Back in March, we found that 27% of ATL readers — and a third of ATL readers in New York — thought the Bear Stearns collapse would hurt their careers.
With Lehman Brothers filing for bankruptcy this morning, and Merrill Lynch selling itself to Bank of America, after “a marathon series of meetings at Wachtell, Lipton, Rosen & Katz,” we can’t help but wonder how billables at Wachtell and Weil and Shearman & Sterling are going to look this month . . . and how everybody else’s are going to look over the next year (especially if other firms, like, say, AIG, go under as well).
As we asked back in March:
But how will it affect you? Will work slow down as investors circle the wagons, or will there be a regulatory response that actually increases the need for lawyers? Will shareholders’ fear of fire sales increase bankruptcy and litigation work?
In today’s ATL / Lateral Link survey, let’s find out if your thoughts are any different, now that we’ve had a little post-Bear-Stearns experience to inform our expectations. Update: This survey is now closed. Click here for the results.
– Justin Bernold is a Director at Lateral Link, the sponsor of this survey.
In case you hadn’t heard, Wall Street is in meltdown mode right now. Our colleagues over at Dealbreaker have been working over the weekend and around the clock to cover all the latest developments.
Here are the two big stories from the financial world. First, the top-level parent company of Lehman Brothers, Lehman Brothers Holdings Inc., is filing for Chapter 11 bankruptcy protection. (But no sleeping in for Lehmanites; they have been informed that they’re still expected to show up to work this morning.)
Second, Merrill Lynch, the investment bank that some feared might be next to go down the Bear Stearns / Lehman Brothers path, has reached a deal to sell itself to Bank of America, for $50 billion.
What do these deals mean for lawyers? Well, at least in the short term, they bring good news: more work. (Over the long term, of course, the news may be less good, as current and potential future clients vanish from the landscape on Wall Street.)
For its bankruptcy, Lehman is turning to Weil Gotshal & Manges, long known for its top-notch bankruptcy practice. From Dealbook:
Lehman has hired Weil, Gotshal & Manges, the law firm that handled Drexel [Burnham Lambert]‘s bankruptcy filing [in 1990]. Harvey Miller, the head of Weil’s restructuring practice, is known as one of the deans of the bankruptcy bar.
In addition, Lehman is trying to sell its more valuable assets, including its broker-dealer and asset-management operations. It appears to be represented in those efforts by Sullivan & Cromwell, according to TheDeal.com (subscription). Meanwhile, Wachtell, Lipton, Rosen & Katz, a powerhouse in financial-institutions M&A, is getting a piece of the action on the Merrill deal. As reported by the Wall Street Journal, the Merrill / B of A deal was hammered out in “a marathon series of meetings at Wachtell, Lipton, Rosen & Katz, the law firm which has long represented Bank of America in its deals.” Wachtell isn’t lending out their offices for free. As TheDeal.com reports, WLRK is indeed representing Bank of America in the transaction (for a fee that will be well into the eight figures — Ed Herlihy doesn’t come cheap). Merrill Lynch is being advised by Shearman & Sterling.
If you’re aware of other winners and losers from these deals, please share what you know, in the comments. Lehman Announces Bankruptcy Filing For Holding Company [Dealbreaker] Bank of America Reaches Deal To Buy Merrill Lynch [Dealbreaker] What a Lehman Bankruptcy Filing Might Look Like [DealBook] Bank of America to Buy Merrill [Wall Street Journal]
The constitutionality of the Public Company Accounting Oversight Board, enacted as part of the Sarbanes-Oxley Act, was recently upheld — decision available here (PDF) — by a divided panel of the D.C. Circuit. But those who challenged the Board’s legitimacy are fighting on.
The appellants will either seek rehearing en banc in the D.C. Circuit or certiorari from the Supreme Court. In their efforts, expect them to draw support from the forceful dissent by judicial superstar Brett Kavanaugh (who is, by the way, familiar with this fine website).
If appellants seek succor from the SCOTUS, their pleas may fall upon sympathetic ears. From our colleague, former Skadden and Latham corporate lawyer John Carney, over at Dealbreaker:
Perhaps the most ominous sign for the PCAOB is the fact that Judge Kavanaugh clerked for Supreme Court Justice Anthony Kennedy, who would probably hold the swing vote if the case went to the Supreme Court. His dissenting opinion seems tailor-made to provoke the conservative wing of the court into striking down the board. Unless Congress acts to amend it, we’d bet the autonomous PCAOB is headed for extinction.
* Why does Wall Street get all the juicy scandals? We’re jealous of our DealBreaker colleagues. [Dealbreaker]
* Larry Ribstein’s take: “it’s hard not to think that it’s really all about dispute a few weeks ago between [the NYT's Andrew Ross] Sorkin and Dealbreaker’s John Carney.” [Ideoblog]
* Are you in the top one percent of U.S. taxpayers ranked by adjusted gross income? And which states are home to the richest of rich taxpayers? [TaxProf Blog]
* “Would you trust a law professor to be President?” [Althouse]
* Speaking of law profs, they may boycott the annual AALS meeting, due to the hotel owner’s opposition to same-sex marriage. [National Law Journal via TaxProf Blog]
* An interesting interview of Fried Frank partner Jonathan Mechanic, a superstar of the real estate bar. [New York Observer]
* Russian judge: “If we had no sexual harassment we would have no children.” [Telegraph (U.K.)]
