Bingham Cancels Partner Retreat; Will The Morgan Lewis Deal Go Through?
How bad are things looking at Bingham right now?
A law firm in trouble is like a seriously sick patient. The situation changes day by day, even hour by hour. A report of bad news can quickly get displaced by good news — or vice versa.
That seems to be the situation at beleaguered Bingham McCutchen. Late last month, word was that Bingham’s condition was improving. But now we’re hearing bad news out of Bingham — including questions about the possible rescue by merger with Morgan Lewis, and whether or not it will go through….
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Here’s a report from the American Lawyer (via Morning Docket):
An annual partnership retreat at Bingham McCutchen scheduled for later this week in Scottsdale, Ariz., has been canceled, according to six sources knowledgeable of the matter. A partnership meeting has been called for Thursday, two sources say.
We reached out to Bingham; the firm declined comment (as it previously did to Am Law).
Three sources tell The Am Law Daily that current Bingham partners are facing a Wednesday deadline to accept offer letters from Morgan, Lewis & Bockius, as the two firms continue to mull a potential combination of their operations. Whether or not Bingham partners favor the terms of the tie-up may not matter, given the alternative. Bingham faces the distinct possibility of bankruptcy without a merger — an increasingly unattractive option following a recent key decision involving partner clawback claims in the two-and-a-half-year-old Chapter 11 case of Dewey & LeBoeuf.
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The gist of that ruling (mentioned yesterday in Morning Docket): partners are more vulnerable to having to pay back money they earned from a bankrupt firm during the period when the firm was insolvent, even if they didn’t know the firm was insolvent at the time and even if the money they received was in exchange for value they brought to the firm. Yikes.
What does this mean for the proposed merger between Bingham and Morgan Lewis? Both firms declined comment, but Am Law reported as follows:
Three sources familiar with the matter say that Morgan Lewis has not sent offer letters to every Bingham partner. Reuters first reported last month that Morgan Lewis’ management was seeking so-called golden handcuffs on key Bingham rainmakers in order to push through with a potential combination. The Am Law Daily recently reported that the terms of arrangement for some nonrainmakers were harsh—compensation cuts of up to 25 percent and the loss of capital contributions should a Bingham partner leave before three years.
The latest terms put forth by Morgan Lewis, in conversations with four sources familiar with the negotiations, sees a portion of current Bingham partners being offered six months pay at a combined firm. One source, a former Bingham partner, likened the latter Morgan Lewis offer to “six months severance,” while acknowledging that Bingham often did the same through its various combinations over the past several years.
In other words, as Michael Allen of Lateral Link previously put it, Bingham might be “fall[ing] victim to its own strategy.”
The Morgan Lewis retreat, also in Scottsdale, did go through last month, but no vote on the Bingham deal took place, according to Am Law. Rather, Morgan Lewis is taking a “wait and see” approach to how many Bingham partners accept their offers. If a large enough number of Bingham partners accept, then Morgan Lewis will go ahead with the deal and take on Bingham’s bank debt and other obligations. If not enough Bingham partners accept, then… it will probably not be pretty.
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Of course, things aren’t very pretty right now. Here is one ATL tipster’s take on the situation:
Management is telling everyone that everything is fine, but some people are discreetly being told to seriously start looking for new jobs. My bet is that the merger doesn’t go through, Morgan Lewis will cherry-pick anything decent that hasn’t run out the door to another firm and everyone else will try to ‘get out of Dodge’ before the whole thing collapses to try to minimize their liability (of course, they are screwed because there will be clawbacks).
From over a thousand attorneys to this. Of course, lack of transparency for partner pay, “new partner guarantees” and
2715 offices didn’t help. [Ed. note: The tipster is referring to Dewey having 27 offices at its peak; Bingham had just 15.]
Dewey know where we’ve seen this situation before? But on the “bright” side, speaking of Dewey, some sources suggest that the recent clawback ruling in the Dewey bankruptcy could actually help Bingham by increasing the chances of a full-blown merger with Morgan Lewis. Two sources told Am Law that because of the Dewey ruling, “Morgan Lewis would not benefit from raiding Bingham [for individual partners] should the firm end up in Chapter 11” — the debts would just travel with the pirated partners.
So Morgan Lewis might as well “do the right thing” and swallow the whole Bingham burrito. For the sake of the many lawyers and staff at Bingham, let’s hope that Morgan Lewis has a healthy appetite.
Bingham Partner Retreat Canceled as Morgan Lewis Deadline Looms [Am Law Daily]
Earlier: Bingham McCutchen: Is The Patient Stabilizing?
The Rise And Fall of Bingham McCutchen
What Needs To Happen For the Bingham / Morgan Lewis Deal To Proceed
Law Firm Merger Mania: Bingham McCutchen And Morgan Lewis Reach A Deal
