Biglaw, Musical Chairs, Partner Issues

What's Going on at McDermott Will & Emery?

Last week, the American Lawyer shined a spotlight on extensive partner departures from McDermott Will & Emery. According to Brian Baxter of Am Law Daily, a whopping 38 partners have left MWE in 2011 so far. Let's look at some of the departures, explore possible implications for the firm, and discuss what might be motivating the movement toward the exits....

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Last week, the American Lawyer shined a spotlight on extensive partner departures from McDermott Will & Emery. According to Brian Baxter of Am Law Daily, a whopping 38 partners have left MWE in 2011 so far.

Some of these defections have come in clumps. Most notably, as we mentioned back in January, nine partners left McDermott for Cadwalader, Wickersham & Taft, as part of CWT’s raid on MWE’s energy law practice.

But that explains just a quarter of the year-to-date partner departures from McDermott. Let’s look at some of the others, explore possible implications for the firm, and discuss what might be motivating the movement toward the exits….

Partner defections from large law firms are closely watched, since they can sometimes reflect on the long-term health and viability of an enterprise, in a “canary in a coal mine” sort of way. Here’s more info about specific McDermott departures, from Am Law Daily:

The latest defectors: Stephen Shahida, the head of the firm’s IP litigation group in Washington, D.C., who joined Weil, Gotshal & Manges on Monday, and Gary Moss, the head of the IP practice in London, who is leaving for British IP boutique EIP.

(There’s more about Gary Moss’s move to EIP in The Lawyer.)

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The departures of Shahida and Moss follow those of three other partners earlier this month: former New York–based restructuring cochair Geoffrey Raicht, who moved to Proskauer Rose; former IP partner and East Texas practice head David Stein, who joined Akin Gump Strauss Hauer & Feld; and Palo Alto–based tax partner Roderick Donnelly, who left for Morgan, Lewis & Bockius.

That’s an awful lot of movement for one month. And it may be part of a longer-term trend of shrinking partner headcount at McDermott, according to Am Law:

The lateral losses come amid declining revenues and a shrinking equity partnership (though not every partner who left this year had an equity stake). Am Law 100 figures show that McDermott’s gross revenue fell from $966 million in 2008 to $788.5 million in 2010. The firm, which like many others laid off attorneys and staffers during the recession, saw its equity partner numbers drop from 266 to 185 during the same period.

That decline in revenue represents a dip of about 20 percent. But, in fairness to the firm, MWE isn’t the only place that saw revenue go down between 2008 and 2010. There was a little thing called the Great Recession, you see.

In further fairness to the firm, the McDermott partner departures have been balanced out, at least in part, by new hires:

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“Looking at ins and outs can be misleading,” says litigation partner Jeffrey Stone in Chicago, who was elected cochair of the firm two years ago, along with New York–based litigation partner Peter Sacripanti. “There is an intelligent and strategic growth initiative going on here.”

Stone and Sacripanti say that 2011 has seen McDermott grow in head count (including new fee-earners), gross revenues, and profits. They also cite the addition this year of 25 lawyers — partners, counsel, and associates — to the firm’s IP practice. And they note that McDermott continues to keep costs down for itself and, by extension, its clients.

For example, McDermott recently picked up four lobbyists from Edwards Wildman Palmer, as well as two new partners for MWE’s German offices.

The cochairs declined to comment on specific lateral departures, but say that few of those who left this year held significant, firmwide leadership posts. Stone and Sacripanti also would not discuss which of the moves may have been byproducts of McDermott’s new strategic vision.

“I’m not going to say anything bad about any of our former partners, and I’m not going to comment on any individual,” Sacripanti says. “That’s not our style, and there’s just no reason to do that. Some [departures] were voluntary and some were involuntary, and I’ll just leave it at that.”

Understandable, but disappointing. It’s always fun when a law firm trashes a departing partner.

Jeffrey Stone and Peter Sacripanti declined to discuss specific departures, but Am Law Daily was more than happy to. The lengthy “Outbound Traffic” section of the Am Law article chronicles the 2011 year-to-date defections in excruciating detail, over nine long paragraphs. I love to read the Biglaw blow-by-blow, but even my eyes began to glaze over near the end.

What could be driving the departures? Here’s a concise summary of possible factors, from the ABA Journal:

[Former partners, legal recruiters and consultants] cited internal disagreements over strategy and direction. More specifically, they criticized:

• The law firm’s two-tier partnership structure, where lower paid, lower tier partners have to wait up to 15 years for equity status.

• Practice groups that hoard work rather than sharing with other practice areas.

• International expansion that increases overhead and puts upward pressure on hourly billing rates.

We may do a follow-up on goings-on at McDermott, if we can obtain additional detail about the departures. If you have inside information about goings-on at MWE, please feel free to email us, subject line “McDermott Will and Emery,” or to text us, at 646-820-TIPS (646-820-8477). Thanks.

As Lateral Losses Mount, McDermott Leaders Focus on Growth [Am Law Daily]
McDermott Picks Up Four Lobbyists from Edwards Wildman Palmer [The BLT: The Blog of Legal Times]
McDermott’s London IP litigation chief quits for boutique EIP [The Lawyer]
After Losing at Least 38 Partners This Year, McDermott Focuses on Strategic Growth [ABA Journal]

Earlier: Cadwalader’s Capture of Energy Lawyers from McDermott

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