This post over at our sister site, Dealbreaker, may remind you of some of your colleagues. It reminded us of a partner we once worked with — a brilliant litigator, with a photographic memory, but not the easiest person to interact with socially. Writes Bess Levin:
I’m sure it doesn’t come as a shock for me to point out that many of you are socially awkward, often fail to demonstrate empathy for your peers, and are prone to restricted patterns of behavior such as hitting the submit button over and over and over again when trying to comment.
Which is to say, you likely all have a mild to major form of Asperger syndrome. Or do you? Take this quiz and post your results.
The incidence of Asperger syndrome is probably higher among Dealbreaker’s Wall Street readership than it is among the more well-adjusted ATL crowd. But if you’d like to see where you fall on the scale, visit Dealbreaker, and take the test.
(It’s 50 questions long, so it takes a few minutes to complete, but it goes by faster than you’d expect. We scored a 6. Feel free to post your score in the comments.) What’s Wrong With You? [Dealbreaker]
Dominating today’s news cycle is the Treasury Department’s plan to reform the nation’s system of financial regulation. For some thoughts on the proposal, check out what John Carney has to say over at our sibling site, Dealbreaker (in posts here and here).
This regulatory reform proposal comes at a grim time for Wall Street, characterized by some as “the worst financial crisis since the 1930s.” It feels like we’re at the end of an era. Wall Street profits are sinking fast, venerable investment banks look endangered, and financial-sector layoffs could claim 20,000 more jobs in the next two years, in New York City alone.
This is generally viewed as bad news for Biglaw, considering how much large law firms depend on the financial services industry for work. But could it perhaps be a boon for lawyers, if their standing in the city’s financial pecking order falls at a slower rate than that of Wall Street Masters of the Universe?
A reader drew our attention to this interesting Sunday Times article:
The collapse of a major financial institution is usually an occasion for hand-wringing and tut-tutting over potential job losses, lower consumer spending and missed mortgage payments.
In New York City, it’s also seen as an opportunity. For many of the city’s middle class, especially those in the creative class, who have felt sidelined as the city seemed to become a high-priced playground for Wall Street bankers, the implosion of the brokerage house Bear Stearns raises a tantalizing possibility: participation in an economy they have been largely shut out of.
Wonders our tipster:
“Some New Yorkers seem to be looking forward to the collapse of Wall Street and their huge salaries in the hopes that prices deflate a bit. Does this return lawyers to the top of the financial food chain? Or do those huge partner salaries take a dive along with Wall Street?”
For some law firms and lawyers — e.g., those that are heavily dependent on securitization and structured finance work — the Wall Street retrenchment is definitely unwelcome. But for others, especially those focused on countercyclical practice areas like bankruptcy, the bust could be a boom.
Take a look back at this post, in which one Biglaw partner described the plight of lawyers in New York as follows:
“Face it, [lawyers] have no status. We go to these [elite private] school functions [for our kids], and this well-heeled group looks right through you. They won’t give you the time of day. You’re just one step ahead of the doorman.”
Inspired by the example of the generous Hamptons-based design firm which is now offering its stagings service at a discounted price to current/former/soon to be former Bear Stearns employees (staging is cleaning and prepping a house to be shown for sale), I have decided to offer a discount on sessions to all current/former/soon to be former Bear Stearns employees. The discount is equivalent to the current value of a share of Bear Stearns stock. That is to say, $2.
I approached this decision with some trepidation. You see, in my experience finance guys usually want things in their asses. I do not offer anal play on demand. Consequently the majority of my clients are lawyers.
Over at Dealbreaker, the commenters had some interesting reactions:
“One of the few times I’m actually glad I chose law instead of finance . . .”
“lawyers already take it up the ass on a daily basis from bankers, so they probably get their fill in the office.”
“so what? a chick’s tongue up there is a wondrous thing.”
With JPMorgan quintupling its offer for Bear Stearns earlier this morning, it seems like an appropriate time to discuss last week’s ATL / Lateral Link survey, which asked you whether you were afraid the recent Bear Stearns collapse would hurt your career.
Twenty-seven percent of you said yes. New Yorkers were the most concerned, with roughly one third of respondents opining that the Bear Stearns collapse would hurt their careers. A quarter of respondents in Los Angeles and Atlanta and a fifth of respondents in Washington, DC said the same. In Boston and Philadelphia, seventeen percent of respondents were afraid the Bear Stearns event would hurt their careers, while in the Bay Area, the number fell to an unlucky thirteen percent. Respondents in Chicago, Dallas, and Houston were generally unafraid.
