Now that both partnerships have voted, the merger between Sonnenschein and Denton Wilde is a done deal. But the ride between now and the effective merger date of September 30th could still be bumpy.
This month is a rough one for former Thacher-ites. Many are still jobless. The last of their WARN-mandated paychecks have come. And first year associates are being reminded that they still owe the firm money, and the firm wants it now.
Legal Times reports that Thacher Proffitt & Wood is putting a call out for the $10,000 loans the firm made to first year associates to cover their moving and bar expenses in 2008. The members of Thacher’s dissolution committee place the blame at the bank’s doorstep:
Omer “Jack” Williams, a former Thacher managing partner who left retirement to chair Thacher’s seven-member dissolution committee, says associates knew the money was a loan when they took it. “In the exit interviews, we made it clear we anticipated they would pay their loans back,” he says.
Former managing partner Paul Tvetenstrand, now a partner with Sonnenschein Nath & Rosenthal, says Citigroup — which held the firm’s debt — made the decision to go after the money. “The bank has asked for those loans back. It’s not the firm. The firm is in dissolution,” he says. Williams says the committee wasn’t explicitly ordered to pursue the associates for repayment by the bank, but “the situation is the bank is our secured creditor, for better or for worse. And our main obligation as the dissolution committee is to collect all receivables.”
Hasn’t Thacher done enough to ruin the lives of its 33 first year associates, asks one of those in the payback bind. One of the Thacher debtors wrote in an e-mail to us:
This ‘exit interview’ was really just them collecting our Blackberrys and then telling us they were doing us a favor by not making the balance of the loan due immediately. But they said they expected us to make the same payments ($833.33 a month) until the balance was paid. I told them that offer was completely ridiculous – you expect me to pay the same amount when I’m making nothing as I was when I was making 3K/week? You guys are crazy. Every other first year that took the loan had pretty much the same meeting – some people were actually brought to tears.
We believe that case law is on our side from the minimal research we have done. It is our understanding that a loan like this is made in anticipation of employment – so cessation of employment is not a justifiable reason for calling the loan. Furthermore, it’s not as if I have this money in some interest-bearing account somewhere – it cost me a lot to move out here and to take the bar and to get set up. We were essentially used in a scheme to keep the firm sale-able: they wanted it to appear like everything was running smoothly while they were courting buyers.
The Legal Times estimates the total to be collected from the 33 former associates at $300,000 to $350,000. That’s a drop in the bucket compared to the $32 million total that the firm owes Citibank.
Thacher Proffitt & Wood made its dissolution official last month. Last Monday, the firm officially rescinded offers to approximately twenty 3Ls who were bound there after graduation.
One would-have-been Thacherite said no one was surprised to have the offers rescinded but that the soon-to-be law school graduates are still “bummed.”
The “firm did it right.” The partners in charge of Thacher’s summer associate program called all of the 3Ls on Monday. With the firm bound for nonexistence by May, the reason for the call was fairly obvious. The partners offered to do anything they can to help: forward resumes on, provide references, resend offer letters, etc. (Though those not rescued by Sonnenschein may be a bit busy looking after their own job prospects.)
Law students who placed their eggs in the baskets of failing firms Thacher, Thelen Reid, and Heller Ehrman may no longer be looking forward to cap-and-gown day. One Thacherite-would-have-been talked to us about what it’s like to see one’s Biglaw prospects dissolve. “When you take an offer from a 150-year-old firm, you think it’s pretty solid,” said the UnThachered 3L.
Heller Ehrman’s bankruptcy has been a long time coming. The firm made the news official on Sunday:
Today the Dissolution Committee of Heller Ehrman LLP, in Dissolution (the “Firm”) authorized the Firm’s counsel to file a Petition for Reorganization under Chapter 11 of the United States Bankruptcy Code. We took this step only after very careful and extensive analysis.
