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Bonus Bucks Some large Texas firms followed Vinson & Elkins’ lead and raised associate salaries to the new market rate effective Aug. 1: a $160,000 salary for first-year associates and $170,000 for second-years. But Dallas-based Winstead is going its own way. The 303-lawyer firm announced last week it will not raise associate salaries but will put more money into the pot used to fund year-end, merit-based associate bonuses. “We are not going to act reflexively in a lock-step action without regard to actual contributions an individual associate makes,” says Denis Braham, chairman and chief executive officer of the firm. “We expect our associates’ compensation will meet or exceed our competition, but we will do it in increases in bonus rather than in base salary,” Braham says. Braham says Winstead will continue to pay its first-year lawyers a $135,000 base salary, but instead of a $5,000 bonus, associates will be eligible for a merit-based bonus of up to $25,000. “Then we’ve basically increased those bonus ranges all of the way up for all associates, and increased them significantly, particularly starting in the third year,” he says. Under Winstead’s new plan, an eighth-year associate can earn a base salary of up to $190,000 and a bonus of up to $80,000, he says. Previously, the maximum bonus was $45,000. Braham also notes that extraordinarily productive associates may qualify for special bonuses above the maximum levels. The firm expects associates to bill 1,950 hours, and that’s unchanged, Braham says. The V&E plan defers some of the salary for third-year lawyers and up, with those associates required to bill at least 2,000 hours to earn the full base salary. At V&E an eighth-year associate who bills 2,000 hours will earn $260,000 annually in base salary and a bonus ranging from $12,500 to $45,000. It’s the deferred portion of V&E’s compensation system that seemingly has stumped other large Texas firms, including Houston-based Bracewell & Giuliani and Andrews Kurth, Dallas-based Thompson & Knight and Akin Gump Strauss Hauer & Feld, and Houston- and Dallas-based Locke Liddell & Sapp. Each of those firms matched V&E’s salaries for first- and second-year associates as of Aug. 1 but say they are studying the compensation for more senior associates. On Aug. 1, Houston-based Fulbright & Jaworski, which has 974 lawyers worldwide, gave a raise to its first-year associates in Texas, moving to the $160,000 market effective Aug. 1, but the firm is reviewing other associate compensation. No Shelton � Again Criminal-defense lawyer Catherine Shelton and her attorney, James Lombardino, principal in Houston’s Lombardino & Associates, did not attend a July 27 hearing before the State Bar of Texas 4B4 Evidentiary Panel in Houston on Shelton’s motion for rehearing and to set aside the disbarment judgment that the panel issued in May. As noted in the May 17 judgment of disbarment in Commission on Lawyer Discipline v. Shelton, the evidentiary panel found that Shelton twice failed to appear at hearings on one client’s motion for a new trial and accepted $20,000 from another client but failed to work on his appeal. The panel also found, according to the judgment, that Shelton repeatedly was late for another client’s trial in Hood County and failed to show up for hearings when the trial court held her in contempt. Texas Lawyer was unable to locate Shelton. Lombardino, who is on vacation, did not return a telephone call seeking comment. In June 2006, the Board of Disciplinary Appeals reversed a default judgment of disbarment against Shelton because of a deficiency in the affidavit of substitute service on her. TXU Suit Ends Lawyers on all sides of the TXU shareholder litigation have decided to lay down their weapons and enter into a global settlement on July 23 that may allow the historic $45 billion sale (including debt) of Texas’ largest utility company to go through. The leveraged buyout, which was proposed earlier this year by two private equity firms, would be the largest sale of its kind in which a publicly traded company is taken private. The shareholder litigation, which was pending in state and federal court, suffered a significant blow on May 25, when 44th District Judge Carlos Cortez of Dallas agreed with the defendants’ plea to the jurisdiction, dismissing the class action suits that had been consolidated into In Re: TXU Corp. Shareholder Litigation. In an interview, Cortez explained that the 5th U.S. Circuit Court of Appeals and Dallas’ 5th Court of Appeals had ruled that Texas law does not allow shareholders to pursue direct claims against TXU directors for alleged breaches of their fiduciary duty. Cortez’s ruling convinced the remaining shareholder-plaintiffs to cease pursuing the multifront litigation in state and federal court aimed at halting the sale, says Gerry Pecht, a partner in the Houston office of Fulbright & Jaworski who represents TXU. “I think they were seeing the writing on the wall,” says Pecht, who also believes the shareholders came to understand that the price was fair. More important, the July 23 settlement allows a shareholder vote on the sale to go forward, he says. While the defendants will pay no money as part of the settlement, the shareholders will receive two concessions, says Roger Mandel, a partner in Dallas’ Stanley, Mandel & Iola who is co-lead counsel for the shareholders in the class action. The shareholders will receive more information about the sale in proxy notices to be sent before the vote, he says. “And No. 2, there is a decrease in the amount of the termination fee which TXU would have to pay to the buyers [which means] if the deal doesn’t go through it would make it easier for a competitive bidder to come through,” Mandel says. Mandel adds that the shareholders challenging the sale became more comfortable with the purchase price during the course of the litigation. “Our analysis ended up being that the price that was proposed was within the range that the board could have approved without breaching fiduciary duty, which was why we were willing to settle without a price increase,” Mandel says. Peter Kavanoff, a partner in the New York office of Simpson, Thacher & Bartlett who represents the two private equity firms, Texas Pacific Group and Kohlberg Kravis Roberts & Co., did not return a telephone call seeking comment before presstime on Aug. 2.

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