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Hopefully, none ever felt so bad as lawyer Phelan Beale did 75 years ago.

After the jump, his tale of woe in a letter from the dawn of the Securities Act, courtesy of Letters of Note.

To set the stage:

Beale was a lawyer and sportsman (both of the hunting/equestrian variety and the with-the-ladies variety) in New York, who ran in a very upper-crust set, despite Southern roots. In the 1920s, he started a firm with his father-in-law John Vernou Bouvier, Jr. The firm was originally known as Bouvier and Beal, and later Bouvier, Caffey, and Beale. Beale and his wife, Edith Bouvier Beale, had a daughter, also called Edith (who liked to say that she would have married Joe Kennedy, Jr. had he not been killed in World War II, which would have made her First Lady, instead of her cousin, Jacqueline Bouvier). Those two women were the subject of the “Grey Gardens” documentary, movie and musical, as debutantes who retreated to a secluded, eccentric life at the mansion Beale bought in the Hamptons.

But back to the part that makes it interesting to the Law Shucks crowd. The Crash of 1929 came perilously close to wiping Beale out personally, and his business suffered for years.

On August 22, 1934 he wrote a letter to his wife, describing the dolorous state of his finances. He laments the personal cutbacks the family will have to make, including taking their sons out of Westminster School and cutting back on the kids’ horseback riding, which some days cost as much as $8! He was one of many affected, though:

Since the great crash in 1929, we have seen many of our friends and acquaintances suffer. Fortunately, this suffering did not come to me until now. My law business has been largely builded on that of an “Exchange Specialist”, and my income was almost entirely derived from this source.

We can only assume that an “Exchange Specialist” is the precursor to today’s securities practitioners. But that’s a lucrative practice (at least when the IPO market isn’t dead), so why was he so negatively affected?

The Stock Exchange legislation on the part of Congress has so reduced the volume of business that Stock Exchange houses are either merging or retiring from business. Few, if any, are earning their expenses. A number of annual retainers that I have enjoyed have been cancelled, and I have been notified that others will be cancelled on the first of the year.

That legislation was presumably the ‘33 Act, which was enacted in May of 1933, and the ‘34 Act, which was enacted just prior to the letter, on June 6, 1934.

Here we are, 75 years later, and the heirs to the Stock Exchange houses are merging and retiring (involuntarily) from business.

What else is the same today?

Layoffs!

I am truly in a desperate situation, so much so that Miss Maguire, one of the girls in this office is being let out on next Saturday. Major Norris goes on the 1st of October. In addition thereto, Mr. Vincent who has been with me for twenty years has got to go, for the single reason that I cannot afford to keep him. Even Miss Mahoney, the telephone operator, who likewise has been with me for several years must go through necessity. My three office boys I am reducing to one.

In the end, he’s a man worn out by the five-plus years of struggle and the unpromising future, as he closes morosely:

There is nothing more to write just at this moment, because I must leave in the next five minutes to get the airplane to Washington. I do hope that the machine crashes, because it would be a pleasant exit of a very tired man -

*  *  *

Here’s the full transcription.  Letters of Note has scans of the original letter.

BOUVIER & BEALE
165 BROADWAY

CABLE ADDRESS “VERGELIN”
TELEPHONE CORTLANDT 7-2425

NEW YORK August 22, 1934

Mrs. Phelan Beale,
East Hampton,
Lon Island, New York.

Dear Edith:-

This is a difficult letter to write, but nevertheless it must be done, so here goes:-

Since our marriage I have endeavored to provide you with every luxury, and in this up to the date hereof I think I may say that I have been successful. I will not enumerate the generous gifts that I have made to you, because, after all, this is water over the dam, and I will confine myself to the immediate present.

Since the great crash in 1929, we have seen many of our friends and acquaintances suffer. Fortunately, this suffering did not come to me until now. My law business has been largely builded on that of an “Exchange Specialist”, and my income was almost entirely derived from this source.