But the firm’s Dissolution Committee also notes:
The Dissolution Committee’s decision to conduct the continued wind down of the Firm under the jurisdiction of the Bankruptcy Court was not prompted by the Firm running out of money. On the contrary, thanks to the dedication and tireless efforts of the Firm’s remaining employees who comprise the Liquidation Team, the cooperation of the Firm’s former shareholders, and the positive responses received from hundreds of the Firm’s former clients, collection of accounts receivable over the past three months has been strong. And going forward, we continue to expect collection of tens of millions of additional dollars.
After the jump, we post the full Heller memo and check in with Thacher Proffitt.
As Thacher Proffitt prepares to shut down, the “how did this happen” reports can begin. AmLaw Daily notes that while other firms had banner years in 2007, Thacher was already struggling:
Thacher entered 2008 already struggling financially. The firm had suffered a dismal 2007, with gross revenue growing only 1.6 percent to $194.5 million and profits per partner dropping 22.1 percent to $1.02 million. The year to come didn’t treat the firm much better, especially come September, when several bank clients either collapsed or went into hasty mergers.
As we noted many times in these pages, a merger with King & Spalding had been the best hope for TPW to remain in business:
For months, Thacher had tried and failed to convince King & Spalding to acquire the firm outright. Discussions with the Atlanta-based firm to instead hire a chunk of its lawyers had plodded along for weeks. A deal to hire about 75 lawyers was close, but still not final, two sources at the firms say. With time running out for the 150-year-old firm, Thacher’s lawyers began talking to others, including Sonnenschein.
At least Sonnenschein was able to step in a save a lot of jobs. But after the jump, things are still pretty somber over at TPW today.
Seriously, though, it’s a good sign for the firm, even if it may not be a lucrative engagement — the Treasury press release reports that “total cost for the firm’s services is not expected to exceed approximately $500,000.” It raises the possibility that rumors of the firm’s demise are greatly — well, maybe not greatly, but somewhat — exaggerated.
Hard facts are difficult to come by, especially when the firm does not respond to requests for comment. But a tipster reports that Thacher Proffitt & Wood did have an associates meeting yesterday (as expected). At that meeting, we understand that associates were informed that TPW’s litigation department would close on December 31st.
No mention was made of any severance package that would be offered to displaced associates, nor was there discussion of any WARN obligations for the firm. TPW representatives did not respond to requests for comment last night.
According to our tipsters, whether or not there is a rescue by King & Spalding, Thacher’s litigation department won’t be a part of it. Word on the street is that the head of litigation is leaving TPW tomorrow.
The head of TPW’s litigation department is Richard Hans. Our sources tell us he is still with the firm during the merger negotations with K&S, but his contact information is no longer available on TPW’s website.
We will keep you posted with any additional TPW news as it comes in. If you have info to share, please email us (subject line: “Thacher Proffitt”). Thanks.
Update (10:25 AM): Multiple tipsters report that Richard Hans is leaving TPW for DLA Piper, his former firm. Word is that he will be taking a few attorneys back with him.
[Thacher's] overall headcount is down more than 100 lawyers compared to last year — and so are its profits. Profits per partner fell more than 22 percent in 2007 to $1.02 million, according to the Am Law 200.
The firm has had a constant stream of high-profile departures, including its vice chairman Thomas Leslie, who decamped for Greenberg Traurig in October, and Washington managing partner Richard Schaberg, who left for Hogan & Hartson’s D.C. office last month. The New York consultant and another individual familiar with the discussions say that if the deal falls through, Thacher Proffitt will likely go under.
We don’t have much more information about the K&S/TPW talks, but based on sources at Thacher, something significant is about to go down at the firm — and dissolution is one possibility.
According to our tipsters, whether or not there is a rescue by King & Spalding, Thacher’s litigation department won’t be a part of it. Word on the street is that the head of litigation is leaving TPW tomorrow.
Atlanta-based King & Spalding is in talks to acquire most, but not all of Thacher Proffitt & Wood’s lawyers, say two sources aware of the discussions. In order to avoid dissolution, New York-based Thacher hopes to find a partner to acquire it, these sources say.
One New York legal consultant says the discussions have been ongoing for the past three to four months, and that the firms hope to reach an agreement by year-end. The consultant says King & Spalding is considering taking on about 100 of Thacher’s 195 lawyers, but that it’s not yet clear which practices and offices the 100 lawyers would come from. “There’s a tremendous amount of uncertainty about who’s going to be invited to the party,” says the consultant, who asked not to be named.
