(Photo: Jason Doiy/ALM.)
Morgan, Lewis & Bockius partners voted early Friday afternoon to admit 227 Bingham McCutchen partners into the firm. Morgan Lewis confirmed the mass lateral move in a press release, which omitted any mention of a merger. Five sources briefed on the matter say that the deal is indeed not a merger but an acquisition of assets by Morgan Lewis.
Bingham McCutchen partners invited to join Morgan Lewis are expected to make the move before month’s end. Other Bingham McCutchen lawyers and staffers are expected to join Morgan Lewis in time, according to a handful of knowledgeable sources. The hires will make Morgan Lewis a 2,000-lawyer firm with offices in 28 cities.
As of midday Friday, Bingham McCutchen listed 307 partners on its website, along with 174 counsel and of counsel, 195 associates and 19 other professionals. A Bingham McCutchen spokeswoman declined to comment on the fate of those individuals not joining Morgan Lewis, although The Am Law Daily learned late Friday that at least two Am Law 100 firms are poised to add Bingham McCutchen refugees.
Morgan Lewis had roughly 1,400 lawyers prior to Friday’s announcement. To achieve the 2,000-lawyer mark, the firm would have to bring on about 370 other Bingham McCutchen lawyers besides the 227 partners it has already agreed to hire. Taken together, the total number of counsel and associates currently listed on Bingham McCutchen’s website is 369. At 2,000 lawyers, Morgan Lewis would become the world’s 17th-largest firm by attorney head count, according to The American Lawyer’s most recent Global 100 rankings.
The impact of the deal announced Friday depends on how it is structured, the details of which remain unclear. Two sources familiar with what was discussed at a firmwide conference call held early Friday afternoon at Morgan Lewis say that the firm’s newly elected leader Jami Wintz McKeon made it clear that the deal with Bingham McCutchen was an acquisition of certain partners and practice areas and not a merger.
Another two sources say that Bingham McCutchen chairman Jay Zimmerman, who ceded day-to-day leadership of the firm earlier this year to current managing partner Steven Browne, would not join Morgan Lewis. Zimmerman did not respond to a request for comment.
Bingham McCutchen of counsel Stephen Merrill in Boston, who serves as chairman of Bingham Consulting, also did not return a request for comment about whether the public policy and government affairs affiliate of the firm would join Morgan Lewis. Nor did Bingham McCutchen partner and Bingham Consulting president Christopher Cox—a former chairman of the U.S. Securities and Exchange Commission who joined the firm in 2009—or former California Gov. Pete Wilson, of counsel at the firm and a principal with its consulting arm.
Frank D’Amore, founder of Haverford, Pa.-based Attorney Career Catalysts, says that the Bingham McCutchen partners brought on by Morgan Lewis would presumably be among the firm’s highest producers in the practice and geographic areas that Morgan Lewis is most interested in expanding. He further notes that in an asset acquisition in which Morgan Lewis purchases Bingham McCutchen’s accounts receivable and work-in-progress, the larger firm would see some cash right away. Morgan Lewis would also receive an influx of capital contributions from incoming Bingham McCutchen partners.
D’Amore adds, however, that a typical lateral hire doesn’t begin generating revenue for their new firm for three to four months, during which time the acquiring firm pays a partners’ draw and the salaries of other lawyers and staffers, as well as the cost of additional office space.
“That’s a heavy, heavy load that a firm either has to pay out of existing cash reserves, which for a deal of this magnitude would have to be huge,” D’Amore says. “Or you go into your line [of credit] or hope that some of it is defrayed by capital that the new partners are diffusing into the firm.”
Several sources at both Morgan Lewis and Bingham McCutchen, who requested anonymity in order to spreak freely about the matter, say Morgan Lewis will use Bingham McCutchen’s accounts receivable and work-in-progress to satisfy the latter’s outstanding liabilities while also picking up the firm’s office leases. (In September, Akin Gump Strauss Hauer & Feld struck a separate deal to take on most of the lawyers in Bingham McCutchen’s London, Frankfurt and Hong Kong offices.)
The Am Law Daily reported last month that Bingham McCutchen had roughly $100 million in debt, some of it incurred through the opening two years ago of a back-office operations center in Lexington, Ky., whose fate remained unclear at the time of this story. Bingham McCutchen has also sought to trim its payroll in recent months, during which time the firm lost more than 100 partners following a financially disastrous 2013.
Morgan Lewis is no stranger to raiding firms in distress. McKeon, a litigator who relocated to San Francisco a decade ago to help lead Morgan Lewis’ West Coast expansion, orchestrated the firm’s absorption of 150 lawyers (50 of them partners) from Brobeck, Phleger & Harrison, a former Silicon Valley stalwart that filed for bankruptcy in 2004.
Besides its Brobeck additions, Morgan Lewis also poached the Palo Alto office of IP boutique Pennie & Edmonds shortly before its collapse in December 2003, added 17 lawyers from Thelen just prior to that firm’s dissolution in late 2008, brought on another 11 lawyers following the fall of Howrey in early 2011 and welcomed another 65 lawyers from now-defunct Dewey & LeBoeuf in 2012. Morgan Lewis has had to pay for some of those hires, settling for $10.2 million with Brobeck’s bankruptcy estate in 2004 and paying another $1.15 million to Howrey’s estate a year ago.
Bingham McCutchen and Morgan Lewis have been talking with one another for months, but two weeks ago The Am Law Daily reported that a key ruling involving partner clawback claims in the ongoing Dewey & LeBoeuf bankruptcy made waiting for a potential Chapter 11 case by Bingham McCutchen an increasingly unattractive option for Morgan Lewis.
The Am Law Daily reported earlier this week that a major malpractice settlement by Bingham McCutchen over the summer helped smooth the way for discussions on a potential union with Morgan Lewis. But on Friday, that combination instead became a mass exodus.