Gap Between Big U.K. Firms and Rest: Business of Law

While top-tier U.K. law firms weather the economic difficulties that have gripped the profession, their mid-market counterparts could be facing a serious risk of survival, according to a survey by PricewaterhouseCoopers.

“Against a challenging backdrop, 2013 could be seen as a turning point for the legal sector with the gap between best and worst performing firms widening further -- and clear blue water between the Top 10 firms and the rest of the sector,” David Snell, partner and leader of PwC’s Law Firms Advisory Group, said in a statement.

Pricing pressures, inefficient work allocation and cost-reduction challenges are putting the firms’ survival at risk, according to the survey, which looked at the 100 U.K. law firms with the largest global fee incomes.

Average profit margins for the Top 10 firms are more than 14 percentage points higher than the next 15 firms, three points more than last year, according to the survey. By comparison, the survey found that there was only a 1.5 point difference between the Top 11-25, Top 26-50 and Top 51-100 firms.

The top U.K. firms are also outperforming in other areas, including in profit per equity partner. At the top 10 U.K. firms, such profit averaged 1 million pounds ($1.6 million), up 6.1 percent from last year, while average U.K. firm profit per equity partner for the Top 11-25 firms was 448,000 pounds, a decline from 481,000 pounds in 2012, according to the survey.

“Continued focus on cost reduction and innovative delivery is required across all firms to maintain profitability in a highly competitive U.K. market,” Snell said in the statement.

Law Fees

UBS Whistle-Blower Ends Fee Dispute Over $104 Million Award

Bradley Birkenfeld, the former UBS AG banker who exposed how the Swiss lender helped Americans evade taxes, settled legal disputes with a law firm that claimed it was owed $13 million of his $104 million whistle-blower award.

The Washington firm of Schertler & Onorato LLP claimed Birkenfeld owed it 12.5 percent of any whistle-blower award he got from the Internal Revenue Service. Birkenfeld sued the firm in Superior Court of the District of Columbia, claiming it mishandled his case. Both cases were dismissed Oct. 31, court records show. Terms weren’t disclosed.

“The parties to this litigation hereby notify the court that this case has been settled,” lawyers for Birkenfeld and Schertler & Onorato wrote in a filing Oct. 31 in Superior Court.

In a separate filing in federal court in the District of Columbia, the lawyers said Birkenfeld agreed to dismiss “the arbitration of the fee dispute filed before the D.C. Attorney-Client Arbitration Board.”

Birkenfeld hired Schertler & Onorato in 2006 to help him tell the U.S. how UBS used Swiss bank secrecy to cheat the IRS. Birkenfeld told his story the next year to the IRS, the U.S. Justice Department, the U.S. Senate and the Securities and Exchange Commission. He agreed in October 2007 to pay the law firm 12.5 percent of any IRS whistle-blower award, according to court documents.

Birkenfeld served 31 months in prison after pleading guilty to conspiracy and was released in August 2012, six weeks before the IRS gave him the largest federal whistle-blower award for an individual. Birkenfeld had fired Schertler & Onorato in 2008, and his new law firm, Washington-based Kohn, Kohn & Colapinto LLP, said the 12.5 percent accord is no longer binding.

Birkenfeld’s impact on Zurich-based UBS, the largest bank in Switzerland, is undisputed. A neurosurgeon’s son from Brookline, Massachusetts, he spent 15 year in Swiss banking, including five at UBS. He was one of as many as 60 UBS employees who trolled the U.S. for rich clients, even though the bankers lacked required SEC licenses, he told Senate investigators. They visited art shows, yachting regattas and golf and tennis tournaments, he said.

The cases are Birkenfeld v. Schertler & Onorato, 11-cv-01529, U.S. District Court, District of Columbia (Washington); and Birkenfeld v. Schertler & Onorato LLP, 2011-CA-6905, District of Columbia Superior Court (Washington).

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Firm News

O’Melveny Names Washington and San Francisco Office Heads

O’Melveny & Myers LLP announced two new office leadership appointments last week in Washington and San Francisco.

Jeffrey Kilduff is the new managing partner of the Washington office, succeeding Steve Bunnell, who will become general counsel at the U.S. Department of Homeland Security. Luann Simmons is the new managing partner in San Francisco, giving the firm a third woman managing partner in its California offices.

Kilduff, the firm-wide chairman of O’Melveny’s securities litigation practice, represents clients in securities litigation and enforcement matters as well as in antitrust litigation and counseling, the firm said. His securities practice has included class-action defense, the defense of derivative litigation, internal corporate investigations and other matters.

Simmons, who succeeds criminal antitrust litigator Michael Tubach, is a member of the intellectual property and technology practice within the litigation department. She works with the firm’s technology clients in the enforcement, defense and litigation of patent, trade secret, copyright and other intellectual property rights.

With Simmons, three of the firm’s five California offices have women at the helm. Elizabeth McKeen became the managing partner of the Newport Beach office in May of 2013. Carla Christofferson has been managing partner in Los Angeles since the beginning of 2008.

O’Melveny & Myers has approximately 800 lawyers in 16 offices in the U.S., Europe and Asia.

King & Wood Mallesons Joins SJ Berwin to Form $1 Billion Firm

The combination between King & Wood Mallesons and SJ Berwin LLP, forming a firm with about $1 billion in revenue and more than 2,700 lawyers, was completed on Nov. 1, according to statements from the firms.

The combined firm will have more than 550 partners in 30 locations and be based in Asia.

The deal added London-based SJ Berwin to Asia’s largest law firm, formed last year by the combination of Beijing-based King & Wood and Sydney-based Mallesons Stephen Jaques. King & Wood Mallesons’ global managing partner is Stuart Fuller. Wang Junfeng, who founded King & Wood in 1993, remains the chairman, based in Beijing. SJ Berwin’s former senior partner Stephen Kon is co-deputy chairman of the combined firm.

