The Genesis

In November last year, the Firm Spy reported that Clayton Utz had appointed Darryl McDonough as the new CEO of the firm. At the time, we reported that McDonough’s appointment very much came to the chagrin of some Clutz partners. An excellent Clutz spy told us the following:

“one of the senior lawyers has heard that [Clutz board member] Linda Evans told the partners at the AGM a week ago that she wanted the firm to change its size and shape. Apparently some partners think this is code for dumping 30 to 40 partners”.

The Firm Spy understands that Evans was instrumental at board level in securing McDonough’s appointment. Very soon after this appointment, the Firm Spy understands that a number of Clutz partners began looking for employment opportunities with competitors.
In a major scoop, The Australian yesterday reported that some 14 Clayton Utz partners from the Sydney office have defected to Allen & Overy, heralding the arrival of the first Magic Circle firm in Australia. Initially, the 14 Clutz partners will be joined by a Freehills partner, a former Freehills (joining from JP Morgan) and a former Clayton Utz partner.

One partner making the move told AMLaw that:

 ’the plan grew out of unique circumstances - the dissatisfaction key players felt with management succession at Clayton Utz - and was unlikely to be replicated by other Magic Circle firms any time soon.’

The Comments

Among a number of insightful remarks received by the Firm Spy last night were the following comments from an anonymous Clutz spy:

“I notice that the major legal publications have failed to report on the number of other fee earners and support staff who are set to accompany the departing Clayton Utz partners. I know of at least 10 Clayton Utz senior associates who also be heading to Allen & Overy, in addition to more than 15 lawyers. Initially, it is rumoured that the new offices will be run ‘lean’, so we won’t lose a proportionate number of non-fee earners.”

And then this, from another anonymous Clayton Utz spy in response to Clutz Chief Executive Partner David Fagan’s comment that “Clayton Utz is [still] in excellent shape”:

“I would characterise CEP Fagan’s comment that the firm is still in good shape as delusional. We have lost a major portion of our corporate practice. Partners, senior associates, lawyers and, no doubt, support staff are gone. The engine of the most prestigious group in by far our most prestigious office is now, sadly, a hollow shell.”

The New Numbers & Losses

Among the departing Clayton Utz partners are the following heavyweights:

• Corporate Group Managing Partner Michael Reede;
• Banking & Finance Head Grant Fuzi;
• Real Estate Practice Leader David Wilke; and
• Perth Office Head Geoff Simpson

Supposing the rumoured number of total lawyer departures foreshadowed by our anonymous spy above is correct, Clayton Utz will soon have about 40 less fee earners. Putting aside the comments of the anonymous Clutz spies above, the impact of the departures is clear when considering several statistics reported by the Firm Spy last year:

• Estimated revenue per lawyer = $560,000.00 x 26 = $14,560,000
• Estimated revenue per partner = $2,260,000 x 14 = 31,640,000
• Clutz revenue grew by 4.9% in 2008/2009 to $491,000,000
• $491,000,000.00 - $46,200,000 = $444,800.00. This equates to a revenue loss of about 9.3%.

Is this a firm in “excellent shape”, or is CEP David Fagan afraid to speak his mind?

Compelling Reasons to Leave Clutz

The catalogue of reasons to leave Clayton Utz is probably too large to mention here. However, some major reasons are listed below:

• the firm is embroiled in an ugly spat with a former employee, presently making its way through the courts, in which it is alleged he was the subject of sexual harassment whilst working for the firm;
• the Firm Spy obtained photos rumoured to by of the Clayton Utz Christmas Party depicting lawyers cross-dressing with sex dolls;
• Clayton Utz apparently has an inordinate number of disillusioned junior staff; and
• a new, shocking rumour received yesterday by the Firm Spy (about which we will report more when we know more - at this stage it is unsubstantiated) that the ATO’s Operation Wickenby has a very keen focus on the firm with charges rumoured to be in the offing.

The Newcomer

Speaking of the major expansion, A&O senior partner David Morley said:

“The Australian market has become much more linked to the Asian and global economy. We see much more inbound and outbound work and that creates an opportunity for a global firm like us that can provide advice seamlessly. We are not envisaging a huge presence in Australia. We think this is the right strategy for us because we are targeting the high-end work and especially the cross-border work.”

