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In a move that highlights an ongoing debate over partner compensation at the world’s highest-grossing law firm, antitrust star Steven Newborn and three other partners defected from Clifford Chance’s D.C. office for Weil, Gotshal & Manges late last week. Winning the four prominent global competition partners gives New York-based Weil, Gotshal a ready-made group of top flight antitrust lawyers in the District, and leaves London-based Clifford Chance without a marquee name to anchor what has been one of the firm’s leading U.S. practice groups. “The bottom line is that this is a giant coup for Weil, Gotshal,” says William McLeod, a D.C. antitrust partner at Collier Shannon Scott. Newborn — the highest-paid Clifford Chance partner in the United States, pulling in around $3 million annually — made the move to Weil, Gotshal with partners James Egan Jr., John Scribner, and Laura Wilkinson. The group’s departure, which had been a subject of speculation in the antitrust bar in recent weeks, may deepen a fissure over compensation between some Clifford Chance partners in the United States and the rest of the 3,000-lawyer firm’s partnership. The differences stem from Clifford Chance’s acquisition in 2000 of New York-based Rogers & Wells, where Newborn and the others were partners. The merger was seen as a key test of the viability of melding British and American law firms. And one of the merger’s thorniest underlying problems was the dramatically different approach the two firms took to paying their partners. Rogers & Wells, with 400 lawyers, had a strong “eat-what-you-kill” tradition, where partners were compensated based in large part on the amount of business they generated. By contrast, partners at Clifford Chance were long accustomed to a lock-step system, where salaries are directly linked to seniority. Clifford Chance did bend its compensation system somewhat to accommodate a handful of Rogers & Wells partners, most notably Newborn and fellow antitrust leader Kevin Arquit. Both had been earning far more than the highest-paid partners at Clifford Chance and were awarded extra profit-sharing points after the merger. Together, the pair was responsible for generating more than $40 million in business annually. Last December, Arquit quit Clifford Chance to join the New York office of Simpson, Thacher & Bartlett. After his departure, Newborn became the sole Clifford Chance partner with more than the maximum lock-step points. According to the U.K. publication Legal Business, Clifford Chance’s 441 equity partners made $958,500 each on average in 2002, an 11 percent drop from 2001 figures. Also, the firm last year posted gross revenue of $1.5 billion, a decline of more than $8 million and its first decrease since 1993. Newborn, who served as director of litigation at the Federal Trade Commission’s Bureau of Competition from 1991 to 1994, says money didn’t prompt the move to Weil, Gotshal, where average profits per partner were at a record $1.3 million in 2002. Still, he says, the lock-step plan probably isn’t viable in the United States. “It’s worked well for [Clifford Chance] throughout the world. The question is whether it can do the same in the U.S. market,” says the 57-year-old Newborn. “I think lock-step can’t survive in the U.S. The firm will have to either accept more exceptions to lock-step or retrench.” More problematic, Newborn says, is the sheer size of Clifford Chance. IN CONFLICT In the last six months, Newborn says, he was conflicted out of at least a half-dozen major matters. With more than 1,100 lawyers, Weil, Gotshal is very large, but it’s still only one-third the size of Clifford Chance, he notes. “Leaving Clifford Chance was very difficult. It is one of the few elite firms in the world,” he says. “I’m happy to go to another of the world’s elite firms.” At Weil, Gotshal, Newborn will co-head the firm’s global competition practice with New York partner Helene Jaffe. Whether Newborn’s departure will push the megafirm to consider easing its lock-step pay scale — which could hamper its ability to attract and retain star lawyers in the United States — remains to be seen. The firm will decide later this fall about what kinds of exceptions, if any, it will make to its pay system. Jon Roellke, a D.C. litigation partner at Clifford Chance, says the depth of the disagreement over compensation has been exaggerated and adds that it’s unclear whether it played a part in Newborn’s decision to leave. “There is much broader consensus on lock-step here than any division,” says the partner. But Arquit agrees with Newborn that Clifford Chance’s method works better abroad than here. “If one firm is offering 30 percent more — why is someone going to go to the firm offering them less?” Arquit asks. “At the end of the day, the markets work.” “It’s understandable why some people would find chipping away of the lock-step to be counterproductive or not desirable,” he continues. “People tend to favor a system in which they do best.” John Carroll, Clifford Chance managing partner for the Americas, says the firm isn’t budging on the fundamental principles of its approach to partner salaries. “We’re firmly committed to lock-step,” Carroll says. “We are considering and probably will soon come to a final decision whether we want to have a degree of flexibility in that. But we’ve chosen the lock-step path.” The loss of the four partners won’t affect Clifford Chance’s more than 3,000 lawyers throughout 19 countries, Carroll says. The firm still has seven antitrust partners and more than 40 associates in the United States, he adds. “Inevitably I expect the clients of the firm who rely on [Newborn] will leave,” says Carroll. “But most clients come to us because we’re Clifford Chance, and I expect they’ll continue to use us on all of the work Steve was servicing them on.” Newborn’s regular clients include DaimlerChrysler, Citibank, Johnson & Johnson, and Siemens. In recent years, he has worked on Royal Dutch Shell’s acquisition of Pennzoil, Gart Sports’ merger with The Sports Authority, and the combination of Kluwers Academic Publishers with BertelsmannSpringer, among others. David Berz, Weil, Gotshal’s D.C. managing partner, says attracting antitrust partners with FTC experience and international reputations was a goal for the firm’s 58-lawyer D.C. office, which had no lawyers who focus exclusively on antitrust. “This has been our primary strategic planning objective,” says Berz. “It’s creating a level of expertise that we don’t have in Washington.” He calls Newborn’s team a “tremendous complement” to the firm’s antitrust practice in the United States and abroad, particularly in the European Union. Whether a bevy of associates will follow the Clifford Chance partners is an open question, says Berz. The firm can assist them for now with existing associates, but he adds that they plan to add six to eight associates over the next few months. And in the beginning of 2004, Weil, Gotshal hopes to lure more antitrust lateral partners either from government or private firms, Berz says. “We certainly intend to add more bulk to this group,” says Berz, adding that anticipated improvements in mergers and acquisitions, transactions, and capital markets will inevitably mean more work for competition lawyers. But some antitrust lawyers are unsure whether Newborn will be a good fit at his new firm. “I’d say it’s an interesting marriage,” says one D.C. antitrust partner. “Weil is a hard-nosed, tough firm. It also doesn’t have much in D.C. antitrust-wise, although it’s strong in New York.” McLeod, a colleague of Newborn’s and Arquit’s at the FTC in the 1980s, says that Newborn will add depth to Weil’s already sophisticated antitrust and trade regulation practice. “He left a department store and went to a specialty firm,” says McLeod. “I think it will give clients a choice when they’re looking for the best antitrust advice — which now may not come from the firm that also happens to give their corporate or tax or real estate advice.”

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