This fall, after the Boston Business Journal reported on dozens of departures at Locke Lord Edwards, the firm’s chair Jerry Clements sprung into action.
In a scathing Letter to the Editor, Clements accused the newspaper of painting an inaccurate picture and the firm issued a press release proclaiming its Boston office, where many of the departures occurred, “stronger than ever.”
“To suggest that the departures of those lawyers who left our firm will prevent us from achieving our vision may make for a sensational headline,” Clements wrote in her letter, “but it is a very narrow, unsophisticated and uninformed perspective.”
The PR front erected by Locke Lord highlights the pressure that the leaders of corporate law firms face in an era when partner turnover has reached record high levels: Public reports about partners leaving a firm because of financial problems can exacerbate that firm’s woes if it depresses morale and encourages more lawyers to flee. Because a law firm’s greatest assets are the lawyers who work for it, the problem isn’t easily ignored.
As a result, some law firm leaders are devoting more resources to managing the market perception of their firm’s business affairs and taking a more proactive stance in quashing rumors — whether those concern waning revenue, pay disputes or partner departures.
“If you’re not careful, even if you have really good business, market perceptions can affect you, just like they affect companies’ stock market evaluations every day,” said Andrew Glincher, CEO and managing partner of Nixon Peabody, a Boston-based law firm with more than 600 lawyers. “You need to be mindful of that.”
Of her own tack, Clements said that “we knew it was incumbent on us to change the conversation,” and added that it was “not spin control,” but a matter of providing “accurate information” to set the record straight.
Boston Business Journal Managing Editor Craig Douglas said that his publication stands by its reporting and refutes assertions that it passed judgment on Locke Lord’s merger effort.
“We encourage reader feedback whenever possible, and at no point have we been alerted to specific examples of inaccuracy or factual errors in our coverage of the firm or its dealings in Boston,” Douglas said in an email.
Going to War with People Who Sell Ink by the Barrel
Numerous legal media professionals interviewed by Big Law Business said external communication has gained importance at law firms in recent years, and protecting a firm from negative coverage, ensuring its placement on rankings or promoting its brand have become paramount.
In one frequently cited example, earlier this year, Dentons launched an unprecedented campaign attacking The American Lawyer for reportedly understating the firm’s profits per partner.
After months of publicly airing their complaints, in August, The American Lawyer relented and issued a correction, revising Dentons’ profits per partner upward — from $495,000 to $680,000. The magazine made the change after Dentons not only launched its own website for the campaign and purchased ads in legal trade publications, but also after the firm provided its financial figures along with a good word from its auditors.
“People say don’t go to war with people who sell ink by the barrel,” Dentons’ Chairman Joe Andrew, joked in an interview this summer.
Andrew said it was a worthwhile fight for Dentons because financial metrics “are used by others to measure the value of a law firm” and can affect the firm’s ability to recruit talent and grow its business.
“I think law firms are recognizing that, in addition to being part of a profession, they are businesses, and businesses interact with the media,” said Joshua Peck, a media relations manager at Duane Morris. “Their own corporate clients have sophisticated mechanisms of shaping public image.”
In another example, former partners of the failed New York law firm Dewey & LeBoeuf continue to say the dramatic 2012 demise was accelerated by persistent news coverage of its business problems.
“I grant you, the firm had financial problems,” said Stuart Saft, a former Dewey & LeBoeuf partner who now works at Holland & Knight. “But we were on the road to recovery at the beginning of 2012.”
Once the firm’s financial problems were reported, Saft said clients began to call and say they couldn’t give Dewey any more work because they believed the firm would be insolvent in the coming months based on what they read in the press. He refused to name specific clients other than to say generally that they included real estate developers and financial institutions.
In a May 2012 interview with Bloomberg Law, Saft elaborated on his theory: “There are many of us who believe that this story started with blogs, and many of us believe that the recruiters got the story from the blogs and took it over to the mainstream press.”
“We sort of think the way this played itself out was this was going to be a bonanza for the recruiters if they could destabilize the situation and get the partners to move their practices,” he added. “It became a media sensation.”
Looking at base compensation alone, the average projected pay for the top 10 earning partners at Edwards Wildman was $971,000, while that figure was $2,112,500 for Locke Lord.
Locke Lord’s Turbulent Acquisition as Coverage Hits
At Locke Lord, Clements wrote her letter to the Boston Business Journal in September as the firm was grappling with a delicate transition: In January, it had acquired the Boston-based law firm Edwards Wildman, which had been weakened by a 55-partner exodus in London to Cooley. Around that time, Edwards Wildman was facing numerous industry-related pressures, such as pushback from clients on pricing and stiffer competition from other law firms, the firm’s former managing partner Alan Levin, now vice chair at Locke Lord, said in an email.
Firm documents reviewed by Big Law Business offer more details. The documents were provided by a source who insisted on anonymity because the information was confidential and included about 150 pages of documents related to the merger, including the new firm’s partnership agreement, compensation chart and one of the final drafts of the merger agreement that created Locke Lord Edwards.
Locke Lord declined to comment about any information related to the documents.