It is understood that A&O intends to open offices initially in Sydney and Perth. The move comes after the January 1 Norton Rose merger with Deacons, and reports that US firm Jones Day intends to double its partnership from 25 to 50 in its Sydney office. The arrival in Australia will take A&O’s number of Asia-Pacific lawyers to 360 across 8 offices. Allen & Overy has more than 450 partners and about 5000 staff globally, populating its 31 offices in 22 countries. A&O is the fourth largest UK firm by revenue. Last year it cut 450 jobs worldwide - including 47 partners - in response to the GFC.

Stay tuned for more details, the details you want to hear, as they come to light.

 Send the Firm Spy your news and views!

Since we reported a few weeks ago on the harbinger of top-tier lawyers departing their firms to start afresh at the up-and-coming (and apparently highly salaried) offices of Gilbert + Tobin, there has been no end of spies ready to criticize the firm.

Take this, for example, received from an anonymous spy over the weekend:

Dearest FirmSpy,

As you know, the concerned public of the Internet and IP lawyers everywhere were buzzing this week for Justice Cowdroy’s decision in Roadshow Films v iiNet (No 3). The film companies were represented by our good friends at G+T and iiNet by Herbert Greer.

After the decision, Neil Gane of Australian Federation Against Copyright Theft (AFACT) made a statement expressing his great disappointment with the judge’s decision. A video of Mr Gane’s statement is shown here:

Note the gentleman on the left of Mr Gane, Michael Williams, partner of G+T. Mr Williams is the tough copyright litigator who helped Universal Music to victory in the Cooper and Kazaa cases. However, like his clients, Mr Williams did not look very tough on Thursday. His eyes appear downcast and his ‘countenance’ (pun intended) differs markedly in expression from his picture on the G+T website:
I guess G+T partners are human too?
  

Excellent question! Are Gilbert + Tobin partners human? If being charitable is a measure of human-ness, then perhaps the answer is ‘no’, following the rumour also sent us over the weekend from another anonymous spy:

Who quietly left Gilbert + Tobin on Friday because they’d been accused of doing too much pro bono work?

Yes, who did leave? If you know the answer, please tell the Firm Spy!

Rubbing salt into the fresh knife-wound is this, also received over the weekend from an anonymous G+T spy:

 As a lawyer who cut my teeth at one of the top tier firms, and who is now at G+T, I can offer some words of warning for any Mallesons lawyers thinking of moving to the “hoi polloi” end of town.

Although the money is better, and depending on the practice, the work interesting and stimulating, G+T lawyers work with very little support, bare bones research resources and second rate IT systems (the firm’s email systems were significantly “slowed” twice in recent week). Also working late nights and weekends are a very frequent occurrence which makes the firm’s official policy of after-hours meals in “emergency situation only” both tight and puzzling. The firm makes you work for that extra bit in
your back pocket, many times over.

The training for junior lawyers does not compare with the training provided by the top tier firms; and career progression for mid level lawyers is nowhere near as structured as it should be for a firm of G+T’s
size. And if you are used to the elitist approach of the top tier firms and the concomitant high quality of output, the “close enough is good enough” approach of many of the G+T partners can be incredibly frustrating. On top of all this the firm’s offices look like they haven’t been refurbished since the early 1990s, and the reticence of the firm’s leadership to spend money on new or expanded digs is resulting in more and more lawyers being forced to share smaller and smaller offices.

There is also an open question about how long G+T will be able to grow its Telstra practice, as Telstra is used to demanding an incredibly high level of quality from its external lawyers. With some G+T partners used to running matters with lean teams, the lack of what might be called “quality control” over some of the work being sent to Telstra has caused some dissatisfaction in the Telstra ranks (at least one Telstra legal group rated G+T a zero in a recent survey of its satisfaction with the firm’s performance). One way that all firms attempt to build their relationship with Telstra is to “embed” lawyers on secondment in the various Telstra practice groups. The problem for G+T is that it lacks the number of lawyers to do this is an sustainable manner for extended periods of time.  And this just means that more work is done by less lawyers at G+T.

