We reported a few days ago that Allen & Overy had scored a major coup in convincing high profile lawyer David Poddar to take a hop, a step and a jump from Mallesons Stephen Jaques. It emerged late last week that Poddar would receive some performance enhancing assistance with the addition of another very highly regarded partner from a competitor firn - Allens Arthur Robinson’s Angus Jones.

The AFR reported (9/7):

a soft A&O landing

Allen & Overy added … Angus Jones… Along with the partners originally poached from Clayton Utz and Freehills, Allen & Overy Australia now has a partnership of 19.

But that figure of 19 looks set to jump even higher, given what The Australian has termed “a CV rush” from solicitors wishing to join the firm. According to The Australian:

Allen & Overy’s Australian partners have been inundated with CVs from individual solicitors and whole teams of lawyers looking for work… “In three cases whole teams have been offered up”… Allen & Overy’s Grant Fuzi, said overall the Australian practice was on track to have a staff of 50 lawyers by the end of the year and in three to four years planned to have [approximately] 40 partners in Australia.

And the remaining 21 partners that will take the Allen & Overy partnership from its current number at 19 to the forecast top of 40 will come directly from the partnership of Australia’s best corporate law firms. They will be the youngest and the most athletic brightest. Why, you ask?

Because they will be paid considerably more working for Allen & Overy than they will for any other firm in Australia.

According to the AFR:

It is understodd that Allen & Overy’s Australian partners will share in the firm’s single global equity pool.

The size of that equity pool was helpfully and willingly exposed by Allen & Overy last week in what we consider an intentional effort to attract Australian partners to the firm. According to The Australian:

The first year’s income for Allen & Overy’s new partners is “predominantly a fixed prior share of profits”… But after that first year… most new partners become “full” partners with profit shares that start at pound stg. 661,000 ($1.18 million). This is in line with the income of top partners at Australia’s best-performing firms. But at Allen & Overy, it is relatively modest. Last financial year, the top partners at this firm took home pre-tax profit shares of pound stg. 1,652,000, or $2.9m, the firm’s documents show.

$2.9million is roughly DOUBLE what top equity partners reportedly earn at Australia’s most profitable firms. But most importantly, the second-year Allen & Overy partners who earn $1.18million will be receive approximately THREE TIMES what they would expect at any of the top domestic firms. For cash-starved corporate partners, the mathematics of this equation is plain to see. And for ageing partners at the top of the equity ladder at domestic firms who rely on dynamic junior partners, this news poses a big risk of some triple jumping.

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Congratulations to the AFR legal affairs team for their excellent work last Friday. For those of you who missed it, we suggest you get your hands on last Friday’s AFR and read the annual Partnership Survey.

fanatical breast exposure NOW

The survey offers some fascinating insights into the way the legal market is moving. We intend to spend much of this week digesting the info and commenting on it.

But before we do that, let’s talk about the defection of David Poddar from Mallesons to A&O.

We received the following quip from an anonymous Mallesons spy last night:

Can the Firm Spy think of any way to tie the defection of disliked national sprinter Jana Pittman to our English rivals with the defection of the equally disliked ex-Mallesons partner David Poddar to our English rivals Allen & Overy?

Indeed - for those that missed it - Athletics Australia suffered a great loss yesterday when it emerged that “Drama” Jana Pittman would be leaving Australia to represent England. So too did Mallesons, when highly regarded partner David Poddar defected last week to English rival Allen & Overy. In the A&O media release, managing partner of A&O Australia, Grant Fuzi, said

Dave is highly respected practitioner and his joining is particularly important to our clients. With his experience, we will have the capability to provide top level advice on merger clearances, access issues and general competition matters, as well as cartel advice, which is particularly important after the recent introduction of criminal cartel laws in Australia. This expansion is yet another reflection of our commitment to strengthening the Australian offering since our launch just a few months ago.

Although Mallesons has played down the significance of the defection, we would regard Poddar’s defection as a very worrying development for the firm, given that Poddar is clearly a highly rated lawyer. The Australian noted for example:

The Allen & Overy raid on Australian law firms continued yesterday with the hiring of one of the leading members of the trade practices mafia, David Poddar, a Mallesons partner for the last 12 years.

