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In only a five-year span, Reed Smith has nearly doubled in size and profitability while making big splashes into the California and London markets with large mergers. The firm is now led by the dynamic Gregory Jordan, a 45-year-old Reed Smith lifer from the Pittsburgh home base who has accepted the mission of taking the firm to the next level. The Philadelphia office has seen a particular amount of change, as the faces that had come to symbolize the firm’s presence — David Auten, Michael Browne and Richard Glanton — have given way to a new generation of leaders bent on running the firm in a more businesslike fashion. But changes such as these create casualties. In the past few years, several partners in the Philadelphia office have left for various reasons, not always on the best of terms. Several legal headhunters and partners at other firms say they have heard the Philadelphia office at Reed Smith has been virtually ignored in recent years while the firm concentrates its growth on other markets. Reed Smith management hotly disputes any such contention, saying the Philadelphia office is coming off its best financial year in its more than 20 years of existence. Jordan succeeded longtime Chairman Daniel Booker in January 2001 after what some say was a bit of a power struggle with Browne, who for eight years was the Philadelphia office managing partner. Browne, a rainmaking corporate insurance lawyer, simultaneously was replaced as head of the Philadelphia office by litigator Robert Nicholas. Jordan named Philadelphia corporate partner Michael Pollack, 48, to the newly created position of director of strategic planning. The two set a course for expansion and increased profitability, and have basically delivered over the past four years. As Jordan started his new job, a merger with 60-attorney London firm Warner Cranston took effect. Jordan’s first year ended with the addition of 26-attorney Parker Duryee Rosoff & Haft to Reed Smith’s already 35-attorney New York office. That acquisition, which doubled the size of its New York site, played a key role in luring Oakland, Calif.’s Crosby, Heafey, Roach & May, a 220-attorney firm that had offices in Southern California as well. That merger became effective in January 2003 and Jordan said the firm has retained all but one of the original Crosby Heafey partners that joined the newly merged firm. It’s hard to argue with the firm’s financial results during Jordan’s tenure. Reed Smith’s revenue per lawyer has increased from $325,000 in 2000 to $553,000 in 2004, according to Jordan. Profits per equity partner have increased to an even greater degree, from $335,000 to $662,000 in 2004. And according to Law.com affiliate The National Law Journal‘s annual NLJ 250, from 2000 through 2004, Reed Smith grew from 612 to 957 attorneys, while the Philadelphia office has grown slightly, from 111 to 121 lawyers during that same time span. But some former partners say Reed Smith management has used a singular focus on bottom-line profitability in an attempt to become more like a New York firm. In the process, they argue that the firm has picked up some of the New York culture — making equity partnership a more difficult goal and de-equitizing partners that don’t have a strong book of business. In November 2002, two months before the merger with Reed Smith became effective, Crosby Heafey stripped 30 partners of their equity status. Half the partners who were de-equitized left the firm. “I thought there was a chance that I might be de-equitized so I got out,” said one former Reed Smith partner who requested anonymity. “It’s a New York model that they are using.” During the Jordan era, the number of non-equity partners has increased from 80 to 197. While much of that can be attributed to the firm’s growth, the percentage of partners carrying non-equity status has gone from 28.8 percent in 2000 to 46.8 percent in 2004. That number was actually higher in 2003, when it reached 52.3 percent. In the Philadelphia office, 24 of the 56 partners listed in the 2004 NLJ 250 were of the non-equity variety. It’s true that most national firms, or firms attempting to become national firms, have increased their non-equity partner numbers. The theory is that the fewer equity partners, the higher profits per equity partner will be. Morgan, Lewis & Bockius stopped revealing the number of non-equity partners it has to the press. Dechert has seen non-equity partner numbers rise from 9.7 percent of all partners to 29.9 percent. Blank Rome has seen its numbers increase from 19.4 percent to 24.5 percent. Both numbers are lower than Reed Smith’s percentages. Pollack said the main reason for the increase is the new system for making partner, which was implemented in 2001. The old system saw associates eligible to become equity partner after their eighth year out of law school. The new system calls for associates to be eligible for non-equity partner after their seventh year and equity partner after their 10th year. “I would say the main reason for the change [in the number of non-equity partners] is our new system of promotion, followed by all of our merger growth, then by lateral hires and then de-equitization,” Pollack said. Jordan said of the 19 percent increase in profits per equity partner, only 1 percent can be attributed to the change in equity partner status. “We don’t use de-equitization as a profit strategy,” Jordan said. “We use it as a personnel strategy. Some people are winding down their careers while others see their status change so they can be in the right position. It has a negligible effect on our bottom line.” Bankruptcy partner Peter Clark, who said his four years at Reed Smith have been the happiest of his career, does not think the de-equitization has had an effect on the firm’s culture. “It hasn’t been a painful process,” Clark said. “I think a lot of people think it’s for the best for their particular situation.” Reed Smith enjoyed several years of adding strong lateral partners in Philadelphia. Clark joined the firm in 2000, then fellow Duane Morris alums James Keating (2001), Claudia Springer (2002) and Matthew Tashman (2002) followed suit. Clark is now head of the firm’s 55-attorney bankruptcy practice while Springer is said to command a seven-figure practice. The firm also added litigator Alan Cotler from Klett Rooney Lieber & Schorling in 2001, labor and employment partner Gary Tocci from Schnader Harrison Segal & Lewis in 2002 and banking partner Lisa Kabnick from Pepper Hamilton in 2003 — all of whom are said to have strong practices and books of business. But since Kabnick arrived in January 2003, Reed Smith has lost an impressive list of partners in Philadelphia without making one lateral partner addition. In 2003, Robert Kauffman left for Berger & Montague (and now is general counsel for Harleysville Insurance Co.), corporate attorney Peter Tucci left for Piper Rudnick while litigator David Marston retired and Glanton joined client Exelon Corp. as an executive. In 2004, Browne left to become CEO of Harleysville Insurance and bankruptcy partner Ben Howell left the practice of law. And since the start of 2005, four partners have left the firm, with litigators Douglas Christian and Kelley Grady migrating to Ballard Spahr Andrews & Ingersoll, intellectual property partner John Goldschmidt joining Dilworth Paxson and litigator Carolyn Short leaving to become general counsel of the U.S. Senate Judiciary Committee. “Greg Jordan is a celebrated, charismatic guy and a lot of people admire what he’s done since taking over that firm,” one recruiter said. “But he also runs a tight ship and I don’t know if they are positioned well in Philadelphia because I don’t know if they view it as a pivotal city.” Jordan takes issue with such assessments. He said the Philadelphia office is coming off its best financial year, partly due to its representation of Wyeth in fen-phen litigation. He said the Philadelphia office is right in the thick of the two industries in which Reed Smith has chosen to focus — life sciences and financial services. Along with Wyeth, the firm’s product liability litigation practice, spearheaded by rainmaker Michael Scott, is representing Merck in Vioxx matters and also does substantial work for Tenet Health System. Kabnick and partner Leonard Bernstein represent financial services clients such as Wachovia, Freddie Mac and GMAC in regulatory and transactional areas. Nicholas said it is a fact of life that partners leave large law firms. “I don’t view [the departures] as something of great significance in terms of the culture of the firm,” Nicholas said. “The firm has become increasingly successful because it is well managed. Not everyone is incredibly productive, but things are set up to where we can accommodate people’s goals and our expectations. Not everyone needs a huge book to be successful here.”

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