side class-action lawyers excluded). if you're in it for the paper and the minutiae.. you've made the right choice!
3:09 - you obviously know nothing about finance or banking. I am actually laughing out load that you think that young bankers, equivalent to junior - mid associates at law firms, make seven figure bonuses "on a regular basis during decent years."
2:56, it was a settlement.
i worked on this case for a different firm and it was awful.
Guys in my JAG unit back in Bhagdad used to roll the dice and make seven figure bonuses all the time, it was no big deal. It was not US currency, and the value was substantially inflated, but it was nonetheless seven figures and it was really super easy.
I'm a BSF associate who worked on the case. I opted for the contingency arrangement. I expect to take in around $1.6m after having put in around 3 years on the case. There's alot of grumbling at the firm, but anyone with half a brain would would have taken the gamble. It was more likely than not that we would win and the potential payoff was huge.
So glad I changed careers. Private equity rocks.
The parties settled. No appeal.
i call BS on 3:34.
Previous Litigator = How did you move from Lit to PE??
How'd yuo get from Lit to PE?
Also, are you working on the legal side or business side?
i worked on this case for a different firm and it was awful.
3:34 here. It's no BS. I also bought stock in Amazon with my barmitzvah money in 1996 so I am pretty loaded. Oh, and in August I put $500 on the Pats to go undefeated during the regular season, that paid out pretty well too. Oh, and one time in highschool, this guy I knew who was all into science and stuff built a crazy time machine. I went into the future to get a sports almanac, and . . .
3:34 probably doesn't work at BSF. I do and although I only briefly worked on the case can tell you that the firm has not provided even estimates of what the bonuses might be.
I actually DO work at BSF. It's been the most miserable experience imaginable being on this case. That said, my lunch conversation ended with an estimate of roughly $1.1-1.3M coming my way very soon ... and once I get it, believe me, I'm OUT. This is the payday many of us were longing for ... holding on this long was the hard part.
I'm at BSFlex (as we call it in Armonk), and I do all my work on contingency. Some weeks I'm sleeping on the couch in reception, others I'm cruisin' 684 in my Maserati. Sweeeeet!
To those responding to 2:32,
I was responding to Lat's "In hindsight, it was the right choice," and I stand by my post. It's easy to say now that it was "the right choice" or that anyone with half a brain would have taken it. My point is that even if you had half a brain, but didn't want to wait around for a payday that *might* not come for 10 years, then take the money now.
I don't begrudge the firm for offering the choice, and I don't begrudge those that chose (and now get) a payday. Good for them. But that's no reason to shit on the associates who took the money and ran.
4:14 / 2:23 = Ninja = Associate who "took the money and ran"
Dude, any self-respecting PIRATE would have bet on the contingency fee
3:09 (and 3:14 too) here.
Good point 3:20 - too bad I wasn't talking about only mid/junior associates in my original post. And most of the associates who will make that bonus in 2007 are mid-level to senior associates by now (given the case started in 2004).
still the point is, that such a bonus is only a big deal at law firms - chump change at any hedge fund, PE, i-bank, etc.
"when you assume something..."
4:34, you're right...that bonus is barely worth taking.
BRAVO! Take the money and run. This is always what's it been about. It's like doing M&A deals at Goldman and then getting a % of the deal on the back end. People should not hate on the associates for taking the deal. It's amazing that the firm even made the offer. Hopefully, the firm doesn't pull some snarky shit and fire people before the big payday for "performance based" issues or claim that you aren't in good standing with the firm.
Gettin' Paid, Dogg: Are you single? SJP
Yeah - Gettin' Paid, Dogg: You swing on the rainbow side? RM
2:48 - Congrats!
i worked on this case for a different firm and it was awful.
3:09, 3:14 and 4:34
Even taking your point that these guys are now mid/senior associates by now, are you really saying that MOST 3rd year associates / 1st year VPs at i-banks make $1-2 million "on a regular basis during decent years"?
Come on - boast all you want, but at least be truthful.
Here's my question: Is the contingency fee pot decreased by the earlier set bonus payouts? E.g., let's say there were 10 associates on the case, 5 took the guaranteed bonus, 5 took the contingency fee risk. Is the final pot decreased by the amount of guaranteed bonuses paid out in the past? Was it decreased by the amount of their actual bonuses or by the amount the guaranteed bonus associates would have stood to gain had they taken the contingency fee arrangement?
Just interested in how the economics of the deal worked. Apologies if I'm missing something fundamental.
Wow. Hey, where can a guy pick up a hard copy of the American Lawyer?
3:34, did all associates get the chance to work on this case? Or is there grumbling now because only some people got the chance to participate in a contingency case?