“In an increasingly crowded market, our powerful Asia-Pacific base is our key difference and means that we are best placed to meet the current and future needs of our clients,” Kon said in a statement last week. “King & Wood Mallesons will operate seamlessly across Asia, Europe and the Middle East offering our clients unparalleled law capability of the highest standard at the speed of global business.”

Hogan Lovells Asia Partner Barr Sees ‘Conservative Optimism’

Jamie Barr, head of the Asia corporate practice at Hogan Lovells LLP in Hong Kong, spoke to Bloomberg Brief on Oct. 31 about the law firm’s recent survey of 240 senior executives on mergers and acquisitions, the outlook for deal activity in Asia and global economic trends.

Q: We have a global recovery that still hasn’t gained traction in several major economies. How do Asian companies view this environment?

A: The global findings are entirely consistent, in fact, reassuringly consistent, with what we see here in Asia.

Overall, corporates have got $5.6 trillion of cash on their balance sheet, which is twice as much as they had 10 years ago. They’re trying to work out what to do with it. You’re seeing examples where there are share buybacks or special dividends being paid, suggesting that corporates think their investors have better ideas as to how to deploy that money. Others are looking at what they can do with it.

But interestingly, the general overview is that the markets are still going to be shaky for the next couple of years. There is some emerging optimism, but nonetheless the general mood is conservative. It’s conservative optimism, perhaps you could describe it.

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Wife Poisoning Husband’s Lover Tests Weapons Law at High Court

What began as attempted revenge for marital infidelity has turned into a U.S. Supreme Court showdown over the power of the federal government.

The high court will hear arguments tomorrow in the case of Carol Anne Bond, a microbiologist who tried to poison her husband’s lover -- and was prosecuted under a U.S. law enacted to implement a chemical-weapons treaty. Bond says her crime is a local one that never should have involved federal prosecutors.

The case poses the most important test of the federal authority since the Supreme Court upheld President Barack Obama’s health-care law last year.

“The case is hugely important because it’s about a fundamental principle of constitutional law, which is limited federal power,” said Nicholas Quinn Rosenkranz, a Georgetown University Law Center professor.

Bond, of Pennsylvania, is challenging a 1920 high court ruling that said Congress can use its constitutional power to implement treaties as a mechanism to regulate local conduct.

The Obama administration, backed by the chemical industry, defends the prosecution and the 1920 ruling. The administration says Bond’s argument would undermine the president’s ability to strike agreements with other countries and cut against a centuries-old understanding of the Constitution’s treaty power.

“In international affairs, the federal government has complete sovereignty and acts on behalf of all the citizens of the nation,” U.S. Solicitor General Donald Verrilli argued in court papers. “And it follows from the national government’s exclusive power to make treaties that it must have the power to ensure treaty compliance.”

Those weighty constitutional questions come to the court through a tale worthy of a soap opera.

Bond was thrilled when she learned in 2006 that her closest friend, Myrlinda Haynes, was pregnant. That excitement turned to rage when Bond discovered that her husband, Clifford Bond, was the father.

Bond, who worked for the chemical maker Rohm & Haas Co. outside Philadelphia, stole a bottle of an arsenic-based substance from her employer. She used the Internet to order a second toxic chemical, potassium dichromate, which is commonly used in printing photographs. Dow Chemical Co. bought Rohm & Haas in 2009.

Bond, now 42, tried to poison Haynes 24 times over the next several months, spreading the chemicals on her doorknob, car door handles and mailbox. Although Haynes usually noticed the substances and avoided touching them, on one occasion she suffered a chemical burn on her thumb. Postal inspectors eventually installed surveillance cameras and identified Bond as the perpetrator.

Federal prosecutors then charged her with violating the 1998 Chemical Weapons Convention Implementation Act, a law that carries out a 1997 treaty covering the development, production, stockpiling and use of chemical weapons. The treaty, which supplements an earlier accord that applies in wartime, was designed in part to protect against the use of chemicals by terrorists.

Bond pleaded guilty and was sentenced to six years in prison, while reserving her right to appeal and try to overturn the conviction. Had she been prosecuted under Pennsylvania state law for assault, she would have served no more than two years and one month, according to Paul Clement, the lawyer who will be arguing on her behalf. She was released from prison last year.

Clement, who was solicitor general under President George W. Bush, said in court papers that Bond’s circumstances “are far removed from the United States’ treaty obligations or any issues of national or international importance.”

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WilmerHale Appellate Partner Named California Solicitor General

Edward DuMont, the vice chairman of Wilmer Cutler Pickering Hale & Dorr LLP’s appellate and supreme court litigation practice group, was appointed to the position of California Solicitor General by Attorney General Kamala D. Harris.

In his new role, DuMont will oversee all civil and criminal appeals and litigate key cases throughout the appellate process in state and federal courts, according to a statement from the attorney general’s office.

“I am confident that his talent, drive and background will supplement the department’s already robust appellate practice and help us establish the best solicitor general’s office in the country,” Harris said in the statement.

DuMont has more than 27 years of public and private sector experience. He spent seven years as an assistant to the U.S. solicitor general and as an associate deputy attorney general at the U.S. Justice Department, focusing on computer crime and privacy. He has argued 18 cases before the U.S. Supreme Court on issues involving employment law, the First Amendment, criminal law and administrative procedure. He has been a partner at WilmerHale since 2004.

“While it will be hard to leave my current clients and colleagues, I look forward to returning to California, joining a new team and working together to build an expanded solicitor general’s office that we will all be proud of,” he said in the statement.

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