Bloomberg News

Firm Revenues, Wilson Sonsini, Goodwin Procter: Business of Law

August 20, 2012

Although law firm revenues increased slightly in the first half of 2012, the growth in expenses outpaced the revenue increase during the same period. That’s the takeaway of the recent quarterly survey of the law firm group of the Citi Private Bank of Citigroup Inc. (C:US)

Gretta Rusanow, the senior client adviser in the Citigroup business, said in a telephone interview on Aug. 17 that while revenues increased 2.7 percent compared with the first six months of 2011, compensation expenses increased about 2 percent and operating expenses, such as rent, infrastructure upgrades, and insurance, went up 5.5 percent.

Additionally, the growth in headcount also exceeded the 0.3 percent growth in demand for attorneys’ services, according to the survey of 176 law firms.

Rusanow said that transactional work is slower than litigation. While in the past the pace of litigation can offset a slow deal market, she said corporate clients are pressuring their law firms to discount the bills for litigation.

As a result, Rusanow said, “It doesn’t matter what end of the market you’re sitting in, demand is down. And no one is immune.”

Layoffs haven’t occurred she said. Instead, firms have cut compensation costs by not awarding spring bonuses to their associates like last year.

Unless the market picks up, Rusanow said that “there will be a struggle to achieve even the low single digit profit growth we predicted at the start of the year. We’re concerned.”

Dewey Committee of Ex-Partners Wants Examiner for Defunct Firm

Although appointing a trustee to take over Dewey & LeBoeuf LLP is “premature,” an examiner should be appointed for the defunct law firm, the official committee representing former partners said in a court filing Aug. 16.

In the filing, the committee was critical of a settlement proposal the firm is offering to former partners which would give those partners releases from claims and lawsuits in return for payments in varying amounts. The Wall Street Journal reported last week that the settlement is at least $50 million.

The official committee argues that the firm “simply lacks fiduciary credentials to decide how much each partner should be permitted to pay” because it’s “managed solely by individuals who remain partners and who were actively engaged in many of the debtor’s most controversial pre-petition actions.”

The committee criticized the firm for offering discounts in return for collecting unpaid bills, “further rewarding those with the largest practices for doing only that which they are already obligated to do.”

The filing is especially critical of the firm’s demand for payments from lawyers who retired years before bankruptcy. The committee says that the demand for subsidies from retirees “cries out, at a minimum, for vetting by an entirely disinterested fiduciary.”

An ad hoc group of 54 former partners filed papers on Aug. 8 telling the bankruptcy judge in Manhattan that the firm should be taken over by a Chapter 11 trustee or an examiner appointed to conduct an investigation into management’s “blatant conflicts of interest.”

In a large case such as Dewey’s, the bankruptcy judge is required to appoint an examiner if a motion for a trustee is denied. A judge retains the ability to decide the scope and cost of an examiner’s report.

A call for comment to the firm’s lawyers wasn’t returned. There is a separate official committee representing creditors.

Dewey, which once had 1,300 lawyers, began liquidation under Chapter 11 in May. There was secured debt of about $225 million and accounts receivable of $217.4 million at the outset of bankruptcy, the firm said. The petition listed assets of $193 million and liabilities of $245.4 million as of April 30.

The case is In re Dewey & LeBoeuf LLP, 12-12321, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Lawyer Sues News Corp. for Hacking in 2007 Prosecutor Affair

News Corp. (NWSA:US) and the former private investigator who hacked phones for the News of the World tabloid were sued in Britain by a criminal-defense lawyer who newspapers said in 2007 had an affair with the country’s chief prosecutor.

The lawsuit by Kirsty Brimelow, of Doughty Street Chambers in London, was filed against News Corp.’s U.K. unit, which published the now-defunct title, and Glenn Mulcaire, 41, in the High Court on Aug. 13, according to court records.

Brimelow had an affair with Ken Macdonald, who at the time led the U.K. Crown Prosecution Service, the Telegraph and other titles reported in February 2007. The alleged relationship made headlines about a month after Macdonald’s agency secured prison terms for Mulcaire and the News of the World’s Royal Family reporter Clive Goodman. While the men pleaded guilty to phone hacking, the case failed to uncover the extent of the scandal.

