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The Cost of Cash Texas associates at all levels just received big raises at Andrews Kurth and Locke Liddell & Sapp, retroactive to Aug. 1. In July, when Vinson & Elkins announced a new, higher associate pay scale that moved the Texas market, Houston-based Andrews Kurth and Locke Liddell, based in Houston and Dallas, announced they would pay a base salary of $160,000 to first-year associates and $170,000 to second-years. But on Aug. 31, Andrews Kurth, which has 110 Texas associates, announced a new salary scale that will pay $172,500 to third-year associates, $175,000 to fourth-years, $180,000 to fifth-years, $185,000 to sixth-years, $190,000 to seventh-years, $195,000 to eighth-years and $200,000 to ninth-years. Year-end merit bonuses will be awarded on subjective and objective criteria, including billable hours, which can include up to 150 pro bono hours. First-year associates can receive a $5,000 bonus this year. Year-end bonuses this year for second-year associates will range from $5,000 for 2,000 hours to $15,000 for 2,300 hours. According to the new scale, third-year associates can receive up to $26,500 in bonus for 2,300 hours. It’s up to $42,000 for fourth-year lawyers, up to $58,000 for fifth-years, up to $64,000 for sixth-years, up to $72,000 for seventh-years and up to $77,000 for eighth- and ninth-years. “We said we are going to be competitive, and this just confirms that,” says Robert Jewell, the 400-lawyer firm’s managing partner. He says bonuses for 2008 are under review. At Locke Liddell, Texas third-year associates will earn $172,500 in base salary according to the new pay scale, fourth-years $175,000; fifth-years $180,000; sixth-years $185,000; seventh-years $190,000; and eighth-years $195,000. The firm has 138 associates in its three Texas offices. Those Texas associates also have the opportunity to earn significant amounts in what a firm memo refers to as “the deferred portion of the compensation” or year-end lump sums. In Texas, that deferred compensation ranges between $15,000 and $65,000. To earn the deferred compensation this year, Managing Partner Jerry Clements stressed in the memo to associates on Aug. 28, Locke Liddell associates will have to meet a billable-hour target of 2,000 hours annually. Any associate who has worked fewer than 2,000 hours annually will not be eligible for the deferred compensation at the end of the year, Clements wrote. This year the firm will also give additional, merit-based bonuses. But the firm may not continue that tradition for long. Clements wrote: “We will continue to evaluate our year-end merit-based bonus program in light of changing market conditions. In view of the increased base and deferred amounts, the lower tier bonus amounts will likely be eliminated. The mid-level and high-level bonus amounts will likely remain, with the performance targets consisting of 2,200 hours for the mid-level bonus and 2,400 hours for the high-level bonus.” Marc Watts, managing partner of Locke Liddell’s Houston office, says while the firm wants to offer compensation to attract top talent, it wants to address concerns some associates have about their lifestyles being dominated by such steep billable-hour targets. “We needed to find a way to give associates an alternative,” Watts says. Big Baker Botts Win The Texas Supreme Court handed Houston-based Baker Botts a big victory. On Aug. 31, the Supreme Court denied a petition for review in Kathleen C. Cailloux v. Baker Botts, et al., a ruling that upheld a take-nothing judgment in favor of Baker Botts and Wells Fargo Bank Texas in a big-bucks estate-planning suit. In 2005, 198th District Judge Karl Emil Prohl of Kerr County ordered Baker Botts and Wells Fargo to pay $71 million in damages to former estate-planning client Kathleen C. Cailloux, a wealthy widow in Kerrville. A jury found Baker Botts breached its fiduciary duty for failing to disclose all important information when doing estate-planning work for Cailloux after the death of her husband, Floyd, in January 1997. The jury also found Wells Fargo breached its fiduciary duty to Cailloux. Cailloux alleged in the Sixth Amended Petition that the defendants conspired to convince her, right after her husband’s death, to disclaim her rights to her husband’s estate and transfer more than $60 million to the Floyd A. Cailloux and Kathleen C. Cailloux Foundation � ostensibly to save more than $30 million in taxes � without informing her of other estate-planning options. In February, a three-justice panel of the 4th Court of Appeals in San Antonio reversed the judgment and rendered a take-nothing judgment in favor of the firm and the bank. In the opinion, Justice Catherine Stone wrote that nothing in the record proved that Baker Botts or Wells Fargo breached a fiduciary duty that caused Cailloux to disclaim her right to the estate of her late husband. Joseph Cheavens, deputy general counsel at Baker Botts, is pleased with the Supreme Court’s ruling. “And frankly, it’s what we expected. The court of appeals in San Antonio got it right. There were really no compelling legal issues here that would warrant the Supreme Court to even order full briefing,” Cheavens notes. He says Kenneth Cailloux, who filed the appeal on behalf of his deceased mother, could ask for a rehearing, but those motions generally are not successful before the Texas Supreme Court. Rick Harrison, a partner in Fritz, Byrne, Head & Harrison in Austin who represents Cailloux, did not return a telephone call seeking comment before presstime on Sept. 6. Neither did Dean Fleming, a partner in Fulbright & Jaworski in San Antonio, who represents Wells Fargo.

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