Not sure we’d call it a “party.” But the alternative to a K&S acquisition isn’t appealing:
[Thacher's] overall headcount is down more than 100 lawyers compared to last year — and so are its profits. Profits per partner fell more than 22 percent in 2007 to $1.02 million, according to the Am Law 200.
The firm has had a constant stream of high-profile departures, including its vice chairman Thomas Leslie, who decamped for Greenberg Traurig in October, and Washington managing partner Richard Schaberg, who left for Hogan & Hartson’s D.C. office last month. The New York consultant and another individual familiar with the discussions say that if the deal falls through, Thacher Proffitt will likely go under.
It’s worth noting that TPW has placed its New York headquarters up for sublease (as reported by Lindsay Fortado and David Levitt of Bloomberg). If TPW is seeking a subtenant for all five floors it leases at Two World Financial Center, then one has to wonder if the firm plans to continue operations (at least in its current form).
As for King & Spalding, it’s growing strategically, despite the downturn. The firm recently snagged three energy partners from Kirkland & Ellis. KS hopefully has room in the lifeboat for Thacherites seeking a new home.
Thacher Proffitt & Wood has been struggling for some time. A memo sent by managing partner Paul Tvetenstrand to TPW staff the Wednesday before Thanksgiving provides the latest evidence of the firm’s faltering state:
From: Paul D. Tvetenstrand
To: Non-legal staff
As you are aware. The past year has posed many challenges for the firm given the downturn in the economic climate which has affected our clients and ultimately the firm. Unfortunately given this continuing downturn the firm will not be able to pay any bonuses or year end service awards this year. We truly appreciate the contributions each of you has made in these trying times and we wish we were able to recognize each of you as you deserve.
Paul
I’m not at all sure why TPW tried to bury this information within the Thanksgiving news cycle. Did they think TPW staffers were not going to notice? Maybe they were thinking of maintaining their industry reputation, but most people who have been paying attention already know that TPW is in serious trouble.
Watch to find out what some of our subscribers received in their May box!
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We currently have a number of active openings for associate roles at US and UK firms in HK / China, Singapore and two new in-house openings. As always, please feel free to reach out to us at asia@kinneyrecruiting.com in order to get details of current openings in Asia, as well as to discuss the Asia markets in general and what we expect for openings later this year. Our Evan Jowers and Robert Kinney will be in Beijing the week of March 25 and Evan Jowers will be in Hong Kong the week of April 1, if you would like to meet them in person.
The US associate openings we have in law firms are in the usual areas of M&A, cap markets, FCPA / white collar litigation, finance, and project finance. The most urgent of our top tier (top 15 US or magic circle) law firm openings in Asia (among many other firm openings that we have in Asia) are as follows:
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The last time I flapped my wings your way, I tried to make at least enough noise about your mobile phone to make you more than a little bit uncomfortable. I hope I did. If enough of us become anxious enough about the known and unknown unknowns and knowns in our mobile phones, then we can start making wise decisions about how to manage that information and its resultant investigations.
Today, I’d like to put a finer point on the last installment’s topic by asking a question that seemed to catch most attendees off-guard at a conference panel that I moderated last week: is there discoverable personal information in a mobile app? Our panelists’ answer was a uniform “yes” with one stating that, if he had to choose only one type of data that he could discover from a mobile phone, he’d choose app data. Why? Because there’s simply so much of it and because almost all of it is objective – not just user-created like an email – but machine-tracked like GPS, usage duration, log in and log out times, browsed web addresses, browsed actual addresses. Also, most of us seem to have the idea that data doesn’t actually “stick” to our mobile devices the way it “sticks” to our hard drives. Maybe there’s a disconnect based on the fact that our phones are mobile so we assume the data is mobile to?
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Now that both partnerships have voted, the merger between Sonnenschein and Denton Wilde is a done deal. But the ride between now and the effective merger date of September 30th could still be bumpy.