So why would a partner at Australia’s most prestigious law firm and most profitable firm want to a move to a rival firm? We imagine that the following issues were foremost in Poddar’s mind:

• Allen & Overy probably offered a set two or three year salary, meaning no at-risk component unlike at Mallesons;
• presumably that wage is higher than he could have possibly received at Mallesons;
• With A&O’s arrival, Mallesons might have lost its domestic lustre - the Magic Circle being more prestigious; and
• perhaps Mallesons financial outlook is not as promising as it once was.

Of course we’re speculating, but the move of a young partner to A&O is a truly worrying development for the Mallesons partnership. And if Poddar is able to so readily depart, what will stop a flood of his former colleagues jumping ship if Clifford Chance arrives later this year?

In much better news for the males remainng at the firm, and still on the topic of sport, we received the following comments from an anonymous Mallesons spy over the weekend:

It might interest the Firm Spy to know that two Mallesons graduates, currently strutting their stuff in the corridors of its Melbourne office, were cited by reputable websites across the world specialising in such matters as being ‘Official World Cup Crowd Babes’ for the 2006 World Cup.

Presumably the platinum bottle-blond ‘Fanatics’ pictured to the left and right of the top photo of this link - http://fivefalcons.com/world_cup_babes_2006/australian_babes_world_cup_2006.php - are not as enraptured by their new corporate suits and computer screens…

Yes, that is interesting. Out with the old Dave “Drama” Poddar and in with the new nubile blondes! We do hope, however, that the young lady exposing her very own soccer-balls (yes, you have been warned!) mid-way through the ‘Germany 2006 - World Cup Babes Australia Gallery’ isn’t also a Mallesons lawyer.

Have you been watching the soccer? Have you been thumbing through 2010 World Cup Babes Galleries?

Send the Firm Spy your news and views!

The “Trench” v Clayton Utz sexual harassment/bullying/victimisation saga shows no sign of ending. However, it has now reached the offices of A&O matermind defector Grant Fuzi, who is simultaneously allegedly fighting an equitable action against Clayton Utz for a breach of fiduciary duties.

It is one big Trench-coated Clutzy Fuz-ball love-fest!

Clayton Utz yesterday

For those unfamiliar with this forgettable episode in Clutz’s recent history, let us refresh your memory:

[Trench] alleges that Mr Williams, Mr Taylor, Ms Goumenis, Ms Best and Mr Robinson, all employees of Clayton Utz, sexually harassed him. With respect to Mr Williams, it is alleged that:

…He says they were making jokes about him ‘articulating the association between trench coats and deviant and illegal sexual behaviour and referring to him as a ‘flasher’ and as ‘trench’.

[it is alleged that]… On one occasion, Mr Williams ‘explained to the applicant how solicitors could take paralegals home for sex’.[emphasis added].

[it is alleged] One Friday evening Mr Taylor went into Mr Mitchell’s office, took his coat, put it on and ran up and down the hallway calling out ‘trench, trench, trench’. He then went into the office of Mr Ho and continued to make fun of Mr Mitchell. Mr Taylor agrees that he put Mr Mitchell’s coat on and walked several metres down the hall, saying ‘trench-coat’ several times in a sing-song voice.

…With respect to Ms Goumenis, Mr Mitchell alleges that she referred to Mr Mitchell as ‘trench’ as a way of ‘getting his attention’

Mr Mitchell says that Mr Robinson is a partner of Clayton Utz and that he was aware that he was being called ‘trench’ and did nothing to stop the conduct… According to Mr Mitchell, Mr Robinson derived ‘maximum enjoyment’ out of the [Trench] comments.

Conclusion. Leave is granted for the complaints of sexual harassment against Mr Williams and Mr Taylor personally and against Clayton Utz as their employer…

We received the following comments yesterday alerting us to a new interlocutory decision in the “Trench” saga (thanks very much to the anonymous spy in question):

Clutz is on a roll.  Fuzi better watch out! Arguing that Mike Trench Mitchell`s claims were “speculative” and insufficiently “particularized,” Clutz scored a major victory against the naked Trench. If they ever get back that $700,000 from  Fuzi they might just buy themselves some champagne - http://www.lawlink.nsw.gov.au/adtjudgments/2010nswadt.nsf/731b718ec02a5793ca25684e00413824/3398fec1280164a8ca25770b001be6c1?OpenDocument

As you’ll note in the decision, “Trench” asked the NSW Administrative Decisions Tribunal for leave to amend his complaint. In particular, “Trench” wanted leave to amend his complaint to add:

1. a complaint of “aiding and abetting” against Mr Trevor Robinson & Ms Sonia Goumenis; and
2. a complaint of victimisation against Mr Grant Fuzi and Clayton Utz.