The Stock Exchange legislation on the part of Congress has so reduced the volume of business that Stock Exchange houses are either merging or retiring from business. Few, if any, are earning their expenses. A number of annual retainers that I have enjoyed have been cancelled, and I have been notified that others will be cancelled on the first of the year. I am truly in a desperate situation, so much so that Miss Maguire, one of the girls in this office is being let out on next Saturday. Major Norris goes on the 1st of October. In addition thereto, Mr. Vincent who has been with me for twenty years has got to go, for the single reason that I cannot afford to keep him. Even Miss Mahoney, the telephone operator, who likewise has been with me for several years must go through necessity. My three office boys I am reducing to one. There may be other changes as well, and in the same manner I am forced to retrench in every possible way, which means that I cannot return the boys to Westminster School, and I am so writing to the Headmaster. To keep them there costs me about $4,000.00 per annum. I can borrow on my insurance sufficient funds to keep little Edie at Miss Porter’s School for the next year.

I can well understand your bitterness when you read this letter. You have not been extravagant and you doubtless feel that if I had curtailed expenditures, I would not be in my present unenviable position, but as we say in the law, regardless of what may have been, I am at this time faced by a condition and not a theory.

I am not giving up, although at times there is great temptation to take the easiest way out. It will not be the first time that I have met with a major catastrophe. When the war broke out in 1914, all of my German business was destroyed and I found myself facing a situation similar to the present, although then it was not as burdensome as I was unmarried.

I do not intend to ask you to do anything that I would not ask my mother and sister to do. I must arrange for them to occupy less expensive quarters, even though it may mean a boarding house.

I am glad that you have the house in East Hampton, because it is in tip-top repair and may be occupied comfortably the year round. The boys can go to the school in South Hampton. It is possible that when I get the expenses of maintaining my office out of the bone, and I then am able to give eighteen hours a day to my business, free from financial worries that keep me awake at night, I will stage a quick come back, wherefore, your abnegation of remaining in East Hampton may be short-lived.

I do not intend to live in luxury when I am asking you to make a sacrifice. I am going to Washington this afternoon. On my return I will move to more modest and cheaper quarters, such as procuring a room at some bachelor hotel for $50.00 per month.

I do hope that you will appreciate that the contents of this letter should not be broadcasted. You are at liberty, however, to show the same to your mother and father.

I hate like the devil to deprive little Buddy of the pleasure he gets in going horseback riding. Will you ask the boy to give up his riding until next season. The bill from the riding school came in this morning. It is $53.00. In some instances the charge for his rides were $8.00 per day, and in no one day was it less than $3.00. Do not tell the children anything that will alarm them in regard to my financial condition. They are so young that their minds receive an exaggerated and inflamed impression which may have evil effects of a permanent nature. Offer some excuse to the kids about remaining in East Hampton and attending school in South Hampton. Make a game of it, so that they will like the idea. Even with little Edie, you should not confide in her, otherwise she may think that we are headed for the poorhouse to-morrow, and it will destroy all the happiness of her year at Farmington.

There is nothing more to write just at this moment, because I must leave in the next five minutes to get the airplane to Washington. I do hope that the machine crashes, because it would be a pleasant exit of a very tired man -

Your husband,

(Signed, ‘Phelan’)

PB:CL

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Image: Papa Mike's

We’re far too poor to afford the full report, so we have to rely on Law360’s excerpt of BTI Consulting’s ranking of the most arrogant firms.

The eight firms topping the list are regulars on this site.

After the jump, we summarize them and cross-reference to some other interesting data.

Skadden topped the list.

Baker & McKenzie, Cravath, King & Spalding,  Kirkland & Ellis, Latham & Watkins, Sullivan & Cromwell, and Vinson & Elkins were in the second tier of haughtiness.

Far be it from us to say that some firms’ arrogance is more justified than others’, but a few of those firms seem to be acting above their place.

