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New York-based Rosenman & Colin has announced that it has signed a merger agreement with the Chicago law firm Katten Muchin Zavis, creating a law firm of roughly 675 lawyers called KMZ Rosenman. The merger is the latest example of a larger Chicago firm scooping up a midsize New York firm. Although Katten Muchin is by far the larger of the two firms, with about 435 lawyers, compared with approximately 240 at Rosenman, it is little-known in New York and has a local office with only one attorney. Katten Muchin is generally considered to be in the second-tier of Chicago firms, behind larger firms such as Kirkland & Ellis; Mayer, Brown, Rowe & Maw; Winston & Strawn; McDermott, Will & Emery; and Sidley Austin Brown & Wood, all of which possess substantial New York offices. Katten Muchin now has one of the largest New York offices of any Chicago firm. Though other firms say a New York presence is essential to forging an identity as a national firm, Katten Muchin was driven to merge by client demand, not by grandiose expansion plans, according to Vincent A.F. Sergi, Katten Muchin’s former managing partner and the combined firm’s national managing partner. “We have systematically avoided New York for many years,” Sergi said. “Strategically, we felt we weren’t ready to be in New York.” Katten Muchin began exploring New York expansion about 18 months ago as client needs pointed in that direction, according to Sergi. Rosenman was also motivated to merge by client demand, said Joshua S. Rubenstein, Rosenman’s former chairman, now managing partner of the firm’s New York office. “Our clients are consolidating at a rapid pace,” he said. “We lacked a national presence and we lacked the ability to grow as fast as our clients.” Though Rosenman has well-regarded practices in real estate, litigation, corporate finance and trusts and estates, it has had difficulty expanding without a national presence, which is a problem facing many midsize, general-practice firms. Rubenstein said certain Rosenman clients had advised him the combined firm could pick up work in Chicago and Los Angeles, where Katten Muchin had about 70 lawyers. Apart from its New York headquarters, Rosenman has small offices in Washington, D.C., Charlotte, N.C., and Newark, N.J. Besides Chicago, Los Angeles and New York, Katten Muchin has offices in Washington, D.C., and Palo Alto, Calif. Sergi and Rubenstein both said the two firms had strengths in similar practice areas, and their combined strength in growing areas such as intellectual property litigation would allow them to better compete for business and talent. Rubenstein said a number of lateral partners who had been waiting for the merger to happen should be joining the firm shortly. The two firms began talks several months ago and had originally planned on completing a merger by Jan. 31. Lingering disagreements on certain issues delayed the merger on several occasions over the past two months. At times, the future of the merger seemed in doubt. “I think I only knew in the last five days that we were over the hump,” said Rubenstein. Both firms had addressed the issue of the combined partnership’s constitution some months ago. Rosenman, unlike Katten Muchin, did not previously have a two-tier partnership. In anticipation of the merger, about one-third of Rosenman’s partners were reclassified as income partners rather than equity partners, Rubenstein said. According to The American Lawyer‘s most recent Am Law 200 survey of law firm earnings, Katten Muchin had profits-per-partner in 2000 of $645,000, compared with Rosenman’s $545,000. Rubenstein said the introduction of income partners at Rosenman effectively equalized the firm’s profitability. In the last few weeks, the firms’ differing retirement plans were the most contentious issue, Rubenstein said. Rosenman partners have previously looked forward to generous retirement plans that paid benefits for life, while retired Katten Muchin partners have retirement benefits that terminate after 10 years. The two firms reached a compromise two weeks ago, Rubenstein said. Rosenman partners over a certain age will be able to continue with the Rosenman plan. All others will join the Katten Muchin plan. There was also substantial debate over the combined firm’s name. As the acquiring firm, Katten originally proposed the firm simply adopt the Katten Muchin name or call the firm Katten Muchin Zavis Rosenman, said Rubenstein. Several Rosenman partners objected, and not just out of pride. “No one in New York knows Katten Muchin,” said Rubenstein. Rosenman, on the other hand, bears the name of Judge Samuel I. Rosenman, who served on the Court of Appeals before becoming counsel to Franklin D. Roosevelt when he was elected governor of New York. Judge Rosenman later became the first White House counsel under Roosevelt, and also served President Harry S. Truman in a similar capacity. One of President Roosevelt’s most trusted advisors, Rosenman is often credited with coining the term “New Deal.” Concerned about Katten Muchin’s lack of name recognition and not wanting to bury the prestige of the Rosenman name, the two firms ultimately decided to brand the combined firm as KMZ Rosenman. CULTURAL DIFFERENCES The nature of these disputes highlights major cultural differences between the two firms. Age is one major difference. Rosenman has partners a generation older than those at Katten Muchin. About one-third of Rosenman’s partners are over 55, Rubenstein said. Founded in 1912, Rosenman recently mailed postcards celebrating the firm’s 90th anniversary. Katten Muchin, on the other hand, is a relatively young firm, founded in 1974 by Melvin L. Katten, Allan B. Muchin and Michael W. Zavis, all of whom are still active partners at the firm. The histories of the firms have fostered somewhat different cultures. In New York, Rosenman is often regarded as a “lifestyle” firm where attorneys exchange some income for a better quality of life. The firm’s billing target is a modest 1,850 hours per year. By comparison, Katten Muchin has developed a reputation as a somewhat hard-charging, aggressive firm. Rubenstein acknowledged the Chicago firm “has traditionally been more focused on billable hours.” Katten Muchin’s culture was placed in an unflattering light in 1994 when Lawrence D. Mungin, a black Harvard Law School graduate working as a senior associate at the firm’s Washington, D.C., office, sued the firm for racial discrimination. Mungin charged, among other things, that he was denied meaningful work and opportunity for advancement. A federal jury in Washington, D.C., awarded Mungin $2.5 million in damages, but the verdict was overturned in 1997 by the U.S. Court of Appeals for the D.C. Circuit, which noted that Mungin received arguably better treatment than many white associates. Sergi said Katten Muchin has always possessed an open culture that values diversity. He acknowledged that Katten Muchin was energetic and intense, but he said his contacts with Rosenman attorneys gave him every reason to believe the firms were more alike than not. Rubenstein said he also expected the firms to mesh well. “The reality is that we’re not as lax in that regard as might be believed,” he said. “The reality is also that they’re not as strict.” Chicago firms have been actively expanding of late. Sidley & Austin’s merger last spring with New York’s Brown & Wood created one of the largest law offices in New York. Mayer Brown’s merger with London’s Rowe & Maw was one of the largest transatlantic mergers to date. Sonnenschein Nath & Rosenthal may be next; sources say the firm has been looking for New York acquisitions and may be close to acquiring at least one smaller firm.

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