In what we would characterise as a weak decision, Deputy President Hennessy refused the application. In relation to the complaints against A&O defector mastermind Grant Fuzi, “Trench” made the following allegations:

Mr Mitchell alleges that … Mr Fuzi victimised him… Mr Fuzi is said to be the head of Banking and Financial Services at Clayton Utz. The triggering event … was that Mr Mitchell told Mr Fuzi during an interview that he had been sexually harassed by other employees. The ‘detriment’ was restricting his access to necessary information about the accusation of sexual harassment against him during the investigation process. The causal connection between those events was said to be that Mr Fuzi refused to provide the necessary information straight after Mr Mitchell made that allegation. Mr Mitchell clarified in his reply to the respondents’ submissions that he is seeking to add Clayton Utz as a respondent because they are vicariously liable for Mr Fuzi’s conduct. Mr Mitchell explained the victimisation complaint in his submissions to the Tribunal in the following terms::

“Once I informed Grant Fuzi that I experienced harassment, he refused to provide the rest of the allegations against me … he said he needed to check with some other people before he could release the rest of the allegations although he later provided the allegations by e-mail… Grant Fuzi and Clayton Utz restricted my access to other necessary information about the accusations against me that I should have been guaranteed under the employee handbook… [which] states that it will follow natural justice in dealing with the investigation…”

Mr Mitchell alleges that Mr Fuzi’s conduct constituted discrimination on the ground of sex and/or disability.

The Tribunal declined to grant “Trench” leave to amend his complaint on the basis of prejudice to Fuzi and based on the Deputy President’s perception that “Trench” had a detailed knowledge of the anti-discrimination laws and had “ample opportunity to make that complaint to the Board”.

Are you convinced? What should “Trench” do next?

Send the Firm Spy your news and views!

In the wake of the defection of 14 Clayton Utz partners to A&O earlier this year, we reported that a group of Clayton Utz lawyers met confidentially to discuss the demands they would place on the Clutz partnership to remain at the firm. At the time, we reckoned that many of the remaining lawyers were well placed to ask partners for an overdue pay rise. However, we never thought that the Clutz partnership would be so perturbed by the prospect of losing more lawyers that it would take the unprecedented step of awarding junior lawyers with senior associateship.

We received the following comments from anonymous Clayton Utz spies last week and over the weekend:

constructions lawyers have higher to jump

Dear Firmspy Yesterday I reported to you the seemingly *impossible* rumor circulating among polite circles that Clutz has promoted to SA a securitisation lawyer admitted December ‘08. Yes, DECEMBER ‘08! Well, Firmspy, as I tapped away at my computer, I could barely believe it myself. But I sent it anyway, with seemingly carefree abandon for the truth (you know what us Clutz lawyers are like!). But when I saw that you published it, I could feel the anticipation that your readers would now have not knowing if this was true. So I felt that I should try and find out more by way of details. So today I took it upon myself - between some value adding due diligence - to make some more enquiries and, to my sheer surprise and delight, it does appear that Clutz has its very own Australian idol. Our idol’s name is #######…. as A&O continues its ravenous bottom feeding on second tier (Clutz) finance lawyers, I am sure that you too are pondering this question - why didn’t our ####### join A&O. Is our ####### too good for A&O? You bet! Our ####### knows what fiduciary duties are (having learned about them at law school, rather than at Clutz) and is not one to sell himself to the highest bidder like some cheap hooker. This is not the last that you will hear of our ####### … Well done, you.

We then received this:

In answer to the posting on the CU promotions, yes it is true. Some of the new senior associates are 2 years PQE (the historical CU rule was 4 years minimum) and one of the new partners is 5 years PQE (it usually takes at least 8 to 10 years). The accelerated partner and lawyer promotions in Sydney were dominated by anyone who worked for the partners that left (i.e. those with negotiating leverage in Banking and Corporate). If you were just a hard working litigation or construction lawyer working 8 to 11 hours a day you did not quite have the same pull. I think I had better move to Banking and find a defecting partner to work for to get ahead!

