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As embattled Steel Hector & Davis was merged into a powerhouse law firm, it did so amid the same air of bitterness that characterized the Florida firm’s final year as an independent business: Senior managers celebrated by popping champagne corks, while staffers who received pink slips dubbed the occasion “Black Friday.” After months of negotiations, the 80-year-old Steel Hector & Davis finalized a merger late last week that took effect Tuesday with Cleveland-based Squire Sanders & Dempsey in one of the largest law firm combinations in Florida history. The transaction gives 800-lawyer Squire Sanders, which was formed in 1890 and was seeking to expand in Florida and Latin America, four new offices and 100 lawyers in Florida, South America and the Caribbean. Squire Sanders ranked 52nd in this year’s Am Law 100 survey of the nation’s largest law firms in terms of gross revenue. Albert del Castillo, who is now the coordinator of the combined firm’s Florida practice, said the strategy is to grow the firm more in Florida and add real estate and health care attorneys in the future. “This is far from the end,” he said. “This is an incredible start.” The Steel Hector partners who joined the newly combined firm hope the merger will end a period of turmoil featuring a rapid exodus of prominent partners. Observers inside and outside the firm blame an unsuccessful international expansion strategy, lack of growth within the United States and poor management by longtime managing partner Joseph P. Klock Jr. for the firm’s loss of independence. Steel Hector ranked fifth in gross revenue in this year’s “Review 15″ survey of South Florida law firms, with $57.3 million. The merger came as no surprise, following reports of deep financial troubles at the once-powerful firm that led to missed draws for partners. The Daily Business Review first reported in June that the two firms were discussing a merger, and reported in August that the deal was close to being finalized. Steel Hector had been hemorrhaging prominent partners for months — including former Coral Gables, Fla., Mayor Raul Valdes-Fauli and Richard Bernstein. Last November, the firm’s board ousted Klock as managing partner and replaced him with Davis. He was also voted off the board of directors. Del Castillo, who managed Squire Sanders’ five-lawyer office in Miami, said his firm had been talking to Steel Hector since April and had been doing due diligence since May. “For quite some time we were looking to expand in Florida,” said del Castillo, who specializes in public finance law and does bond work for the city of Miami. “It made a lot of sense to merge. But this is only the beginning of our expansion in Florida.” “I think it’s very good news,” said Shanker Singham, a partner in Steel Hector’s international division. “It gives me access to far more offices and locations.” Alvin Davis, Steel Hector’s managing partner since last November, will continue as Miami managing partner of Squire Sanders. “This gives us greater depth and gives us a global platform,” Davis said. “It also allows us to attract other lawyers in Florida, because we now have a more stable firm than was perceived.” “Is there some sadness at losing the name Steel Hector & Davis?” he continued. “Of course there is. I’ve been hearing from alumni all morning who wish us well but are expressing sadness. This is a well-recognized brand in South Florida. We want to find a way to keep it in people’s minds, at least for awhile.” But some people may not recall the name so fondly. About 25 Steel staffers were let go Friday, including the entire marketing department, most of the information technology and accounting departments, two paralegals, file room clerks and about six secretaries. Del Castillo said he did not know how many Steel Hector lawyers were let go but said about 20 lawyers had left in recent weeks, some voluntarily and some through layoffs. Davis said that about five lawyers were laid off in Miami, including one partner and one of counsel. “We had some redundancies that needed to be addressed,” del Castillo said, noting that some administrative functions were already in place in Cleveland. At least one South Florida managing partner said the merger was a good move, albeit bittersweet. “It’s a good thing for both of them,” said John Sumberg, managing partner of Bilzin Sumberg Baena Price & Axelrod of Miami, who worked at Steel Hector in the 1970s. “Steel Hector gets depth, and Squire Sanders gets more lawyers. But it’s sad. It was one of the great legal institutions in Florida.” Klock, who’s known as a prolific business generator, will join the newly merged firm, as will another high-profile Steel partner, Donna Hrinak, former U.S. ambassador to Brazil and co-chair of the international trade, competition and government practice. Klock and Hrinak did not return calls for comment for this article. The merger marks the disappearance of one of South Florida’s oldest law firms, which long represented some of the biggest and most powerful companies and individuals in South Florida. Over the years, its marquee client roster included Eastern Airlines, Southeast Bank, Florida Power & Light, and sugar barons Alfonso and Jose Fanjul of Palm Beach. Klock and the firm achieved international fame in 2000 when they represented former Florida Secretary of State Katherine Harris before the U.S. Supreme Court and succeeded in stopping the Florida presidential election recount battle and handing the presidency to George W. Bush. The terms of the merger call for Steel Hector to dissolve its corporation and for Squire Sanders to take on the debts and assets of the firm, del Castillo said. All Steel Hector’s former clients will move to Squire Sanders, he said. Del Castillo and his partners will move to Steel Hector’s current offices in downtown Miami. Steel Hector will retain its name on letterheads and business cards for an undetermined transition period, Davis said. Squire Sanders will not keep its affiliation with Steel Hector’s one-person office in Tel Aviv, or its two offices in Brazil, del Castillo said. Davis said Steel Hector was approached by 12 law firms about a merger in the last 10 months. The firm chose Squire Sanders because the firms’ cultures were similar, he explained. Davis declined to identify the other firms. According to sources, some Steel Hector staffers were offered new positions with lower salaries and chose to leave. One employee who had been at the law firm for 26 years was suddenly laid off Friday after being promised a job with the merged entity, sources said. A source who did not want to be identified said both Davis and Klock were upset about the layoffs. Sources who did not want to be identified said there is the potential for litigation by Steel Hector equity partners who recently left the firm. They say some equity partners are concerned they won’t get the equity pay they are owed, which could total hundreds of thousands of dollars. The sources said the former partners may wind up filing suit against the firm to collect. Del Castillo tried to put those concerns to rest. “If it’s truly owed, it will be paid,” he said. “We’ll need to fully flesh that out.” Many Steel Hector employees also expressed anger about the way the merger was handled, particularly that some partners were drinking champagne in the offices Friday while laid-off workers had to walk past the celebration. “The bodies were still warm,” one employee said. “It was disgusting.” Others were bitter at what they call Klock’s “gross mismanagement” of the firm, and blamed Klock, who served as managing partner of the firm for a quarter of a century, for Steel Hector’s demise. “He’s the one who caused the destruction,” said a former partner. “And he’ll still be paid his grotesque compensation.”

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