Biglaw, Law Shucks

This Week in Biglaw: 07.25.10

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Ed. note: Law Shucks focuses on life in, and after, BigLaw, including by tracking layoffs, bonuses, and laterals. Above the Law is pleased to bring you this weekly column, which analyzes news at the world’s top law firms.

As August approaches, the recruiting process shifts from the summer programs, which are in full (relatively speaking) swing, to on-campus interviewing.

Summer-program sizes were down 44% this year, compared to the classes of 2009. That goes to show just how awkward the law-firm hiring process is. Last year’s summers were given offers in fall 2008 as the markets were already cratering, but firms didn’t know how bad things would get or how long it would last, so hiring was pretty close to the previous year’s levels.

Skip over all the layoffs, deferrals, and rescinded offers since then, and a full year later, in fall 2009, the firms were finally able to slash their pipeline by almost half.

Last year, almost 20 firms had summer programs with more than 100 participants. This year there were only two: the much-vilified Latham, and Gibson Dunn, both of which hosted 110. Summer legal employment is now at its lowest levels since 1991.

And that includes the two laid-off lawyers who are appearing on The Apprentice.

After the jump, more of what’s going on in BigLaw – including firm failings, layoffs, malpractice, and a few good things, too.

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Firm News

A British firm failed this week. The assets of Halliwells were sold to three other regional UK firms. Approximately 700 people will be taken on by the new firms, but at least 38 were made redundant (including one partner and two trainees). Also left out in the cold are 45 would-be Halliwells trainees whose offers were rescinded. One of the acquiring firms does plan to pick up at least 24 over the next three years. The balance will have to start the search anew.

Merger talks between Kilpatrick Stockton and Townsend and Townsend and Crew (note how annoying the Townsend styling is, which makes it impossible to read that clause without actually knowing the names of the two firms or using the annoying "on the one hand/on the other hand" structure) finally broke down. They blamed a "major Kilpatrick client" who wouldn’t waive conflicts.

(Mal)Practice

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Malpractice suits against firms may be on the rise as tough times cause parties to search ever more desperately for someone to blame for bad results. And we’ve got them in spades this week.

Baker Botts has been sued for malpractice resulting from alleged conflicts in its representation of a patent client. The firm says there is no merit to the claim that it didn’t properly represent Axcess International in managing its patent portfolio in the RFID sector, which resulted in another supposed Baker Botts client obtaining significant rights and Axcess not getting all it thinks it should have.

It’s bad enough when firms get sued for losing cases, but winning and getting sued is even worse. That’s what Manatt Phelps and McKool Smith are dealing with, as a bunch of retired NFL players are suing the firms for not getting the retirees enough in a $26 million settlement with the players’ union after a positive jury verdict. The players think the firms should have included the retirees in a settlement with Electronic Arts over likeness rights in the blockbuster Madden video-game series. Dewey & LeBoeuf was on the losing end at trial but has nothing to do with this action.

That’s not even the only bad news Manatt Phelps got last week. A malicious-prosecution suit against Manatt Phelps was just reinstated on appeal. Back in 1998, the firm sued Franklin Mint for dilution of its clients likeness rights by some Princess Diana collectibles, which we’re sure were sublimely classy.

Boies Schiller & Flexner also got bad news on appeal. A model’s suit accusing the firm of fraud and malpractice for agreeing to represent her individually but then including her in a class action was reinstated by a New York appellate court.

Sheppard Mullin and Epstein Becker fared better. A federal judge threw out claims that the firms had been improperly paid for representing a credit repair organization in a class action. Sheppard Mullin went pro se and Arent Fox was represented by Skadden.

Suits

As for litigation in which law firms are relegated to their more-common role as simple advocates, rather than defendants, there were a few interesting ones.

Orrick’s Lisa Simpson appeared on Facebook’s behalf at a New York hearing at which she was forced to admit the possibility that her client had signed the contract. Elie jumped in with his take on the legal analysis. Summary: no meeting of the minds.

Dell settled with the SEC over fraudulent-accounting charges. The chipmaker agreed to pay $100 million, and founder Michael Dell an additional $4 million – or about 0.03% of his $13.5 billion net worth (2nd item). Skadden represented the company and Wachtell represented Dell.

$100 million is a magic number. It turns out that’s also how much Google spent defending its YouTube business against Viacom’s infringement suit. Viacom probably spent a similar amount bringing the claims, so that was a nice chunk of change for all the firms involved.

The facts are slowly starting to come out, but there could be more to the latest smear on Facebook’s title than originally expected. Paul Ceglia, a guy who owns a New York wood-pellet company (and was recently arrested for fraud in that business), showed up out of the blue with a 2003 contract with Mark Zuckerberg purportedly entitling Ceglia to 84% of the social-media company.

One weird thing about litigation, as opposed to deals, is that apparently you can settle a suit without actually having the money to pay. Such appears to be the case in AIG’s $725 million with Ohio pension companies. Paul Weiss led the defense.

It’s certainly not malpractice, but Debevoise got an amusing slap from the bench in a pro bono case of all things. The judge chided the firm’s "unwarranted persistence" and reminded the lawyers that pro bono efforts “should be undertaken with special attention to the need for ensuring that matters are not pursued without regard to a lack of realistic prospects for success … as well as the very real economic costs to adversaries.”

The article continues on Law Shucks with salary news – overall bad, but good for those actually in BigLaw – and other items of interest.

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