And finally this:

As of 1 April 2010 a lawyer who was admitted in NSW on 10 October 2008 was promoted to Senior Associate at Clutz just because the remainder of his team (securitisation - structured capital markets) left to A&O (what a knuckle head, no pun intended!). With only 1 ½ years post admission experience and no prior law firm experience this lawyer has definitely done well for himself by remaining with Clutz. However, for the remaining Clutz Lawyers who in the recent promotions did not get promoted who have been with the firm for more than 4-5 years this is definitely unfair. Clutz did not reward this lawyer for his hard work, but rather are desperately trying to hold onto anything they can since the firms departures in that team to A&O.

Our anonymous sources neglect to mention that the junior lawyer in question may be exceptionally competent, and that this might warrant his incredible progression (but even then, we agree that it is unfair to more senior lawyers who haven’t been made up). However, from a client perspective, particularly in an area like securitisation where there is a whopping market surfeit of under-utilised  lawyers, would it be palatable to pay senior associate charge-out fees for someone with just over one year of post-qualification experience?

Does your firm ever lower the bar?

Send the Firm Spy your news and views!

It has been a couple of months since the Legal Affairs team at the AFR have had a decent scoop, so we took our collective hats off on Friday at the massive revelation that Clayton Utz is pursuing mastermind defector Grant Fuzi for a breach of fiduciary duties arising from his move to competitor Allen & Overy.

If you missed the AFR article, the following summary was sent to us by an anonymous spy (thanks very much!):

A&O Branding

Read on infoXpress this morning… Clayton Utz - Allen & Overy - Grant Fuzi - Case - Clayton Utz is set to prepare a case against former partner Grant Fuzi alleging that he lied about his intent to join Allen & Overy before leaving Clayton Utz, and breached his fiduciary duty. Mr Fuzi allegedly accepted a $700,000 payout on the condition that he would not go to a competitor. - AFR 45

Then another anonymous spy sent us the following request:

Please write about Clayton Utz’s upcoming suit against the Australian A&O partners, including Grant Fuzi, for breach of fiduciary duty. Would love to hear more goss in this regard.

So what do we know? Well, the following very insightful comments were sent to us last night by an anonymous Clayton Utz spy (this is a truly excellent update, so thanks) which help inform the Clutz motivation to pursue the Fuz Ball:

CU is not just bleeding it is haemorrhaging with its lawyers following their partners to A&O in unprecedented numbers. That’s the real story behind CU’s action against Grant Fuzi, as reported in the AFR on Friday -a desperate attempt to stem a tide which started well before Mr Fuzi departed and an attempt to prevent other groups suffering the fate of its Workplace Relations and Banking and Finance groups. In Banking and Finance the blood started with the departures of securitisation guru Brain Salter and his partners Trevor Robinson and Leah Chic in 2008 (as reported in the IFLR). In Workplace Relations it started with Chris Hartigan and his client John Holland, who moved to Herbert Greer in 2008, followed by Louise Russell, Luci Mumme and her team.  Next to depart were John Oakes and his team in Sydney, followed by Luke Connolly in Melbourne and most recently Bruce Heddle in Sydney. As a result, although embarrassingly, the Clayton Utz website still proclaims that its Workplace Relations group is ranked Tier 1 by the Asia Pacific Legal 500, but that’s incorrect. A quick click reveals that the firm is now ranked Tier 2, as it is in Banking and Finance. The exodus doesn’t stop there either. While the Legal 500 reports that Peter Knight retired, Chambers Global reports that he has moved across to Banki Haddock Fiora and then there was Richard Morrison in Canberra.. That’s another 11 partners. CU hasn’t replaced any of these people it has just promoted a few people… I’m sure you can find a few more.

