Patton Boggs’ Ed Newberry (Photo: Diego M. Radzinschi / NLJ)
Patton Boggs will close its Newark office after the firm lost almost $12 million there last year after insurance work arising from the Sept. 11 attacks dried up, according to Edward Newberry, Patton Boggs’ managing partner.
Newberry said in an interview with The National Law Journal Monday that the firm announced the closure to partners at a monthly meeting on Feb 20. The closure of the New Jersey office was first reported by POLITICO on Monday.
Newberry, who is based in in the firm’s home office in Washington, said the move to shut down the Newark office was part of planned restructuring, rolled out over the past year, and not because of any bigger financial woes at the firm. He also attributed ongoing restructuring since last year to stagnated growth in the legal industry.
“Literally, I don’t think there was anyone that was surprised” in the New Jersey office, Newberry said. “It was precisely according to the plan we laid out last July.”
The New Jersey managing partner of Patton Boggs, John McGahren, left the firm in August — seven years after starting the Newark office. His departure came amid a downsizing in Newark from 80 lawyers early last year to less than 50 by the fall, according to the New Jersey Law Journal.
About 10 to 12 of the 25 employees in the Newark office will move to Patton Boggs’ New York location, while five will stay in New Jersey, he said. The rest will be laid off. The firm has nine partners, 10 associates, five of counsel and two senior paralegals working in New Jersey, according to its website as of Monday.
“These are cuts that should have happened a long time ago,” said one Patton Boggs partner.
At its peak, the New Jersey office handled $50 million of business for the firm from the World Trade Center Captive Insurance Company — about one-seventh or more of Patton Boggs’ total revenue of about $335 million in 2010, Newberry said. The account worked with thousands of tort cases involving payments after the Sept. 11, 2001, terrorist attacks.
The case settled around 2010, Newberry said, taking with it millions of dollars in revenue. The New Jersey business crumpled in two phases, he said, from $50 million to less than half that in 2012, then further plummeted in 2013 from $20 million to $1.8 million in revenue, Newberry said.
“It took time to wind down,” he said. “We still had the big office there.”
The closure of the New Jersey office wasn’t the first sign of trouble from the Washington-based firm. Newberry said the firm has been trimming down recently as some $70 million in business, including the World Trade insurance account, ended in 2012 and 2013.
“There’s certainly no argument we’ve gone through a difficult two years,” Newberry said in the interview with The National Law Journal Monday. “What we’ve done is address those problems head on. We now have a strong organization with best practices in place.”
The firm, he said, was profitable in 2013 with $45 million in the black, and has added new clients to the tune of $15 million in corporate transactions, international arbitration and regulatory work since early January this year.
Patton Boggs had a significant drop in gross revenues and partner profits in 2012 before it laid off 30 lawyers and 35 other employees last year. The 30 lawyers were associates and staff attorneys.
The biggest attorney cuts occurred in the firm’s New Jersey office. But Patton employees also lost jobs in Washington, New York, Dallas and Denver.
About 18 partners were told that their “performance here isn’t satisfactory” and should leave before the end of the year if it didn’t improve, Newberry said last March. In June, The National Law Journal reported that 17 partners left Patton Boggs. It is unclear whether these are the same lawyers who were put on notice.
Patton Boggs laid off another 10 lawyers and 35 other staffers near the end of last year, The Wall Street Journal reported in November. At the time, the firm was having merger conversations with Locke Lord. The talks ultimately were called off.
All told, the firm reduced its number of lawyers from 485 in 2012 to about 380 as of last month, a 20 percent drop. The firm will save about $27 million or more from the downsizing, Newberry said Monday.
He noted that the firm is looking to grow in London and California, possibly through acquisitions and mergers. Patton Boggs carries a “miniscule amount” of debt, he said.
Contact Katelyn Polantz at firstname.lastname@example.org. NLJ reporters Andrew Ramonas, Todd Ruger and Zoe Tillman contributed.