An artistic rendering of the reception area of the new Kaye Scholer office.
An artistic rendering of the reception area of the new Kaye Scholer office. (Kaye Scholer)

Kaye Scholer, a nearly 100-year-old firm that has experienced major shifts in personnel, finance and leadership in the last three years, is preparing for another jolt to its system­—a move from its home since 1959 to modern digs on the West Side.

Kaye Scholer has been headquartered at 425 Park Ave. for the last 55 years, making it one of the longest commercial tenants in Manhattan.

In late September, about 400 employees, including 275 lawyers and 125 staff, will move to 250 West 55th St. A few staff will remain on Park Avenue until the firm’s lease expires in 2015. The building is scheduled for demolition.

“We’ve thrown out a lot of stuff,” said Michael Solow, managing partner, who added the shedding will save $100,000 in moving costs.

A more efficient floor plan in the new building, combined with the relocation of about 100 back-office positions to Tallahassee, Fla. last year, means the firm can work comfortably in about 20 percent less space on 55th Street, Solow said.

He declined to discuss financial details of the new 20-year lease, but said the square foot price is competitive with the marketplace. “From an economic point of view, this is not hurting us,” he said.

The move is the latest in a series of changes at Kaye Scholer. In 2012, Solow became the sole managing partner after sharing that role with Barry Willner, who is now special counsel. Solow is also co-chair of the executive committee, along with Stephen Gliatta.

In the last few years, the firm has seen the departure of executive committee members and partners in New York, and a significant reduction in its Los Angeles office.

The firm also posted three years of revenue declines, including in 2013, when total revenue dipped by 5 percent to $380 million, according to American Lawyer financial figures. Meanwhile, last year’s profits per partner rose slightly more than 2 percent to $1.385 million.

Equity partnership also fell from 127 in 2009 to 115 in 2013, according to American Lawyer.

Two former Kaye Scholer attorneys said that by late 2012, a larger-than-usual number of senior partners had become special counsel or retired.

Solow, co-chair of the firm’s bankruptcy and restructing practice, said that while the firm did not have a program to de-equitize partners, some equity partners chose to retire early. “It’s probably slightly more rapid pace than it has in the past,” he said.

Like many other large firms, Kaye Scholer’s New York attorney full time equivalent head count has dropped, declining to 246 in 2013 from 279 in 2010, according to NYLJ 100 figures.

Among partner departures in the last year, former corporate co-chair Adam Golden went to Hogan Lovells; Grace Pan, Janet Barbiere and William Cullen decamped to Orrick, Herrington & Sutcliffe; Timothy Spangler to Sidley Austin; and Eric Sussman, co-chair of the white collar litigation practice in Chicago, joined Paul Hastings.

The firm has lost at least four former executive committee members in about the last two years.

“Whether I like it or not, that is just the reality of the world that all law firms live in,” Solow said, pointing to a rapidly changing legal market and the regularity of lateral moves.

Partner departures may not affect the firm’s finances, but it has an impact on talent, Solow said. “Anyone we elect as a partner is an extremely talented partner,” he said. “Economically, we’re just fine. Would I have preferred that certain people stay? Of course, I would. But it has to be right for them and right for us.”

The firm recently added lateral partners Lawton Camp from Allen & Overy and Glynna Christian from Squire Sanders, now Squire Patton Boggs.

In January, Kaye Scholer elevated 16 lawyers to partner and counsel, its largest promotion class in five years.

Solow said the firm’s head count is consistent with demand, and he expects the head count to increase. “We’re not taking space just to fit in the current group of people,” he said. “We anticipate we will be growing,” he said. “Our guess is that we want to have and pay for about 20 percent extra space,” he said.

Coastal Changes

Meanwhile, the Los Angeles office, which had about 49 full time equivalent attorneys in 2011, dipped to 20 in 2013, with transactional lawyers leaving for Hogan Lovells, Morrison & Foerster and Jenner & Block among others.

