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Litigation Problems at Patton Boggs Lead To Lateral Leakage

Ed. note: This is the latest installment in a new series of posts on lateral partner moves from Lateral Link’s team of expert contributors. Today’s post is written by Michael Allen, the Managing Principal of Lateral Link, who focuses exclusively on partner placements with Am Law 200 clients.

Patton Boggs, the preeminent Washington-based lobbying law firm, is reeling from a slew of recent events, hinging upon their multi-million dollar litigation with Chevron. In 2010, the firm released a memo entitled “Invictus,” proudly proclaiming their new endeavor: the representation of Ecuador in a long-contested battle over Texaco’s culpability in creating nearly one thousand pits of oil in the jungles of Ecuador — a liability Chevron inherited when it purchased Texaco in 2000 for $36 billion.

But Patton Boggs’s plan to quickly enforce a settlement soon became more challenging than anticipated. Playing hardball, Chevron has continuously called Patton Boggs’s bluffs…

This case has had a tangible ripple effect on the frequency of lateral movements to and from Patton Boggs in the last few years. According to Leopard Solutions, Patton Boggs lost 7 and 11 lawyers to rival firms in 2008 and 2009, respectively. From 2010 (after the release of the Invictus memo) to July 2013, they lost a total of 111 attorneys (an average of 28 a year), including 47 in the year to date. Despite a small sample size, this represents a 300 percent increase in lateral movements away from the firm since its decision to fight Chevron in Ecuador. Nevertheless, the firm did make a substantial effort to offset these losses by bringing in 53 attorneys — many of them with specialties or practices in Energy, Environment, or Latin America. Still, these moves resulted in the firm losing a net total of 52 attorneys in the last three years, including a net loss of 43 since the start of 2013. Of the attorneys that have left Patton Boggs this year, 36 percent either practiced in or specialized in Energy or Environment, which is approximately 25 percent of the department as a whole.

Moving forward, when allocating resources for growth, Patton Boggs must take into consideration the potential windfall from its fight with Chevron, while simultaneously increasing efficiency and attracting enough young talent to weather any outcome in this protracted litigation. Patton Boggs has already made inroads by trimming 65 (or perhaps more) purportedly inefficient employees, and by reexamining its employee compensation formula.

In a recent Am Law survey covered by Above the Law, Patton Boggs ranked ninth on a list of firms based on partner pay spreads (the gap between the lowest partner pay and the highest partner pay). According to the survey, the lowest-paid partner at Patton Boggs makes 1/18th of what the highest-paid partner makes. Patton Boggs’s new employee compensation formula seeks to inject fresh life into senior-level management. Additionally, the new formula will attempt to ease senior partners’ transitions into retirement and discontinue a practice that allowed senior partners to benefit from business from a client they introduced, even after they no longer represent that client.

Patton Boggs is hedging its future on enticing younger attorneys to overlook the potential fallout from the Chevron case to counter its recent lateral losses. The firm’s future is not so bleak; its nominal Per Partner Revenue increased by $65,000 per partner, per year, from $625,000 in 2010 to $690,000 in 2012 — a 10.4 percent increase. Even after being adjusted for inflation, real revenue per partner still increased 4.85 percent — from $669,277 in 2010 to $701,750 in 2012. It will not be until the release of the firm’s 2013 financials — which the firm insists will be comparable to 2012 — that we will know the full extent of all these lateral moves. If Patton Boggs can pull off a quiet or graceful exit from the Chevron case, there is reason for cautious optimism; if not, then their employees can likely expect more layoffs.

Disclosure: This series is sponsored by Lateral Link, which is an ATL advertiser.

Lateral Link LLP is one of the largest legal recruiting agencies in the world, with 13 offices in the United States and Asia. Lateral Link has been recognized by the Wall Street Journal, The American Lawyer, the ABA Journal, The Daily Journal, and the National Law Journal for its innovative approach to legal placement. Lateral Link recruiters are comprised of former practicing attorneys who have consistently succeeded in placing partners, associates, general and corporate counsel into some of the most reputable law firms and organizations in the world.