In Hot Market, Some Laterals Forced to Cool Jets

By Julia Love
The Recorder

MEDIA QUOTE April 19, 2013 In Hot Market, Some Laterals Forced to Cool Jets By Julia Love The Recorder Leaving a law firm is a little bit like leaving a lover, partners say: It’s best to part ways quickly.

But sometimes firms don’t want to let go.

Douglas Lumish and three other partners gave notice to Kasowitz Benson Torres & Friedman in early February but they remain at the Silicon Valley office they signed on to build, held by a 90-day notice provision in the firm’s partnership agreement, sources with direct knowledge of the matter say. None of the four partners, who are moving to Latham & Watkins in early May, responded to requests for comment.

Notice provisions ranging from 30 to 90 days are common fixtures in partnership agreements, though they are seldom enforced, recruiters say. Firms are usually eager to show partners the door after they give notice, sometimes even ushering them out before they are ready to go. Corporate-style walkouts are not unheard of in Big Law.

“In the press, firms say, ‘We wish them well,'” law firm consultant Kent Zimmermann said. “In private, it’s often more like, ‘Good riddance.’

The notice provisions are the subject of some controversy in the Valley’s bustling lateral marketplace, where some partners question whether the agreements would hold up to legal scrutiny. In any case, legal watchers say partners’ value to firms is diminished once they say they are leaving — and their presence can drain morale. But firms may still decide that they want to hold on to departing partners to buy time to reach out to clients, head off other defections and chart a new course forward.

That’s why Kasowitz asked Lumish, Gabriel Gross, Jeffrey Homrig and New York-based partner Michael Eisenberg to wait before going to Latham & Watkins, partner Aaron Marks said. As Lumish, Gross and Homrig were the only partners in Kasowitz’s Silicon Valley office when they gave notice, the firm needed more time to bring about an orderly transition, Marks explained.

“It’s a different situation when one or more partners are leaving an office that is otherwise staffed by dozens of other partners,” he said. “When you have a satellite office … the importance of having a transition period is that much more significant.

Some recruiters wonder whether the mounting competition for lateral partners, coupled with the flat demand for legal services, will prompt more firms to invoke notice provisions. Recruiter Stacy Miller Azcarate said three of the partners she has moved this year have been held by their firms for three or four weeks. And there are a few examples lurking in recent lateral move announcements, too.

Bingham McCutchen announced earlier this month that Richard de Bodo and four other L.A.-based IP litigation partners would be joining the firm. But they are still listed on the website of their old firm, DLA Piper, and their first day at Bingham has yet to be set, a firm spokesman said.

Although partners Michael Lyle and Eric Lyttle resigned from Weil, Gotshal & Manges this week to go to Quinn Emanuel Urquhart & Sullivan’s Washington, D.C. office, legal blog Above the Law reports that Weil is holding them to its notice provision.

Some firms are mindful of the message that the holdup sends to other partners who have put themselves on the market, recruiter Sandy Lechtick said.

“Firms are a bit more aggressive in protecting their turf,” Lechtick said. “And if one partner is thinking about leaving, and he knows what happened to a former partner, then the feeling is that it may have a subtle but powerful impact.

Enforcing the notice provision is never the norm, but some patterns emerge, said Robert Hillman, a professor at the UCDavis School of Law who studies the legal and ethical concerns raised by lawyer mobility. Thirty-day notice provisions are enforced more often than others. Small operations may be more inclined to take the time to address holes in their ranks.

And a firm dominated by a “single, strong personality” is probably more likely to hold a partner than one governed by layers of management, Hillman added. (Former Kasowitz partners said the firm is run chiefly by its founder, Marc Kasowitz.) “The risk is that the decision will be in part an emotional decision to force the lawyer to suffer the terms of the partnership agreement,” Hillman said.

CAUGHT IN THE MIDDLE Lumish’s predicament is par for the course in Asia and Europe, where partners are sometimes forced to sit out for several months before joining a new firm in a practice known as “garden leave.” In that time, firms can make a concerted push for a partner’s clients, recruiter Sabina Lippman said. But she questions how much American firms accomplish in the few weeks in which they usually manage to hold onto partners.

“People see that that’s how they’re treating someone who was a productive partner, and it makes the firm look bad,” she said.