A former West Coast partner said the Los Angeles office felt the concentration of power was on the East Coast. “We’re smart, we get it. We realized there would be no focus in California, no support, no resources,” the ex-partner said.

Solow said the firm’s West Coast transactional practice is focused on Silicon Valley. In Los Angeles, he said, while the firm valued its partners there, the transactional practice was not prospering. “The corporate activity that we are best at, the clientele who appreciate the way we do it and the frankly the way we charge for it, are located further north in the state,” he said.

Solow said the firm will continue to focus on litigation and real estate finance in Los Angeles.

He declined to discuss financial expectations for 2014 saying only, “so far, so good.” He told the American Lawyer in February that revenue is expected to remain flat but profits would climb this year.

The firm has continued to work on high-profile matters, such as advising longtime client Novartis Pharmaceuticals on the intellectual property-related aspects of strategic deals totaling $30 billion, including the acquisition of GlaxoSmithKline’s oncology unit.

Kaye Scholer was historically known for its antitrust practice, lead by expert Milton Handler, who died in 1998, and its labor practice.

Today, Solow said the firm’s biggest revenue generators are life sciences, including representing brand pharmaceutical companies; private equity, financial services and corporate and real estate finance. More than half of its revenue is generated by litigation, he said.

Solow said a combination of retirements and de-emphasis of certain practice locations has had a positive effect on profits per partner. “The strategy is to increase our profits per partner, which makes us more healthy as a business,” he said. “What’s important to me is maintaining health of the partnership.”

Three former Kaye Scholer attorneys said the firm has become very “bottom-line” oriented. One said there was an over-emphasis on cost-cutting.

But Solow said the firm was not at risk of focusing too much on expenses to the detriment of top line. “We work on our top line. The real issue that you have—I cannot create demand. Certainly we go out and pitch for business like any other law firm,” he said.

But the firm also has a stable of its top 100 clients, most of whom have been with Kaye Scholer for decades. “We’re comfortable where we’re at with our clients,” Solow said, adding the firm also concentrates on attracting new business. It recently hired its first chief strategy officer, Beatrice Seravello.

Some former Kaye Scholer partners praised the firm’s approach. One said the firm is “very fiscally” responsible. “A lot of firms live beyond their means, they do not,” the former partner said.

The former West Coast partner praised Solow for doing the best he could do to balance the firm during a transition. The partner said Kaye Scholer has “too many institutional relationships” and no significant debt, and that the firm was attractive as a merger partner.

Kaye Scholer is not in merger talks, nor is it seeking a merger, Solow said. If the right opportunity for growth was presented, he said, he would discuss it with his partners.

‘Brighter Space’

At 250 West 55th Street, the firm is leasing about 265,000 square feet, and it has the option to expand. It currently occupies about 330,000 square feet.

A firm committee of attorneys and staff has been planning the space, from working with the architectural firm to picking out furniture.

“I have partners who, this is the only office they have ever worked in. They have scraps of papers from when they were associates,” Solow said.

During its 55 year tenancy on Park Avenue, two bombs exploded on the 12th floor, one in 1970 and one in 1984. The latter happened when the South African consulate occupied the building; a terrorist group claimed responsibility.

Over the years, the firm has opened its office space to organizations and businesses, including after the Sept. 11 terrorist attacks and Hurricane Sandy.

At its new office, with floor to ceiling windows and 10-foot ceilings, Kaye Scholer will occupy 11 floors, including exclusive use of an outside terrace. “It’s going to be a much more open, brighter space,” Solow said.

Morrison & Foerster moved into the building earlier this year.

Kaye Scholer’s move will come a little over a year after it relocated 100 jobs to Tallahassee. Those who chose not to move were offered severance packages, Solow said.

“We’re very pleased with both the operation and the financial results,” he said about the office in Tallahassee. Although it has taken time for attorneys to adjust, the results were “significant enough to make it worth our while.”

250 West 55th St., with a rendering of the coffee bar looking out on the terrace at the new office space. Photo: NYLJ/Rick Kopstein, Rendering: Kaye Scholer