Boutique Law Firms, Intellectual Property, Kenyon & Kenyon, Partner Issues

Will This Law Firm Survive 2016?

There have been a lot of partner departures, but the firm's leader claims that things are looking up.

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technology 2016 new yearHere’s my bold prediction for the new year: a brand-name law firm will cease to exist.

Okay, that’s not a very bold prediction. Law firms come and law firms go. The real questions are which law firms will vanish, and under what circumstances?

One firm that legal recruiters and rivals have been preying upon lately is Kenyon & Kenyon, the once-thriving intellectual property boutique. As we’ve chronicled in these pages, over the past year or so the firm has conducted layoffs and lost partners to competitors. Here are the latest defections, as reported by Casey Sullivan for Big Law Business:

Orrick Herrington & Sutcliffe has hired three intellectual property partners from Kenyon & Kenyon, adding to its team of 100 IP litigators worldwide.

At the same time, the move takes another piece out of Kenyon’s depleting roster of lawyers, which in November saw three other IP litigation partners join Shearman & Sterling. A number of other lawyers joined competitors throughout 2015 and the firm named a new managing partner in September.

The most recent departing group, which starts work at Orrick on Monday, consists of partners Richard DeLucia, Elizabeth Gardner and Antony Pfeffer. The group also includes Patrick Herman, who joins Orrick as of counsel.

This news doesn’t come as a shock to us. Back in December, a tipster told us:

Three more partners are in their way out – DeLucia, Gardner and Pfeffer.

Associates and staff are leaving in droves. Many associates are going to firms where the recently departed partners have landed. The executive director, director of library, lit support manager and personnel in the top HR positions have all left for greener pastures.

BakerHostetler was, as of a few weeks ago, a firm talking to Kenyon about a merger. Now they poached two partners [Robert L. Hails Jr. and T. Cy Walker.] in D.C. – guess they weren’t interested [in a full-on merger]. What happened to a no-raid clause?

We’ve seen this sequence of events play out before. A troubled firm experiences partner departures. The troubles lead to more departures. Stronger firms initiate merger discussions but instead just cherry-pick specific partners or groups, further exacerbating the situation. Eventually what’s left of the distressed firm either disbands or gets absorbed into a more stable firm.

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What will happen at Kenyon? I chatted this afternoon with Edward Colbert, who took over as managing partner in September 2015. (Yes, as we’ve mentioned before, he’s the brother of television host Stephen Colbert — but as I learned when we spoke by phone today, Ed pronounces his surname “COLE-bert,” and the “t” is not silent.)

Colbert sounded optimistic about the prospects for the firm in 2016. He said the firm projects profits per partner this year to reach or exceed 2014 levels.

“We went through some restructuring last year because of general changes in the legal business and specific changes in IP practice,” he said. “I hate terms like ‘right-sizing,’ but I will say we have been structuring the firm to be more efficient and more profitable, and to deliver excellent service to our clients at the right prices. We have tried to correct our overcapacity issues.”

Overcapacity — is it the firm’s position that many or most of the recent partner departures were desired rather than opposed by Kenyon? (Cf. Dewey & LeBoeuf’s claim, back in March 2012, that some of the many defections it experienced were “consistent with the firm’s strategic planning for 2012.”)

Colbert diplomatically declined to discuss specific defectors. He did say, however, “Some partners who were my partners for many years, friends of mine personally, were not the most productive recently. I hope they’re more productive at their new workplaces.”

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“The bulk of our business — the clients, the work — remains here. For our lawyers, their capacity is being used up more, and hours per attorney and profitability are going up.”

Noting that other firms have been letting go of IP lawyers in response to the slowdown in patent litigation, Colbert said, “We are now doing the same; we’re just late to the party. We are not one of these huge mega-firms, we’re not an Am Law 100 firm, we’re not a corporation — we’re a partnership, and we really tried to assist partners to reinvent themselves and to get more business. Some of them have, some of them haven’t, and we’re now at the stage where we must restructure the ranks.”

I inquired into headcount, noting that the Kenyon website reflects around 85 lawyers. Colbert said that for an IP firm, one should really take into account all timekeepers, including patent agents and scientific advisers, and if you do that Kenyon’s headcount is closer to 100. It’s certainly down quite a bit from a decade ago, when the firm had more than 200 lawyers — but that’s the case for many (very successful) firms, Colbert said.

I asked Ed Colbert about prior reports of financial challenges at the firm — which he pushed back on.

“Partners are getting their draws, employees are getting their paychecks, and associates got their annual raises,” he said. “It’s business as normal — the ‘new normal’ for the legal profession, where we’re at a smaller size but working more efficiently.”

What about lawyer attrition and partner defections? Does he expect more lawyers to head for the exits, or does he think it’s more or less done? He gave a response of commendable candor.

“Who knows? Nothing is perfect,” he said. “There are some people who have left that we wish had stayed. But generally speaking we are at about the right size now. There might be people who find they have better opportunities somewhere else. And we are always looking for laterals in areas where our attorneys are completely slammed. So it’s not just about size, but size in the right practice areas.”

And what about merger talks? Has Kenyon been having discussions about possible transactions, whether with BakerHostetler or anyone else? Colbert declined to comment on specific potential partners, but offered some general comments.

“I’ve been a partner at this firm for 26 years,” he said. “There hasn’t been a month in those 26 years in which we haven’t been approached. In the past I’ve told firms, including Am Law 50 firms, that we’re just not interested. But times have changed, and it might be more sensible to have an international platform for our practice today. So when we get approached now, there’s more of a willingness to see if it might be appropriate.”

“I’m perfectly willing to talk to people who want our brand — we are still the gold standard in IP, and I think IP is poised to come back by the end of 2016. We had to go through a sorting-out period in the wake of the AIA [American Invents Act] and [the Supreme Court’s decision in] Alice. Many litigations were stayed due to IPRs [Inter Partes Review proceedings] — but now those IPRs are starting to get turned down, and we are back in court.”

Kenyon as a firm has a long and distinguished history, tracing its roots back to 1879. Following up on his comments signaling greater receptivity to a merger, I asked Colbert: do you believe the firm can continue as an independent entity?

“Absolutely,” he said. “We are positioned now to keep going for another 136 years. The question you have to look at is, ‘Is it the best thing for the firm?’ I will look at anything that makes rational business and economic sense in the long term. We could stand alone, or we could decide a merger is in our long-term best interest.”

So Kenyon partners might decide, then, to end their storied, almost 150-year-old firm, if that’s what’s in the best interest of the lawyers and the staff who are there?

“The firm is made up of its people,” Colbert emphasized. “What’s good for the people is good for the firm, and vice versa.”

“You never know what’s going to happen,” he concluded, “but even a merger or combination doesn’t mean your brand disappears. There are circumstances where the brand endures after that, perhaps in the name of a specific office or the successor firm.”

“And the people who are calling us up are very interested in our brand.”

Orrick Beefs Up IP Ranks With Kenyon Hires [Big Law Business / Bloomberg BNA]
Two More Attorneys Leave Kenyon As Merger Rumors Swirl [Law360]

Earlier: Kenyon & Kenyon: The Incredible Shrinking Law Firm
What’s Going On At Kenyon & Kenyon?
The Biglaw Firms With The Biggest Drops In Attorney Headcount (2015)
Is Patent Litigation Dead? What Gives?

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