Concern was most pronounced among the newest lawyers and those closest to partnership. Twenty-eight percent of respondents in the Class of 2007, and thirty percent of respondents in the Classes of 2000 and 2001 were afraid that the Bear Stearns collapse would hurt their careers. A whopping fifty percent of respondents who graduated before 2000 shared this concern. Law students are also more likely to be frightened, with 43% of law students responding that they were afraid that the Bear Stearns event will hurt their careers.
Additional discussion, including selected comments from survey respondents, after the jump.
JPMorgan and Bear were prompted to renegotiate after shareholders began threatening to block the deal and it emerged that several “mistakes” were included in the original, hastily written contract, according to people involved in the talks.
One sentence was “inadvertently included,” according to a person briefed on the talks, which requires JPMorgan to guarantee Bear’s trades even if shareholders voted down the deal. That provision could allow Bear’s shareholders to seek a higher bid while still forcing JPMorgan to honor its guarantee, these people said.
When the error was discovered, James Dimon, JPMorgan’s chief executive, who was described by one participant as “apoplectic,” began calling his lawyers at Wachtell, Lipton, Rosen & Katz to seek a way to have the sentence modified, these people said. Finger pointing over the mistakes in the contracts began as bankers blamed the lawyers and vice versa.
An interesting article in today’s New York Times — by Lynnley Browning, author of the earlier Biglaw perks piece — focuses on the subprime mortgage mess and current investigations into the adequacy of disclosures to investors.
Investigators are focused on Wall Street, but lawyers involved in the securitization process may also face scrutiny. Government investigation is the last thing these struggling law firms need, as they try to retool in the face of a grim outlook for structured finance and real estate work.
The article focuses on McKee Nelson:
McKee Nelson burst onto the scene in 1999 and quickly grabbed lucrative Wall Street work from long-established rivals. William F. Nelson, one of its co-founders, said the firm, which is known for its sophisticated tax work, did not employ any special legal maneuvers to outflank its competitors. “There’s no secret, magic elixir that we sprinkled,” Mr. Nelson said.
In any case, the mortgage turmoil is now hitting the highly regarded McKee Nelson hard. The firm recently pared its structured finance department to 80 lawyers from about 115 through buyouts, sabbaticals and transfers to other departments. More cuts are unlikely, a spokeswoman said.
So that’s good news. And the firm is trying to take lemons and make the proverbial lemonade:
[A]fter profiting from the mortgage boom, McKee Nelson is now positioning itself to profit from the bust by riding the coming wave of lawsuits. In January, the firm flew its partners and their spouses to Charleston, S.C., aboard four Delta commuter jets, to map out its strategy.
“We’re heavily committed to doing more litigation,” Mr. Nelson said. The firm hopes to represent investment banks, hedge funds and other financial companies, as well as their executives, in a variety of litigation, he said.
Ed. note: The Asia Chronicles column is authored by Kinney Recruiting. Kinney has made more placements of U.S. associates, counsels and partners in Asia than any other recruiting firm in each of the past seven years. You can reach them by email: email@example.com.
We at Kinney Asia have made a number of FCPA / White Collar US associate placements in Hong Kong / China thus far in 2014. Most of such placements have been commercial litigation associates from major US markets, fluent in Mandarin, switching to FCPA / White Collar litigation. Some have already had FCPA experience, but those are difficult candidates for firms to find (this will change in coming years as US firms are now promoting FCPA / White Collar to their 2L summers who are fluent in Mandarin and have an interest in transferring to China at some point).
Legal Week quoted Kinney’s Head of Asia, Evan Jowers, extensively in the following relevant article here.
There is a new trend in the market, though, where mid-level transactional US associates, fluent in spoken Mandarin and written Chinese, are interviewing for and in some cases landing junior FCPA / White Collar spots in Hong Kong / China at very top tier US firms.
Ms. JD is hosting their 2nd annual cocktail benefit to raise money for the Global Education Fund. The event will be held on August 21, 2014 at 111 Minna in San Francisco. Our goal is to raise $20,000 to fund the legal educations of four dedicated law students in Uganda who count on our support to continue their studies at Makerere University during the 2014-15 academic year.
The Global Education Fund enable womens in developing countries to pursue legal educations who otherwise would not have access to further education. According to the World Bank, investment in education for girls has one of the highest rates of return to promote development. In Uganda, more than 45% of women over the age of 25 have no schooling at all, and men are more than twice as likely as women to have access to higher education. Together, we can work to end educational inequality. For more information about the program, please visit http://ms-jd.org/programs/global-education-fund/
When the LexisNexis Cloud Technology Survey results were reported earlier this year, it showed that attorneys were starting to peer less skeptically into the future, and slowly but surely leaning more toward all the benefits the law cloud has to offer.
Because let’s face it, plenty of attorneys are perhaps a bit too comfortable with their “system” of practice management, which may or may not include neon highlighters, sticky notes, dog-eared file folders, and a word processing program that was last updated when the term “raise the roof” was still de rigueur.