Not that this is the basis for our opinion, but let’s start with the firms’ layoff numbers as reported on the Law Shucks Layoff Tracker (and don’t forget, you can search by firm in the raw data):

• Baker & McKenzie (6 reports, 323 people)
• Cravath (1 for 25)
• King & Spalding (1 for 122)
• Kirkland & Ellis (3 for 155)
• Latham & Watkins (1 for 440)
• Skadden (2 for 80)
• Sullivan & Cromwell (1 for 30)
• Vinson & Elkins (nada)

Those are total number of people, i.e., staff and lawyers.

What about Vault rankings? Those are generally considered the rankings of record for firms’ prestige. So here are our arrogant eight ranked by prestige:

• Cravath (#2)
• Sullivan & Cromwell (#3)
• Skadden (#4)
• Latham & Watkins (#7)
• Kirkland & Ellis (#10)
• King & Spalding (#42)
• Baker & McKenzie (#44)
• Vinson & Elkins (#53)

As Law360 notes,

“This conversation brings to mind the aphorism that ‘It ain’t bragging if you can do it,’” [Gary] Klein [founder and president of attorney recruiting firm Klein Landau & Romm Inc.] said. “One client’s view of arrogance is another client’s view that ‘The firm just saved me $100 million.’”

While such impressions probably don’t do any damage in isolation, Rynowecer said, too many instances of arrogance can hurt.

“At some point you’re likely to piss somebody off,” he said. “Too many cases of being arrogant are going to hurt you — because word spreads very quickly. The client is the ultimate judge.”

That’s a risk you can run when everyone thinks you’re top 10. If you’re not, this should probably be a wakeup call.

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Pic: U. Chicago

This week, economists missed on the good side – initial jobless claims fell by more than expected. The 502,000 applicants are the fewest since January 3, and the four-month rolling average is at the lowest level since November 2008.

It’s tough to grasp half a million people filing for first-time benefits as good news, but these are troubled times, so we have to cheer where we can. Don’t get too excited, though. Even news that looks good at first glance probably isn’t. The 139,000 people who came off the continuing-claims roster more likely did so as a result of benefits running out or giving up the search than actually finding work.

But don’t be surprised if that number starts creeping back up. A bill was passed last week that will extend benefits by 14 weeks in all states, and six additional weeks in states where the unemployment rate is greater than 8.5%.

All in all, it was a relatively good week in BigLaw with no layoffs reported. Nonetheless, firms continue to flail about trying to fix their economic models, and we document the efforts after the jump.

While it generally avoided referring to layoffs, the National Law Journal showed significant drops in headcount across the 250 largest US firms. NLJ reports 5,759 fewer lawyers this year compared to last, compared to 4,513 identified on the Law Shucks Layoff Tracker. At Law Shucks, we’re convinced that not only are the declines due to layoffs, but that the underreporting of layoffs is even worse than we expected.

While trimming back on layoffs (and congratulations to all those who made it through the first half of the month, which we’ve shown is far worse than the latter), firms turned to the old standbys of salary freezes, salary cuts, and deferrals.

On the salary freeze front, Covington went back to the well just in time for winter, freezing everyone except New York, despite optimism back in April when the firm proudly announced it was bucking the trend and giving normal raises.

Reed Smith announced its CareeRS™ program, with which we aren’t aren’t too impressed, two weeks ago. New associates are taking pretty serious paycuts: California, Chicago, New York, and Washington, D.C., from $160,000 to $130,000; Philadelphia from $145,000 to $117,500; and Pittsburgh from $135,000 to $110,000. At least the firm has coupled that with a 20% cut in the billing rates, which was one of our biggest gripes about the program. Oh, and the firm also asked nonequity partners to kick in capital contributions (although they still won’t become true partners). The firm’s comments to Am Law Daily are spectacularly confusing:

“It’s about not just saying you’re a partner, but actually being one,” Jordan says. “It means something. It revolves around risk-sharing in the business.”

Sounds like partnership, right? Not so fast:

Under the plan, nonequity partners will actually have three choices: pay the required percentage into the firm and become what Jordan calls “fixed-share partners”; decline the option and lose partnership; shift into the fixed-share system more slowly over the next couple of years.