And once rendered lame ducks, many partners find it painfully awkward to remain at their firms. Their practices are largely on hold as long as they are in the no-man’s land between giving notice at one firm and joining another, recruiters say.

“It’s harder to move forward on business with clients if you’re still on the inside,” recruiter Larry Watanabe said.

And their fiduciary duties limit what they can say to their fellow attorneys, though the move is the subject of lots of chatter in the office.

“Everybody is kind of caught in the middle,” said one Silicon Valley IP partner who was held both times he switched firms.

“You just want to move on with your life.

Clients tend to follow partners to their new firms, legal watchers say. But other attorneys on the matters are up for grabs too. Kasowitz has persuaded a number of supporting attorneys to stay on board in Silicon Valley since Lumish and his group gave notice, Marks said. Chief among them is L. Okey Onyejekwe Jr., who followed Lumish from Weil but won’t be joining him at his next firm. He was recently promoted to partner at Kasowitz.

“He’s certainly going to be a big part of our practice going forward,” Marks said. “And he has been critical in persuading others to stay.

Onyejekwe is set to represent Transperfect Global with Lumish in a suit against Motionpoint Corporation. With Transperfect Global v. Motionpoint, 10-02590, scheduled to go to trial in the Northern District in June, the team may continue to work together on the case across two firms, IP partners who are not involved in the matter say.

Not all associates in the office are spoken for yet, but several have pledged to stay at Kasowitz, and none have announced their intent to move to Latham so far, Marks said. It seems there will be work for them — Lumish has been forced to leave several clients behind due to conflicts at Latham, people with knowledge of the matter say.

“We’re going to continue to have a very vibrant office and a very excellent practice,” Marks said.

But associates will be taking something of a leap of faith. Kasowitz has yet to hire partners to replace Lumish and his team, though not for lack of trying.

Four IP partners in the Valley say they have received calls since February from recruiters seeking to place them at the firm.

Rather than dodging the topic of Lumish, recruiters tout his practice in their sales pitches, these partners said, arguing that the firm’s platform allowed his practice and compensation to shoot through the roof.

Marks said he expects the firm to be close to bringing someone on board by the time Lumish leaves.

NOT THE LAST WORD Several partners interviewed questioned whether firms have the right to hold them at all. California law makes clear that partners can dissociate at will, said Arnold & Porter partner Jonathan Hughes, who represents law firms and lawyers in litigation and legal ethics matters. If they go before the notice provision is up, firms can often levy the financial penalties the partnership agreement calls for — but not always.

If firms are no longer able to provide clients the best service due to conflicts or other concerns, partners may be able to make a case that the notice period is restricting their practices, Hughes said. He handles half a dozen to a dozen disputes between partners and firms each year, a few of which must be resolved in arbitration.

“There just isn’t a specific rule book that tells people how to behave,” Hughes said. “It’s ripe for creating disputes and anxiety.

Although the provisions are enforceable in theory, Hillman of UC-Davis says firms are hard-pressed to enforce them in practice. Firms have little hope of getting an injunction to stop partners in their tracks or landing damages if they do just walk out the door, he said. And waiving the notice period once can make it difficult for firms to hold partners to it in the future, he added. A former Kasowitz partner said the firm did not enforce the notice period when he moved.

“The words in the partnership agreement are not necessarily the last words on the subject,” Hillman said.

But the clauses don’t get tested, partners say, because lawyers tend be both risk averse and generally reluctant to breach a contract they have signed.

And they hate to burn bridges. Baker McKenzie held San Diego-based partner David Doyle for nearly two months after he announced his intention to move to Morrison & Foerster in 2000. Doyle said he wanted to preserve his relationship with his former firm.

“I wanted the parting to be as amicable as it could be,” he said.

In the long run, legal watchers expect the holdup to have little impact on Lumish’s career. Lawyers have survived for much longer in limbo.

IP partners Scott Oliver and James Pooley left Milbank, Tweed, Hadley & McCloy in early 2006, but it took them 16 months to land at their next firm, Morrison & Foerster. After they gave notice, a conflict turned up at MoFo, forcing them to launch a boutique to serve their clients until it cleared.

The pair relished the experience of running their own small shop, donning fleeces emblazoned with “Pooley & Oliver,

Oliver said. But they were anxious to join the global IP group for which they had left Milbank in the first place, and they had no idea when that would be possible.

“Ninety days would have been great,” he said. “Ninety days is something you can handle.

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