News Corp. Chairman Rupert Murdoch closed the News of the World in July 2011 after revelations it intercepted the voice mail of murdered schoolgirl Milly Dowler in 2002, when she was still missing. The company is cooperating with police after admitting some of its journalists targeted celebrities, politicians, crime victims and people close to them until 2006.

U.K. tabloids published photographs of the two lawyers dining together and stationed reporters outside their homes in February 2007 to get reactions from them and Macdonald’s wife, according to news articles at the time. Neither Brimelow nor Macdonald commented on the reports of the affair.

Mulcaire’s lawyer, Sarah Webb, declined to comment. Daisy Dunlop, a spokeswoman for News International, declined to comment on the lawsuit.

Brimelow didn’t return calls or e-mails over three days seeking comment. The details of her claims weren’t immediately available.

Macdonald, who was director of public prosecutions at CPS from 2003 to 2008, declined to comment.

The case is Brimelow QC v. Newsgroup Newspapers, HC12A03219, High Court of Justice Chancery Division.

For more, click here.

Capital Markets

Wilson Sonsini, Goodwin Procter on Trulia IPO

Trulia Inc., an Internet startup focused on residential real estate, filed to raise $75 million in an initial public offering, aiming to capitalize on an improving U.S. housing market. The company plans to list its shares on the New York Stock Exchange under the symbol TRLA.

David Segre and Rezwan Pavri, partners in the Palo Alto office of Wilson Sonsini Goodrich & Rosati represent the company. Richard Kline and Anthony McCusker, partners in the Menlo Park, California, office of Goodwin Procter LLP represent the underwriters, JPMorgan Chase & Co. and Deutsche Bank AG, along with RBC Capital Markets LLC, Needham & Co. and William Blair & Co. Trulia’s general counsel Scott Darling is also listed in the regulatory filing made on Friday.

The filing was made under the streamlined regulations for smaller companies enacted as part of the Jumpstart Our Business Startups Act, known as the JOBS Act.

The law accelerates the registration process of firms with less than $1 billion of annual revenue and gives companies the ability to “crowd-fund” by selling its stock online, among other provisions.

Segre said that the impact of the new law on the filing of a registration statement for an IPO was minimal.

“There are allowances for less disclosure under the JOBS Act related to a number of items like executive compensation and the financial statements but” companies aren’t taking advantage of the provisions because the markets expect fuller disclosure.

He said in an e-mail that the primary benefit derives from the confidentiality provisions of the law, which allow small companies with less than $1 billion in revenues to receive comments from the U.S. Securities and Exchange Commission before the filings become public as Trulia’s did on Friday.

Trulia is a rival to Zillow Inc. (Z:US), which raised (Z:US) $69.2 million in its IPO in July 2011 and has seen its shares jump 79 percent since its market debut. The number of new-home building permits grew in the U.S. last month, indicating that the industry will keep improving in the second half of the year.

Trulia’s search engine is used by more than 20 million people a month to look for homes in specific neighborhoods. The company offers reviews on local schools and crime rates. The company makes money through ads on the site and subscriptions that let real estate agents target users and get their listings featured prominently.

Law Firm Mergers

K&L Gates, Middletons in Talks About Possible Combination

K&L Gates LLP and Australian national law firm Middletons are in discussions regarding a possible combination, according to a statement by K&L Gates. If approved, the combination would create a firm of more than 2,000 lawyers in 45 offices throughout Australia, North and South America, Europe, Asia, and the Middle East.

According to the statement, discussions between the two firms have been under way for several months with formal proposals expected to be presented to both partnerships later in 2012. K&L Gates spokesman Jeffrey Berardi said in an e-mail that K&L Gates has about 1,800 lawyers and Middletons has about 300 lawyers.

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net.


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Companies Mentioned

  • C
    (Citigroup Inc)
    • $53.48 USD
    • -0.18
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  • NWSA
    (News Corp)
    • $17.22 USD
    • 0.19
    • 1.1%
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