Forget about finding more, what about the potentially misleading and deceptive proclamations on the Clayton Utz website?! Perhaps Mr Fuzi might find something useful there for the purposes of defending the forthcoming equitable proceedings…

Which brings us to another very interesting rumour sent to us over the weekend regarding this explosive story:

I thought the Firm Spy might like to know how Grant Fuzi intends to defend against the action being brought against him by his former employer Clayton Utz. I’m told that he intends to rely on the very tenuous argument that he did not technically leave Clayton Utz to work for a “competitor” - and was thus entitled to the $700,000 payout - because A&O wasn’t competing with Clayton Utz for work at the time of his defection. Mind you, if the retarded manner in which the firm is currently handling its PR affairs is an indication of its legal competence, I wouldn’t be surprised if the restraint of trade clause was so narrowly drafted as to permit him to defect and pocket the money!

We wouldn’t be surprised either. And it would make another dark chapter in a forgettable year for the firm in which:

• 14 very profitable, well respected partners defected from the firm to build two Australian offices of Magic Circle firm Allen & Overy;
• the firm sacked over 30% of its Melbourne graduates;
• a former employee has been given leave to pursue further claims against the firm for alleged sexual harassment and bullying;
• the firm was stripped of its credentials as an employer of choice for women by the Equal Opportunity for Women in the Workplace Agency; and
• a librarian has created considerable controversy by hording an inordinate amount of firm fruit.

What will happen next? Share your views by voting in our new poll!

Send the Firm Spy your news and views!

We understand that you’re probably sick of reading about it - we’re certainly sick of writing about it - so unless something explosive happens, we’ll make this our final post about the Clayton Utz partnership defections to Allen & Overy.

This post clarifies further the Clayton Utz machinations giving rise to the defections. We have extracted some excellent info from the AFR 12/2, shedding light on how former Clutz Banking & Finance head partner Grant Fuzi was the protagonist in the Clutz partnership defections:

It is Mr Fuzi’s history with Clayton Utz, and his long-time association with Mr Trahair, a fellow Australian, that was instrumental in facilitating A&O’s bold and sudden arrival here. As one partner said about Mr Fuzi this week: “The mistake we made was taking him on again.”

Mr Fuzi and Mr Trahair were poached by A&O in 2001, with Fuzi stationed in Hong Kong where according to the AFR he:

learned the ins and outs of A&O’s Asia practice.

 Several years later, Fuzi returned to Australia and to his old firm Clayton Utz. In 2005, speaking of Clutz’s absence in Asia, Mr Fagan told AFR that the firm:

did not see the client demand nor the business case for opening an office in Asia.

The AFR considers that this is a view that may have sat at odds with those who had tasted the global law firm life in Asia.

The AFR went onto note last Friday that:

Mr Fuzi resigned in December, after the announcement of Mr Fagan’s retirement, after a nine-year stint, from the role of chief executive in November. Mr Fuzi was a strong contender to replace Fagan, but lacked the numbers in the partnership vote.

“…obviously if I had been made chief executive partner I would not have left.

Fuzi would not have left if made CEP and, apparently, some of the defecting partners may not have left if Clayton Utz had an bigger Asian presence. If you Fuz snooze on these global opportunities, evidently you lose…

So now we know who, what, when, how and why. That’s a wrap on certainly the biggest Australian legal story of 2010.

Let the Firm Spy - your Firm Spy - know first when the big stories break.

Send the Firm Spy your news and views!

We reported yesterday on the astute comments from an anonymous spy that the A&O foray into Australian soil might do no more than dilute its healthy equity pool. It is, of course, a huge risk. And while A&O risks the dilution of its equity, it appears that the defection may also soon result in a major additional strain on the remaining value of the equity points at Clayton Utz.

This incredible update from an anonymous Clutz spy last night:

I am told that a group of my colleagues, ranging from senior associates to senior lawyers, met privately yesterday to discuss the demands they would place on the Clayton Utz partnership to remain at the firm. I suspect, though I cannot be certain, that the senior associates/lawyers remaining in the affected (defective?) groups will be asking for considerable pay rises. I am not aware that any will immediately be asking to be made up to the partnership, though I imagine this is on the radar for some. I think these lawyers are wise enough to realise that this is a once in 20/30-year event and if they don’t hold the partnership to ransom, they may be “dodged” - as the Firm Spy so eloquently put it - on pay into the future.

This rumour was sent just hours after CEP David Fagan told Lawyers Weekly that Clayton Utz was rapidly regrouping and had announced a number of leadership replacements. He alse told LW that:

It also gives an opportunity to critically review different areas - it makes sense for us to restructure in those areas.