The documents show that heading into its merger with Locke Lord, Edwards Wildman’s revenue was $41 million short of its forecasts in early 2014. An initial revenue forecast of $298 million was later knocked down to $274 million, and by the time the year ended, the firm had $257 million in total revenues, according to the documents.
Because of the income shortfall, partners had overdrawn millions of dollars in compensation, a situation which required a remarkable measure: Partners would need to pay back compensation they had already received. Otherwise, the shortfall would not be erased unless all partners stayed with the firm until at least Dec. 31, 2016, according to a Locke Lord memo written by Jerry Clements to legacy Edwards Wildman partners dated February 5.
In an internal memo reviewed by Big Law Business, Levin wrote: “There is no doubt that our financial performance in 2014 was disappointing, which some may consider an understatement.”
“We have been treated as true partners by our new colleagues, and together we can become one of the best AmLaw 50 law firms,” he wrote in the memo. “If we all dedicate ourselves to that goal, I have no doubt that one year from now, when asked are you better off today than you were one year ago, each of us will answer that question with a resounding, YES!”
Nonetheless, Edwards Wildman lawyers faced lower pay prospects than their Locke Lord peers, according to a chart forecasting lawyer compensation for 2015.
Looking at base compensation alone, the average projected pay for the top 10 earning partners at Edwards Wildman was $971,000, while that figure was $2,112,500 for Locke Lord — more than double the amount. The highest earning partner was projected to bring in $3,500,000 a year at Locke Lord, while Edwards Wildman’s best compensated partner was pegged to bring in $1,600,000.
At the other end of the spectrum, which included non-equity partners, the lowest paid partner at Edwards Wildman was projected to be paid as little as $62,500 — but one source said that figure was an outlier since the partner was exiting. The lowest-earning partner at Locke Lord, by contrast, was forecast to receive $175,000 a year.
The figures were labeled preliminary. The documents stipulated that the amounts “are no assurance of budgeted compensation for 2015” and that each partner will receive his or her official budgeted compensation number after the completion of the partner compensation process in 2015.
By September, the newly merged firm was struck by a flood of departures, and the press took note.
According to the Sept. 24 article in the Boston Business Journal, a team of private-client and trust lawyers moved to Goulston & Storrs PC, two partners in the public finance practice headed to Hinckley Allen & Snyder LLP, while two private-equity partners joined Goodwin Procter LLP. Others have joined Mintz Levin Cohn Ferris Glovsky and Popeo PC, McCarter & English LLP and Foley Hoag LLP.
In the aftermath, Clements took a rare step of publicly outlining that Edwards Wildman faced challenging circumstances before the merger.
In the letter to Boston Business Journal’s editor, Clements wrote that Edwards Wildman was “a firm that despite its great and storied history in Boston, was at a crossroads and needed to undertake some painful steps in order to get to a much better place.”
She noted that the combination “provided the resources that have allowed that undertaking to begin.”
In a subsequent interview with Big Law Business, Clements said she felt it was important to get in front of the story about the firm’s departures for accuracy: “We have long worked closely with media outlets knowing that perception can become reality, so we want to always get the factual message presented accurately.”
A firm spokeswoman said that between July and August of 2015, just before the Boston Business Journal article appeared, the firm worked on 21 deals that had a combined value of $4.3 billion, about one-third of which involved Boston attorneys.
Said Clements: “In today’s electronic world, where news reports are posted almost instantly, this is especially important. And in today’s challenging legal market, it is critical that the reports be accurate.”
I don’t think leaders want to acknowledge that a merger partner was stricken, weakened or existentially challenged.
It is not unusual for a newly merged firm to face a flood of partner departures. In 2014, it happened at least twice: After Squire Sanders acquired Patton Boggs, dozens of lawyers and senior public policy advisers jumped ship, and it also happened after Morgan Lewis & Bockius acquired lawyers from the now-defunct Bingham McCutchen.
Locke Lord’s merger stands out because of the way management chose to engage the press about partner departures, according to Allan Ripp, a PR specialist who has worked on a number of law firm mergers.
“I don’t think leaders want to acknowledge that a merger partner was stricken, weakened or existentially challenged, however you want to put it,” said Ripp.
That contrasts with non-engagement policies. Jami McKeon, chair of Morgan Lewis, said she adopted a ‘no comment policy’ during the lead-up to her firm’s acquisition of lawyers from Bingham McCutchen, at least partly to avoid creating any negative perceptions about Bingham McCutchen.
“I had seen other examples of where the target firm suffered” if a proposal to merge fell through, said McKeon. “I didn’t want to have any responsibility or any sense that we were creating risk or difficulty for the people at Bingham.”
For Locke Lord, the merger has already happened, but integrating the legacy Edwards Wildman firm has provided challenges. When the merger was first announced, Locke Lord had said the merger would create a 1,000-plus lawyer firm; but in late September, around the time of publication of the Boston Business Journal article, the firm had around 900 lawyers, according to a firm spokeswoman.
In an interview in September, Clements said the Locke Lord merger would still be successful: “Yes, we lost some people, but we have some great people who are still here. You shouldn’t judge a merger by the people who left, but by the people who are still here.”