Lastly, the Melbourne office is still being run out of serviced offices, with no announcement yet about a permanent location. Read into that what you will.

With these “downcast countenances”, the apparent lack of charity, a “close enough is good enough” attitude, dodgey offices, the “emergency situation only” after-hours meals and apparently oppressive working hours, is G+T really as ‘top-tier’ as Danny Gilbert would have us believe?

Send the Firm Spy your news and views!

It is probably little surprise that Gabrielle Moss, half of the cooking duo “Mossy & Gabe” appearing in the new blockbuster series My Kitchen Rules (ie the reject version of Channel 10’s Masterchef), is such a methodical whiz in the kitchen.

True, she undercooked the cheesecake and misconceived appropriate serving sizes in episode 1, but Mossy & Gabe were the first ”MKR”  (we think this acronym is a giant wank, by the way) duo to show audiences their culinary wares and cooking methodology.

But methods should come easy to Gabe. After all, she has over 20 years experience at McCourts Lawyers, an outfit famed for pioneering the Simplicitor Client Management System. In explaining this system, McCourts Lawyers boldly claim on their website:

We’ve taken the time to make the process behind every legal procedure and transaction as simple and clear as possible. Our Simplicitor Client Management System outlines all the possible steps for each matter. This allows you to quickly see where your particular project is up to, and what the next steps are.

Under the category “Suing & Being Sued”, McCourt offer some very helpful ‘steps’, for example:

Before you see your Lawyer, get all your paperwork together. A client who has done their homework will get the best result from their Lawyer.

Since when did the word ‘lawyer’ command capitalisation? Meanwhile, under the category “Buying and Selling a Business” the very first step in the ‘project’ is provided to consumers of the Simplicitor:

Identify businesses to be bought. Make independent inquiries about industry in which business operates.

With all this simplicity, is it even necessary for McCourts Lawyers to go to work? Or can they whittle away the hours thumbing through the Channel 7 gazette advertising auditions for forthcoming shows? Better still, can lawyers come to work for a legal cook-off?

In Gabe’s case, it seems office cook-offs were squarely on the agenda. Her profile on the McCourts Lawyers website reads:

Gabe has over 20 years experience as a Property Lawyer. She started her career with Rob McCourt in 1986… building her reputation as a Property Lawyer… Gabe has come full circle returning to McCourts as a Consultant… enjoying the social aspects of our small yet busy office.

Send the Firm Spy your news and views!

Last week we published a story in which we quoted AAR spokesperson Susan Ferrier as saying that there would not be an “exodus” of lawyer in 2010 because there are few job opportunities available.

In response to that post, we received the following embittered comments from an anonymous AAR spy:

Susan Ferrier has no idea. Lawyer morale at Allens is at a critical low, people will flood to Freehills who are keenly making the most of this opportunity already. Freehills has positioned itself as the least tight of the top tiers of late. You can’t expect to institute the pay freeze first, be the last to unfreeze, make everyone take annual leave over the christmas break with only half a day on Christmas Eve as bonus leave (Mallesons aren’t even this tight), reveal potential dramatic remuneration restructure in Business Spectator article and continue to brag and strut about exceptional performance and client satisfaction, without fallout. A June/July pay review will be too little too late…but then again what do we expect from HR?

How is morale at your firm? Are you the first to know about major news at your firm, or do journalists/newspapers get the scoop first?

Send the Firm Spy your news and views!

We reported last week the rumour that Mallesons might need to prepare for an exodus of lawyers, in particular from its Melbourne office, in light of the emergence of a new Gilbert + Tobin office in the city.  In response to that post we received the following comments from an anonymous (ostensibly a Mallesons) spy:

Firm Spy is always good for a laugh. If only you guys had the balls to apply the blow torch to Gilbert & Tobin the way you do to other firms. You read like a PR outfit for G&T. It’s not even subtle.

Clearly our friend missed the berating we gave Danny Gilbert over his use of the word “sanguine”.

