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Boies Digs in on Holding Firm Together After Leadership Exits

Dec. 4, 2020, 10:31 AM

At 79, David Boies is arguably the best known lawyer of his generation, dating to when he famously roiled Bill Gates during the successful U.S. antitrust prosecution of Microsoft Corp.

But that was before Boies was tied to efforts to smear Hollywood producer Harvey Weinstein’s sexual assault victims, or news reports emerged that he intimidated witnesses who helped expose Theranos Corp.'s fraudulent blood-testing technology claims.

As his personal reputation took a hit, so did his law firm.

Boies Schiller Flexner has seen nearly 60 partners head for the exit this year, including some who were handpicked as potential successors to the firm’s founders. The total roster of attorneys has dropped from more than 320 to around 200.

Boies’ long effort to hand his firm off to the next generation is now running into new turmoil with the departure of his likely heir apparent, co-managing partner Nicholas Gravante, just a year after being tapped for the role.

Even before Gravante said he would leave, multiple partners picked to transition the firm away from Boies’ leadership had already departed, taking with them key clients including Facebook Inc., Uber Technologies Inc., Apple Inc., and Barclays PLC.

In an interview Thursday, Boies conceded that some of the previous efforts at generational transition—one of the most difficult phases in the law firm lifecycle—hadn’t been as successful as he’d hoped. But he offered few specifics as to why, and insisted the firm’s transition was nearer its end than its beginning. Natasha Harrison, who had been elevated to co-managing partner alongside Gravante in December last year, will likely become deputy chair, and Boies described her as his presumptive successor.

“I don’t think we are back at square one,” Boies said. “I think we are at the beginning of the end.”

New Leaders Short List

Boies Schiller will soon take another stab at a task that has bedeviled it so far: picking leadership to help the firm move beyond its founders’ clients, control, and egos.

Gravante’s exit means three of the four lawyers named to a management committee in 2018 will have left the firm inside of a year. The committee was intended to take over the day-to-day responsibilities for running the firm.

“If we had to do it all over again, would we just jump to where we are now? The answer to that is probably yes, if we could have done that,” Boies said. “But we probably could not have done that. It probably took us going through this process and testing not only what structures work, but what mix of people worked. And that is not something that you can necessarily divine without some experimentation.”

The firm plans to vote on appointing three new managing partners at the end of the year, according to an internal email Boies sent Wednesday obtained by Bloomberg Law. It also has two positions open on its executive committee.

There’s already a short list of nominees for those positions, according to sources familiar with the situation. Those lawyers include: Sigrid McCawley, Alan Vickery, Matt Schwartz, Stuart Singer, Phil Korologos, and Steve Zack. McCawley is best known for her recent work alongside Boies representing a number of hedge fund manager Jeffrey Epstein’s sexual abuse accusers. A number of the other lawyers have already served in leadership positions at the firm.

Merger Talk Scuttled

Gravante quietly considered jumping ship before being promoted last year and unsuccessfully pushed a merger with his new firm, Cadwalader Wickersham & Taft, two former partners told Bloomberg Law. The New York-based Cadwalader is known for representing financial institutions.

Gravante did not respond to an email request for comment. Boies said Gravante “did feel that a broader scope and scale for the firm was desirable,” adding that a merger would have accomplished that, but declined to confirm specifics.

The merger talks ultimately fizzled, according to the former partners, because Boies Schiller was unwilling to share detailed financial information. Firm founder Jonathan Schiller said the idea was a non-starter if the combined firm didn’t include his name, the former partners said.

Boies declined to comment on Schiller’s specific reasons against a merger, but said Schiller also did not want the firm to stray from its high-profile litigation roots into a general practice shop. He said Harrison shared that view. A spokesman for Cadwalader did not return a message seeking comment.

Royalty or Tax?

Departing partners have listed various reasons for their unhappiness at the firm, including a rare provision at Boies Schiller that grants Boies and his founding partners a share of firm revenue. Two former partners described the so-called “royalty payments” as a tax on recruiting new partners, since other firms don’t have that agreement.

Boies disputed that view, saying he couldn’t think of a single partner who voiced that concern to him as cause for their departure. He noted that equity partners have never been asked to pitch in capital to join the firm, which is typically required in exchange for a share in the firm’s profits. Only the founding partners have contributed capital, Boies said.

“The founding partners’ compensation has been actually considerably less than it could have been if you applied a market test,” he said.

Some departures were part of a “failed acquisition” of California litigation boutique Caldwell Leslie & Proctor in 2017, Boies said. Other lawyers didn’t make the cut, and likely shouldn’t have been hired, he said.

As for the other, “very talented” lawyers who left, Boies said they decided to depart either due to disagreements about what practice areas the firm was pursuing; efforts to “monetize” their cases; or because they had hoped to be picked for leadership positions—or hoped others had been.

“It is not unusual in any institution in the course of a transition, for people who are not selected or whose favored candidate is not selected, to go somewhere else,” he said.

Contingency Plan

The firm was founded in 1997, when Boies became one of only a few partners to ever leave the prestigious Cravath Swaine & Moore. The firm grew to more than 400 lawyers, and its partners earned more than $3.3 million on average in 2019, according to data from The American Lawyer.

Boies took an aggressive approach to building the firm, embracing risky contingent-fee cases that elite Wall Street firms have largely eschewed for the more reliable method of charging for their time by the hour. Those cases currently account for about 25% of the firm’s annual revenue, he said.

One of those contingency investments will soon pay off. Boies served as co-lead counsel in an antitrust class-action that alleged Blue Cross Blue Shield Health plans conspired to limit competition. A judge this week preliminarily approved a $2.7 billion settlement and a potential lawyers’ fee of up to 25% of that amount, which would be about $665 million.

On the other hand, the firm’s billable hour work has dwindled as lawyers with blue-chip clients have left. Last month, a defamation case the firm was pursuing on behalf of former AIG CEO Hank Greenberg against Eliot Spitzer was dismissed by a New York state court judge. The matter was one of the firm’s larger billable hour cases, according to one former partner.

Harrison said the firm wants to build up its institutional client base while selecting winning contingency fee cases. It plans to develop its lawyers organically while making lateral hires, she said.

“The vision is to be building and to continue to build the elite litigation firm in the world,” she said.

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Rebekah Mintzer at rmintzer@bloomberglaw.com; Chris Opfer at copfer@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com

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