UNFORTUNATE (AND IRONIC) COMMENT AWARD

If Dewey & LeBeouf has so-called friends like its former partner John Altorelli…well, you know the rest.

Altorelli’s recent comments to Am Law Daily include so many candidates for my Unfortunate Comment Award that it’s difficult to choose just one. So let’s go with the most ironic. In discussing whether Dewey could have done a better job managing information — presumably referring to publicity about attorney layoffs, partner departures and financial results — Altorelli said:

“In most law firms, I think, as good as the lawyers are at advising clients, they’re not as good at taking their own advice. They are surprisingly obtuse when it comes to their own situation.”

He then proceeded to reveal himself as someone surprisingly obtuse about his own situation. Before listing those inadvertent revelations, consider how Altorelli himself embodies the lateral partner hiring phenomenon that has overtaken much of big law as a dominant business strategy.

The revolving lateral door

After  graduating from Cornell Law School in 1993, Altorelli made his way through four law firms in only fourteen years — LeBeouf, Lamb, Greene & MacRae, Paul Hastings, Reed Smith, and Dewey Ballantine (shortly after the collapse of Dewey’s merger talks with Orrick, Herrington & Sutcliffe and a few months before its October 2007 merger with his original firm, LeBeouf Lamb). Such a journey is not likely to produce deep institutional loyalties anywhere.

He’s not unique. For example, as I composed this post The Wall Street Journal reported that Brette Simon had left Jones Day to join Bryan Cave. Since graduating in 1994, she’s also worked at O’Melveney & Myers, Gibson, Dunn & Crutcher, and Sheppard, Mullin, Richter & Hampton.

Still, Altorelli’s book of business apparently qualified him for a place on Dewey & LeBeouf’s executive committee. He says former chairman Steven H. Davis will “take the axe” for whatever is going wrong now, but surely the firm’s executive committee wasn’t a collection of potted plants. It seems improbable that Davis alone could have forged and executed Dewey initiatives that issued bonds and used guaranteed multi-year compensation contracts to lure prominent lateral partners.

But now Altorelli says: “The only people who need contracts are those who are not so secure. I feel bad that firms have to go that way, in competition for laterals and the like.”

Not my fault

Then again, Altorelli also suggests that management hasn’t contributed to Dewey’s current problems. Rather, it was just “bad timing” of a long recession that didn’t allow the firm to burn off expenses associated with the Dewey-LeBeouf merger: “We kept thinking it’ll get better tomorrow, then it doesn’t get better. The next thing you know it’s been four years.”

Magical thinking rarely results in a winning strategic plan. Curiously, Altorelli also notes that during that same period while he was at the firm, he and Dewey prospered: “I had five of the best years of my career.”

As he headed for his fifth big firm in nineteen years, Altorelli offered several additional insights that qualify for stand alone Unfortunate Comment Awards, especially coming from one of the firm’s recent executive committee members who professes continuing hope for Dewey’s future:

— “I’m not sure how they can weather the departures.”

— “It doesn’t take a rocket scientist to say, I don’t know how many more they can suffer.”

— “[There] could be a survival path for a smaller Dewey. I don’t know how that would work. They seem to have a strategy. Or the firm will be busted up into a bunch of little pieces and survive in the hearts and souls of a lot of good people.”

Yet perhaps the unkindest cut of all came in contrasting his professional life at Dewey with things that will be better at DLA Piper, where he will serve on its executive committee:

“Altorelli says he was drawn to his new firm by the chance to help change the way he practices law. Altorelli…says the firm is experimenting with ways to ‘try to get back to more of an intellectual pursuit, rather than just grinding out the paper.'”

If Altorelli’s interview had appeared five days earlier, I would have looked for this concluding line: “April Fool!”

Just delete “April.”

WHO REMEMBERS FINLEY KUMBLE?

“I just don’t see the need to cram two firms with around a thousand lawyers [each] together. It made no sense,” one Akin partner reportedly told the National Law Journal shortly after the collapse of Akin-Orrick merger talks.

The number of law firm mergers in 2010 is down from recent years, but look at the headliners: Sonnenschein – Denton; Hogan & Hartson – Lovells; Reed Smith – Thompson & Knight; Orrick and anyone. An earlier consolidation wave produced K&L Gates, DLA Piper, Bingham McCutcheon and others.

How much of this activity proceeds from the simplistic premise that bigger is always better?

When I was a young partner in my large firm, Finley Kumble became a disaster that struck fear in the hearts of big firm expansionists. During the early 1980s, Finley rocked the legal world as it signed up high-profile figures and raided other firms’ superstars, some of whom earned the then-staggering sum of $1 million annually. From only 8 lawyers in 1968, Finley became the nation’s second largest firm by 1985.

It promoted itself as a national powerhouse run on principles of meritocracy. The more business a lawyer generated, the more money he or she took home. Money was the glue that held the partnership together. Does that sound familiar?

But Finley grew too fast, assuming debt for office expansions and promising outsized paychecks to big name lateral hires. As revenue dollars dwindled, the firm disintegrated. With more than 650 attorneys at the time of its dissolution in 1987, it was still one of the nation’s largest firms.

The ghost of Finley Kumble haunted Biglaw leaders for years. Some saw its end as confirming that even large, diverse firms possessed their own identities. Mixing cultures through aggressive recruitment of name players with portable practices was a mistake. Others concluded that senior attorneys and their egos couldn’t survive as a single cohesive unit if their sole point of intersecting common purpose was greed. Still others saw the failure as an inevitable consequence of unrestrained growth. Finley proved that there was a limit on the size that any healthy large law firm could attain. No one knew the outside boundary with certainty, but crossing it was fatal.

What did today’s Biglaw managers learn from the lessons of Finley Kumble’s demise? Probably very little. After all, lawyers excel at distinguishing away precedent that undermines their preferred positions.

In that respect, modern proponents of growth through merger and high-profile lateral acquisitions can point to many differences between Finley and today’s firms. For example, the use of MBA-type metrics that focus on short-term profits at the expense of non-monetary values is now pervasive throughout Biglaw. In that respect, the earlier potential for cultural clashes has diminished as  current year equity partner profits have become the universal coin of the realm. Likewise, lateral movement at all levels — especially among rainmakers who were Finley Kumble’s signature recruits — has become commonplace. Indeed, the legal world has become more hospitable to Finley’s central mission and modus operandi.

It would be interesting to hear from former Finley attorneys on the question of how today’s large firms differ from what their old firm once was. Perhaps Finley was just ahead of its time. Or perhaps some major players in Biglaw law are about to see their times change. Or maybe the large firm segment of the profession is proceeding toward the same countdown that big accounting firms have already experienced: From Big 8 to Big 6 to Big 5 to Big 4 — and the race is on to be one of those few.

Here’s the key question: Who benefits in the long run from the rise of mega-firms? Management consultants embrace strategic fits producing scale economies that supposedly benefit clients and equity partners. Perhaps they are correct. But who considers whether hidden costs include undermining community, exacerbating attorney dissatisfaction, or imperiling broader professional values?

Personally, I enjoyed the time when I recognized most of my equity partners at the firm’s annual meetings. Who is willing to develop or consider a metric by which to measure that?