How do those statements reconcile? It’s risk-sharing, but only limited risk (and upside) sharing? We’re also curious to see just how much support the plan has, because it was never put to a formal vote, which would be expected for such a fundamental shift in the structure.

Jones Day just went ahead and did the simpler thing: it cut five partners in London from the equity and made them of counsel.

Much to our surprise, Freshfields is adopting a tiered approach similar to Reed Smith’s (which isn’t exactly the firm we would be following right now, based on those comments about partners, but whatever), although compensation will remain the same for now, and the firm confirmed bonuses will be announced and paid as usual.

Would-be incoming associates at Katten Muchin must feel like they’re reaching in a bag, hoping someone else grabs the black marble. One third of the class had offers rescinded, one third got deferred out to next October, and one third starts in February.

North of the border, hiring for next summer is slightly up, although we haven’t heard as many tales of deferral from our Canadian brethren, so they might not have as big a backlog to clear out.

Another little glimmer of hope. We’re on record that bonuses definitely should be paid this year, and Sidley Austin is the latest firm to jump on the bandwagon, although no specifics have been provided yet.

It came in after we finished writing last week’s roundup, so we didn’t include SJ Berwin in the tally. The UK firm is culling its partner ranks, mostly in the real-estate practice.

That brings last week’s revised total and the month’s total to 149 (46 lawyers, 103 staff).

So far this year, 12,101 people have been laid off by major law firms (4,581 lawyers, 7,521 staff).

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AMD had accused Intel of a host of anticompetitive practices in their fight for share of the PC CPU market (Intel has around 70%, AMD the balance – there’s no real third option). The US suit was scheduled to go to trial in Delaware next spring. That case had already produced 25 million pages of filings and more than 300 depositions, so you know there’s plenty of legal work to go around.

The firms (eight and counting), the lawyers (at least thirty), and an obsessive analysis of a press release after the jump.

O’Melveny & Myers represents AMD, and announced the lawyers involved rather strangely (what can we say, we’re suckers for reading into the order in which names appear):

Chuck Diamond, Linda Smith, Mark Samuels, Henry Thumann, David Herron, James Pearl, Michael Maddigan, Mike McGuinness, Ryan Yagura, and Darin Snyder led the O’Melveny team, which also included partner David Beddow and Brussels partners Riccardo Celli and Christian Riis-Madsen.

We quoted it so you can parse the awkward structuring of the announcement. You know something is awry when the partners aren’t listed alphabetically, which is what a normal release would look like if everyone really was equal.

Diamond (who is the lawyer you’d pick if you really had to pick one leader of this crew), Smith, and Pearl are business litigators. Samuels is an IP litigator, but he’s a member of the Executive Committee, so he gets close to top billing – note how much farther down the list come the other two IP litigators: Yagura (who worked at Intel as an engineer in an earlier life) and Snyder. Thumann, who will be celebrating 50 years of practice next year, is probably one of those elder statesmen of the firm that they like to trot out and bask in his reflected glory. Herron and McGuinness are employment lawyers, but there were no significant employment claims as far as we know, so why would they be “leading” the team? Same could be asked of Maddigan, who is basically a healthcare class-action defense lawyer.

And what about those danglers at the end? Beddow is a transactional antitrust lawyer in DC, so why not include him on the list of leaders? Giving EU partners second-class treatment is only slightly less odd, but they obviously did lead the European component, which was huge (and led to a $1.45 billion fine against Intel by the European regulators).

Basically, we think it’s disingenuous to list 10 lawyers as “leading” a team; then playing games with the order in which they’re listed is just adding silly on top.