This announcement of a ‘rapid regrouping’ came, however, mere moments after Clayton Utz confirmed that another partner, accompanied by 3 Clayton Utz lawyers, was defecting from its Canberra office to rival Sparke Helmore.

Is CEP David Fagan regrouping or degrouping? Are you a Clayton Utz groupie?

Meanwhile, three of the other mysteries surrounding the defections becmae slightly clearer overnight. Firstly, how can A&O open its offices on March 1 with partners having announced their defection only last Monday? What about gardening leave? Lawyers Weekly very helpfully reported that the relevant defecting partners intended “to retire on May 8”. The 1 March A&O kick-off will therefore apparently involve very little legal work. Secondly, where will A&O be located? The Lawyer reported that A&O would occupy the recently vacated Sydney tenancy of merged Australian firm Deacons. Thirdly, did anyone know about the imminent defections? Lawyers Weekly reported that the Clayton Utz Chairman only became aware of the defection when he took a phone call from an A&O partner announcing that the relevant partners would be retiring. This accords with the information sent to us by an anonymous Clutz spy yesterday:

…what I find most intriguing about this saga is that none of my colleagues here in the Sydney Clayton Utz office had any idea that the departures were about to happen. Many of the junior lawyers were mid-way through the completion of tasks/projects for the partners leaving…

Finally, ALB  reported yesterday that A&O has set a target of 50 lawyers and 20 partners for the Sydney & Perth offices for their first year, rising to 25 partners and more than 60 lawyers in three to five years. This adds considerable weight to the rumours, reported by us that some 25 Clayton Utz lawyers and senior associates will be accompanying their defecting partners.

Send the Firm Spy your news and views!

Following the major coup announced on Monday that over a dozen Clayton Utz partners would be defecting to international rival A&O to establish Australian offices of the firm, Allen & Overy yesterday added a new page on the careers section of its website featuring the following advertisement:

We are looking forward to building our practice in Australia. We expect to have vacancies for experienced lawyers shortly, so please submit your covering letter and CV if you are interested in working for Allen & Overy in Australia. You can do this via the job search function to the right of this page. We will keep your details and will contact you if any suitable opportunities arise.

Soon after this, Paul Quinn from Quintessential Marketing told Smart Company that after a tough year, the sector is booming again:

Anecdotally I know that for recruiters, some of them have had their best month ever in January and had a good result after an ordinary year last year. Recruitment activity is on the rise, which would also flow through into headhunting and poaching.

Meanwhile, Chandler Macleao, executive general manager David Reynolds, told Smart Company last month he had:

already heard of workers leaving for greener pastures… employees may have stayed in their current roles during the global financial crisis because of high unemployment, and have put up with actions they might not have otherwise such as pay freezes.

These comments are to be contrasted with the hallucinations remarks made by Susan Ferrier of AAR a couple of weeks ago that there are, in effect, no jobs out there.

But is there a new talent war? If so, what will this mean for your firm and your pay freeze? By our count, no less than four of the six top tier firms are still enforcing a pay freeze or something closely resembling it…

In relation to Clayton Utz’s loss of key personnel, Dwyer Heath’s director Ted Dwyer told the AFR:

[it must be a] shock to the system… one of the things the major firms pride themselves on is the quality of their people. Any dilution of that base represents a dilution of the strength of the firm, and not only that, but they will take a lot of people with them.

As we reported yesterday, indeed new A&O partners may take other Clutz fee-earners with them - 25 lawyers are rumoured to be leaving. But will they take clients? One astute, anonymous firm spy sent us the following comments yesterday:

I consider the dilution of A&O’s equity to be a major risk that could well come to nothing. Think about it - clients ‘belonging’ to the 14/15 partners leaving the firm may consider that it is currently ‘top heavy’ and that the depth of expertise is lacking. However they may also consider that Clayton Utz no longer has the partnership expertise that their business requires. All of this could mean that other top-tier firms will claim new clients and both Allen & Overy and Clayton Utz will suffer.

So what does all of this mean for Clayton Utz? Is it past its Utz-By Date? One anonymous Clayton Utz spy told us that remaining partners are already seeing the silver ining:

…I cant believe I overheard a Clutz partner joking about how we will make a great saving on tenancy costs. Already!

Send the Firm Spy your news and views!

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.

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