In any event, we’re always keen to moderate any biases in our reportage, so this got us digging around for some dirt on G+T. Thankfully, two anonymous tips have come through over the last week, meaning we didn’t have to dig too far.

First, we received this in response to last week’s post from an anoymous spy:

I suggest the lawyer from Mallesons does his homework…

G+T is known for being a sweat shop, yes the money is good but does it make up for being overworked and having very little resources and support around you… Remember all the benefits of a large firm with L&D, KM etc etc

Not to mention there are some dysfunctional partners at that firm, just check out how many partners have been and gone from G+T in the last 5 years, it is a lot higher than other firms.

We couldn’t find the statistical evidence to support the partner attrition rate and the claims about it being a “sweat shop”, however we did receive the following from another anoymous tipster earlier this week:

What the legal news sector has failed to observe in its reporting on the “coup” by G+T to secure some of Telstra’s work for a fixed fee is that staff at G+T will suffer greatly from the deal. In the first place, there will be the workers who are stuck running errands into the wee hours for Telstra, with no billing upside. In the second place, the partners, who have left major firms with the hope that G+T will offer greater performance-based remuneration will find that the opposite is true. You can work to your heart’s content for Telstra under this arrangement, just don’t expect your pocket to get any fatter!

I think Danny has been very canny in this deal. He is hoping to forge a deep connection with Telstra, to understand its business, only so that in future he can use that expertise to leverage a traditional, billable-unit fee arrangement in future. I guess time will tell.

Can Mallesons lawyers, pondering a move to Gilbert + Tobin, expect an even bigger workload? Will the hours be longer? Is G+T a “sweat shop”?

Should G+T revolutionary billing arrangement with Telstra actually be called a “fixed-fee-billable-unit arrangement”?

Send the Firm Spy your news and views!

Over the last 12 months we have at various times reported on rumours, received by us from anonymous sources, that 2010 would see a stunning exodus of lawyers from major Australian law firms. In particular, we reported that the firms who have stiffed junior lawyers over pay and threats of redundancy would see a considerably higher than normal rate of attrition.

We were not surprised to see those rumours refuted last week by AAR P&D director Susan Ferrier and Freehills HR director Gareth Bennett in an article published by our friends at Lawyers Weekly. There is nothing quite like planting a seed of doubt as to the prevalence of jobs in the market to allay employee motivation to depart. Astute media-watchers will note, of course, that economists were quoted confidently asserting in a Business Spectator article penned a mere 4 days prior to the Lawyers Weekly article that the “peak in unemployment has passed”.

So where will the exodus of lawyers go? Obviously, we cannot answer that question in every instance, but in the case of Mallesons, a firm we consider leader of the pack in terms of exodus potential (very low pay, apparently highest working hours), things just became a little clearer.

This from an anoymous Mallesons spy recently:

Mallesons partners must reconsider their current, stringent view on remuneration, the reported 44% profit margin, and they must do so quickly. I am presently considering a far more generous offer from Gilbert + Tobin to join its new Melbourne office and right now I see no compelling reason to stay at the firm. By market rates, my remuneration is appalling and a Red Balloon voucher, purchased en masse for a discount, does nothing fix the situation. Partners should be advised that things need to change, and quickly, or G+T might just land the entirety of Telstra’s work along with dozens of Mallesons lawyers.

As reported by AFR (11/12/09):

G+T managing partner Danny Gilbert snared a large chunk of Mallesons’ work from Telstra earlier this year after offering to provide unlimited advice for a fixed fee… G+T has appointed 5 new partners in the past 6 months, & its partnership has grown by 7.4%. G+T is also growing in geographic terms. It will open its first office in Melbourne soon. The move is client led - Telstra’s [general counsel] Will Irving is based there… Gilbert says … “Telstra was looking for a broader engagement with the firm across all of activites the firm has expertise in and we were looking for a fee arrangement that had the best prospect of expanding our connections across what is a very large corporation”.

The article goes on to mention more bad news for Mallesons:

G+T also announced last week it had convinced highly regarded private equity specialist [and former Mallesons partner] Peter Cook to join the firm.

Are you considering changing firms? If so, why?

Tell the Firm Spy first!