Intel cast a wider net for counsel. Here are the lawyers we know have been involved:

• Robert Cooper was going to be lead trial counsel in the Delaware case, along with his Gibson Dunn partners Michael Denger, Joseph Kattan, Daniel Floyd, Mark Weber, Rod Stone, Kay Kochenderfer, Samuel Liversidge, and John Wood;
• James Venit, an antitrust partner in Skadden’s Brussels office led the EU defense;
• Lester Brown of Howrey represented Intel in seeking coverage of Gibson Dunn’s bills for the defense, and the firm supposedly had other work on the actual underlying case as well;
• Bingham McCutchen reports that it has been lead counsel for Intel on more than 70 pending consolidated class actions and other related state-court suits, and co-counsel in the Delaware AMD action (we’ve identified David Balabanian, James Hunt, Christopher Hockett, and Richard Ripley as lawyers involved from some filings);
• Potter, Anderson & Corroon was Delaware counsel; and
• Duane Morris and Perkins Coie also have been involved.

Who else did we miss?

And what happens when a plum assignment like this disappears in the blink of an eye? O’Melveny is guardedly optimistic, according to AmLaw Litigation Daily:

Over the last year, AMD has been one of O’Melveny’s top five clients in terms of billings, in large part because of this litigation. Bradley Butwin, cochair of the firm’s litigation department, insists that the abrupt cessation of this massive matter won’t materially impact O’Melveny’s revenue. He notes that the firm gets a half-billion dollars from litigation matters overall, so no one case will affect the bottom line too much. The firm throughout its history has redeployed resources from one case to another, he notes, and this settlement will give O’Melveny a chance to move lawyers to other cases.

Yes, I’m sure they’re thrilled about this wonderful opportunity to move lawyers to other cases… never mind the millions of dollars a month in billings (although a success fee likely isn’t out of the question, either). As we reported back in February, Intel sued its insurers to cover more of Gibson Dunn’s bills (as mentioned above), at the time asking for $50 million on top of $66 million that had already been paid in defense costs. We’re guessing the burn rate was pushing $4 million/mo all in as the trial approached. What do you think?

Actually, things are slightly better for Skadden and Gibson Dunn. Even though AMD dropped its suits, a number of regulators had already begun sniffing around, and those investigations and potential subsequent prosecutions aren’t affected at all.

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Fertitta has decided to make another run at the restaurant chain, but this time the company has switched lawyers and bankers. More on that, after the jump.

We’ll let Davidoff describe the switch:

First off, the special committee has replaced its old investment banker, Cowen & Company, and its law firm, King & Spalding, with Moelis & Company and Cadwalder Wickensham & Taft. New blood is a good thing here, considering how badly the previous acquisition was handled. Still, I am slightly surprised that these firms would associate themselves with this tortured deal and Mr. Fertitta. Their association with this deal is particularly disappointing, since once again the Landry’s special committee failed in many ways.

As you can see from the blackline, which he was kind enough to provide, Cadwalader didn’t reinvent the wheel. There aren’t a lot of changes to the agreement, and the Deal Professor column highlights the substance.

The notice provision makes the change in counsel painfully clear:

King & Spalding’s Jack Capers (Vanderbilt BA, Georgia JD) is out and Cadwalader’s Dennis Block (SUNY Buffalo BA ‘64, Brooklyn LLB ‘67) is in. Capers was also assisted by litigator Dick Cirillo (Yale BA, Fordham JD) and Robert Finley (Rochester BA ‘73, Syracuse JD ‘76). Cirillo and Finley sit in New York; Capers is in Atlanta.

We’re not surprised another lawyer, particularly someone like Block, would step in here. The guy has already done every sort of vanilla deal, including a quarter-trillion dollars’ worth of pharma deals, so he’s probably in it for the challenge. Wachtell has no interest in a run-of-the-mill transaction because it’s the messes that are the most interesting, and Block could do a normal deal in his sleep.

Haynes and Boone stays on as counsel for Fertitta.

Tilman Fertitta, by the way, is cousins with Frank and Lorenzo Fertitta – the co-owners of the Ultimate Fighting Championship. Like his cousins, he owns a casino, too – his is the Golden Nugget, theirs are the Station Casinos.

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-Army Cadence

[To our non-US (and forgetful US) readers, today is Veteran's Day]

No related posts.