Biglaw, Lateral Moves, Partner Issues, Partner Profits

Déjà Vu All Over Again: Peter Kalis Of K&L Gates Strikes Back At Law360

Peter Kalis has some sick burns for Law360, which he claims "is not taken seriously as a journalistic organ."

By  
on

Last week, after Law360 published a negative article about K&L Gates, Biglaw managing partner turned law firm consultant Edwin Reeser shared these thoughts with me: “You may expect the chairman, Peter Kalis, to engage with energy…. or avoid this challenge entirely. He isn’t a ‘half way’ type of personality, and there aren’t many out there as experienced and smart about leading a law firm. That does not mean the strategy was a success, but that he is to be respected.” Respected, yes, and feared. Today, Peter Kalis sent around a firm-wide memo that definitely “engage[s] with energy” with Law360. It reminded me of the harsh rebuttal that Kalis gave to Law360 the last time the publication went after his firm. Before we turn to the Kalis memo in all its glory, we’ll pass along some tidbits that our sources shared with us in response to our most recent story on K&L Gates — some positive, some negative. We’ll start with the negative and move on to the positive. The negative:

[Former lawyer in the] Chicago office here. For some reason, nothing has been published regarding the litigation department hemorrhaging partners (as well as associates). Since 2013 alone, the team has lost Ken Rechtoris (former head of the department), Peter Rush, Todd Pentecost, Robert Brown, John Morrison, John Roache, Josh Leavitt, Michael Hayes, Caroline Plater, Dawn Beery, David Rammelt, James Reiland, and David Short, among others. At least 5 associates have departed as well, none of which accompanied the departing partners. Prior to that, the majority of the Labor and FMLA group departed as well. It appears that the litigation department now mirrors the corporate department after a mass exodus of partners post-merger. There remains a handful of equity partners and less income partners. None of the partners have been replaced.

From a second source in the Windy City:

K&L Chicago has also lost people – [investment management lawyers] Paul Dykstra and Paulita Pike took their team over to Ropes & Gray a couple months ago.

Meanwhile, an Australian tipster told us:

You should also focus on the high level of partner exits out of the Australian end of the partnership. The estimate is 15 out of 65 partners have left in Australia since January 2015. The substantial majority of these partners are high performers, including a substantial number of equity partners. The Sydney office is the hardest hit with the departures. So a view that the Australian merger was unsuccessful from a U.S. perspective is likely more pervasive, and toxic, in the Australian end of the partnership. See this chart from the Australian Financial Review.

So those are the negative rumblings. Let’s hear what defenders of the firm said:

Sponsored

Re: your recent post on K&L Gates, management is pushing the story that most of the departures were performance issues — make-up fires for underemphasizing profitability during expansion. (This does not include the Dallas departures, which occurred because K&LG would not match comp.) Claim is that rainmakers are tired of subsidizing unprofitable partners/offices and want to up RPL and PPP. Expect more departures in satellite offices and additional office closings.

On that last point, a different tipster told us:

K&L Gates consolidating or closing small offices is cost effectiveness, not reason for negative conjecture about the firm.

One office we’ve heard might be on the chopping block: the tiny Moscow outpost, which has just seven lawyers. We reached out to firm for comment on this possibility. “As with many of our clients and some other firms, we continuously evaluate the geopolitical circumstance surrounding our presence in Moscow,” said Peter Kalis. And that’s not all Kalis said. Let’s look at his firm-wide memo, sent out earlier today. It begins:

In the last week or so, a false narrative about K&L Gates has surfaced in the online publication Law360, which is not taken seriously as a journalistic organ but which makes up for what it lacks in acuity with a broad daily distribution. If it were an inch deep, we might call it a mile wide and an inch deep.