No - not every associate got to work on the case. It was completely chance. And no associate is taking 5% of the pie. There were tons and tons of people on the case, including roomfuls on doc review people. The idea that any associate's lodestar will be 5% of the total is farfetched.
No matter the precise calculations or whether bigger bonuses can be won elsewhere, big congrats to the BSF associates who rolled the dice on this one. Live the dream!
@2:32 your arguments do make some sense but there are two factors that you don't take into account that I think you should: (1) the tendency of giant cases like this to settle (that's why the plaintiffs firms have been successful) and (2) the fact that year-end bonuses were reduced only by the amount of time spent on this case and were not eliminated completely. You'd have to be an incredibly risk averse person not to gamble on one fraction of your year-end on a case like this, particularly if the case hasn't been thrown out at the initial stages.
Almost nothing about this article, how any bonuses are calculated or the figures represented has any basis in reality.
Talk about differential compensation. What a horrible thing to do.
5:49 is correct. Well put.
5:49,
I agree- if the associate wasn't itching to leave the firm. I'm just thinking of the associates who literally "ran", i.e., were planning on leaving BSFlextime (or whatever the name) for another firm/gig and/or couldn't stand the place and were biding their time until they were in a better position to leave. Better to take the money on your way out the door rather than leave it on the table.
2:32, I hadn't thought about that. Assuming that the firm doesn't pay out to those associates that have left the firm then I completely agree with you.
the settlement is a bad deal for amex. visa's exposure was a lot bigger. boies people shouldn't get anything (but since amex is stupid enough to accept this deal and pay a contingency then hey, enjoy)
I'm at BSF, but was not involved in the case, though I know many, many who were.
First, if you knew you were going to stay at BSF for 3-4 years, then it was a no-brainer to take the contingency. The reason being, the DOJ had already won the case in 2000 (affirmed by 2nd Circuit). In essence, Amex had the liability findings in hand, making this all about damages (which all analyst estimated in the $6B to $10B range before trebling). Anyone who didn't take the contingency either needed immediate money, or was leaving the option open to switch firms.
2) The big payment was needed for wasting half of your career. Very few associates recieved glamor detail. Nearly everyone other was buried in document review and discovery details for 4+ years, and they worked their ass off the entire time.
3) This saga is not over. MasterCard is still on the hook for all remaining damages in the case (including those of Visa and the banks, minus the settlement amout).
Funny how the article refers to David Boies as the gunslinging gambler. This case is being led by Don Flexner, not Boies.
The contingency option was a necessary perk. BSF & Amex couldn't afford to lose the main associates and partners who were driving the case.
For 6:44, not exactly true that BSF had the liability findings in hand. The merits of the 2001 trial decision were being re-litigated, but the DOJ decision definitely put Visa/MC behind the 8 ball, and eased Amex's burden substantially. That's why the contingency fee was much smaller than normal plaintiff arrangements (but still a lot of dollars).
6:49 and 5:49,
I know this is two days too late, but your assumptions are way off. They said that you could chose to have the hours worked on the case count towards your bonus hours, or not. If an associate had any real involvement in this multi-billion dollar litigation, they would be putting in several hundred hours, if not 1,000+ hours per year. That being said, they would not have made any bonus, unless they billed 3,000+ hours those years. They almost certainly received no bonuses those years.
If they only put in a hundred or so hours on the case, then their share of the contingency is negligable anyway. So, if you are a mid-level associate with two kids and huge student loan payments, you probably wanted that extra $50 - $75k a year guranteed. Just saying.
The million dollar figure is based on an associate contributing 5% of the hours to the case over years. In my experience a huge antitrust case like this does not have just 20 attorneys working on it over the course of four years. With 60 attorneys including partners whose hours are billed as well you get around 330,000 a piece. Spread over four years 82,500 a year is nice, but not outlandishly larger than other bonuses.
Also 8:48 is right, DOJ put them on the right track, but the real issue here was whether their were actually any damages to AMEX, which was doing stellar at the time of filing.
The million dollar figure is based on an associate contributing 5% of the hours to the case over years. In my experience a huge antitrust case like this does not have just 20 attorneys working on it over the course of four years. With 60 attorneys including partners whose hours are billed as well you get around 330,000 a piece. Spread over four years 82,500 a year is nice, but not outlandishly larger than other bonuses.
Also 8:48 is right, DOJ put them on the right track, but the real issue here was whether their were actually any damages to AMEX, which was doing stellar at the time of filing.
The article omits one thing: Mastercard is also a defendant in the suit. With Visa out, I imagine the pressure for MC to settle will increase so they're not left holding the bag if it ever gets to a jury (treble damages, gasp!). Using Visa as a ballpark, these numbers could double.