Please bear with us as we wait for the return of all our affiliate firm spies from annual leave and the like. We expect to be running again at 100% in mid to late February. Of course, check us periodically between now and then for all your corporate gossip needs.

Apologies to the spies who have sent us tips and gossip which we are yet to publish. We will do so in due course, once we have the personnel to work through the considerable back-log.

And please, continue to send us your gossip!

AAR partner Paul Quinn uttered in his Business Spectator column earlier this week that junior lawyers should be remunerated based on performance. As reported by our friends at ALB:

associate salaries have remained on a lockstep structure … and “none of the arguments, in my view, present a compelling case to rule out performance based remuneration for lawyers …  a strong and transparent performance culture is a good thing”.

We can think of a good reason Paul; for example when your firm does not have a “transparent performance culture” and young lawyers do not possess a “champion”.

Late last year an anonymous AAR spy wrote us the following

…Allens Arthur Robinson’smanagement are aware that legal salaries across all levels are below market rate (although this has not been acknowledged or communicated to staff). At some levels, the discrepancy is as much as 20% below market rate. Salary compression at junior levels is also critical. “Thawing the salary freeze” offers the opportunity for the firm to consider a revision of its approach to remuneration. This may result in changes to the calibrated lock-step system currently in place. After the introduction of a forced-rank distribution sytem for performance reviews in 2009, the firm “successfully achieved its distribution curve”. (ie the firm reduced the number of staff achieving an “exceptional” or “very strong” rating and increased the number of staff who received a “strong” or “underperforming” grade). Some partners complained that they felt compelled to impose a grade on staff they did not agree with. Lawyers complained about flaws within the calibration system itself, including the fact that lawyers might be disadvantaged if they did not have someone to “champion” them during the calibration process (ie if they do not work directly with a high-ranking partner).

What do you think is fairest? A performance-based salary where lawyers are open to being dodged by partners, or the current lock-step model?

Send the Firm Spy your news and views!

We reported in late December the revelation that Minter Ellison was intending to lift its pay freeze. At the time, we thought that the thaw was dubious, however, because only particular staff would be given good news in the “letter notifying them of the result of their review”.

Sounds a lot like Minters & Chief Executive Partner John Weber only intend to increase the wages of those members of staff it is fearful of losing.

Over the break the Firm Spy received some disastrous gossip for the small few who genuinely hope to get a pay rise after the review. This from an anonymous - and apparently high-ranking - Minters spy:

recently exiled Minter Ellison partner Simon Alroe has had the criminal charges against him dropped. This must be one hell of a slap in the face to his former, conniving partners Ken “Horny” Horsely and Trent “Porno” Forno. But more than that, the news I recently heard from John Weber that Alroe is intending to sue the firm for north of $15,000,000.00 must be sending shivers up the collective spine of all Minters partners - who, as everyone knows, are already paid at the very low end of the corporate law firm partnership wage spectrum.

Worse still, those lawyers hoping that Weber would make good on his recent promise to lift the firm-wide halt on pay rises can probably now expect their pay to remain steady in 2010.

You’ll recall that former Minters partner Simon Alroe was “voted off the island” in July 2009 for allegedly harassing colleague Trent Forno. Presumably the criminal charges mentioned by the anonymous Minters spy relate to charges of harassment arising out of an incident with Trent Forno. We understand that these charges were the primary rationale for de-equitising Alroe from the Minters partnership.

Accordingly, given that the charges were apparently considered as being without merit by QLD police, does this mean Alroe ought to be reinstated to the Minters partnership? Will Forno now be removed from the Minters partnership for registering charges that brought about the downfall of a colleague, yet were considered by authorities as being without substance?

Send the Firm Spy your news and views!

Get a cup of coffee, brush past a reprehensible colleague, listen to the ranting partners talk of their European jaunts and get angry.

Then, tell us about it!

We’re back. We’re not happy to be back at work and we’re looking forward to doing what little we can to brighten your miserable corporate lives.

But of course, we need your help. So drop us a line, anonymously if you so choose.

Some excellent gossip has filtered through over the break which we will post over the course of this week. Please stay tuned.

Firm Spy