Sponsored

Ouch. That’s much meaner than what he said about Law360 in his 2012 takedown, when he called it “a publication that gets it right more often than not.” Back to Kalis’s latest missive:

The source of Law360’s animus toward our firm is unclear. For those of you who were here in 2012, you may be inclined to think that it has something to do with the industry-wide humiliation we (with helpful reporting from Above the Law) inflicted on Law360. Where others see conspiracy, however, I tend to see negligence so I would opt for shoddy journalism over venality. It really doesn’t matter though. In the age of the internet, a false narrative about our firm must be and is taken seriously. Fortunately, some journalistic organs aim for the truth. With its global reputation, Bloomberg unsurprisingly is such a journalistic source. You will find appended below Bloomberg’s article on our firm that has just appeared. We would have written this story differently but it does have the not inconsiderable virtue of trying to be balanced.

Speaking to Bloomberg, Kalis claimed that K&L Gates is stronger than ever, that some of the recent partner departures stemmed from negative evaluations of partners (many of them income rather than equity partners), and that promotions of associates to partner have replenished the ranks. His memo from today provides more specifics:

  • We’re a firm of approximately 2000 lawyers and 900 partners.
  • Through June 30, our lawyer headcount is down 1.3% from our Business Plan for 2015 (formulated in Q4 2014).
  • Through June 30, our partner headcount is down 2.5% from our Business Plan for 2015.
  • Adjusted for foreign exchange fluctuations, through June our revenue is close to Plan for 2015 even given the marginally reduced headcount.
  • Adjusted for foreign exchange fluctuations, and as related at our July partner meeting, based on mid-year results and conservative assumptions our CFO is projecting a 15% increase in profit per equity partner in 2015.

He has this to say in the memo to critics of the Australia strategy (emphasis added):

I find especially annoying the shots being taken at our Australian merger by former partners who weren’t here at the time of the merger, haven’t benefited from it or from the extraordinary positioning advantage it has bestowed upon us in the critical Asia-Pacific Region, and didn’t contribute much while they were here. (That may be why they’re former partners.) Consider this:

  • From 2013 to 2014, Australian imported work from the rest of the platform grew by 52%.
  • From 2014 to 2015 (annualized based on results through June 30), the growth in imports is 21%.
  • From 2013 to 2014, Australian exported work to the rest of the platform grew by 41%.
  • From 2014 to 2015 (annualized based on results through June 30), the growth is 66%.

With about 30% of our firmwide revenue drawn from work sourced in one office and performed in another, much of which is international in nature, it seems clear that your law firm is substantially benefiting from the platform that we’ve all worked so hard to build.

In the last few paragraphs, Kalis stresses the firm’s well-known refusal to take on debt, the 50-plus lateral partners and government-affairs professionals who have joined the firm in 2015, and the 50-plus associates promoted to income partner on March 1. And this:

We live in a fishbowl and have always invited scrutiny. This is why we’re the only financially transparent US-based law firm. But we also return fire when fired unfairly upon. If someone importunes you with a false narrative about our law firm, therefore, please transfer them to me at [redacted] so that I can set them straight. Or, better yet, you might want to do it yourself. As to Law360, it should stick to reporting on cases where it has a 50-50 chance of being right.

We shared a copy of the Kalis memo with Law360 to see if the publication might have any comment. We haven’t heard back from them yet, but if and when we do, we will update.

So who will have the last laugh, Peter Kalis or Law360? We’ll continue to chronicle this catfight. You can share information with us by by email, subject line “K&L Gates,” or by text message, at 646-820-8477 (texts only, not a voice line). Thanks.

UPDATE (6:18 p.m.): Cat Fredenburgh, editor-in-chief of Law360, sent us this statement: “We stand by our reporting on the recent partner departures at K&L Gates. The firm was contacted for this story and declined to comment.”

(Flip to the next page to read the complete Kalis memo in its original form, without the interruption of commentary. It’s juicy!)

1 2Next »
Scissors Cut Money

Enter your email address to sign up for ATL's Layoff Alerts.

Topics

, , , , , , , , , , , , , , , , ,