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Wake Up Call: Cash Crunch at U.S. Firms Drives ‘Aggressive’ Virus Cuts

April 21, 2020, 12:32 PM

In today’s column, a task force of Big Law firms advised the U.K. government on a lending fund to help innovative small companies survive the economic crisis wrought by the Covid-19 pandemic; the U.S. bankruptcy system risks an overload as a flood of companies seeks protection during the crisis; law firms looking to boost their operating cash are asking banks for more credit; and the average score on the multistate bar exam fell to an all-time low in February.

  • Leading off, many of the biggest U.S. law firms have announced steep pay cuts, plus layoffs, and furloughs to boost their liquidity during the Covid-19 crisis. A new Financial Times report says U.S. firms have had to make such “aggressive” moves because they used up cash on profit payouts to partners back in December. By contrast, most big U.K. firms, which pay partners after their fiscal years end in April and so have more cash on hand, have been able to hold their cuts to salary freezes and bonus deferrals, this report says. (Financial Times)

  • Recent Covid-19 austerity moves include Quarles & Brady‘s temporary cuts for partner draws, and associate and staff pay, plus some furloughs; and 10 to 15% pay cuts for employees making more than $100,000 at Fox Rothschild, but no layoffs or furloughs. (Above the Law) Reed Smith is implementingan unpaid leave program in the U.K., while Dentons is furloughing over 100 staff in the U.K. and Middle East. (The Lawyer)

  • Another way U.S. firms are looking to prop up their operating cash is by asking their banks for credit increases. Firms are also flocking to litigation funders and considering selling some receivables, or even equity stakes in non-legal parts of their firms, this report says. (American Lawyer)

  • A task force of U.S. law firms including Cooley, Goodwin Procter, Orrick, Herrington & Sutcliffe, and U.K. firms Taylor Wessing, and Ashurst is advising the U.K. government on a fund to provide financing to innovative small companies affected by Covid-19. (Legal Week via Law.com)

  • Houston’s high-end legal market was once dominated by three big Texas firms, but now they have to compete against the biggest U.S. firms by revenue, most of which have offices in the city. The very biggest, Latham & Watkins and Kirkland & Ellis, are set to grab a big chunk of the bankruptcy business expected from Houston-based energy companies in a collapsing global oil market. (BLAW)

  • Does Covid-19 qualify as a “force majeure,” or act of God event that can get parties out of contractual obligations? Lawyers say that’s a complicated question. (Bloomberg News)

  • Meanwhile, the U.S. bankruptcy system risks being overwhelmed by a wave of previously healthy companies seeking relief all at once. (BLAW)

Lawyers, Law Firms

  • General anxiety, social isolation, and childcare outweigh tech as the biggest challenges faced by lawyers and staff by law firms that have switched to remote working, according to a recent survey by Loeb Leadership. (SquareSpace.com)

  • Major League Baseball ticket holders filed a class action accusing the league of refusing refunds for the 2020 season because of Covid-19. (The Recorder)

  • American Lawyer is holding a webinar today on the release of its annual report ranking the biggest law firms by revenue. This year’s edition looks at the financial health of law firms before the Covid-19 crisis hit. (Law.com)

  • The U.S. Soccer Federation’s chief legal officer, Lydia Wahlke, is still stewing in administrative leave after getting suspended in March. Her ouster was part of a management shake-up apparently sparked by mismanagement of the federation’s defense against a pay bias lawsuit by women players, reports say. (Corporate Counsel) (ESPN)

  • New York’s biggest law firms promoted more lawyers to partner in the last year, and women’s share of those promotions also rose, a report says. (New York Law Journal)

  • Oklahoma Solicitor General Mithun Mansinghani, a former Gibson, Dunn & Crutcher associate, will make his debut SCOTUS oral argument via telephone from his office. (National Law Journal)

  • Pierce Bainbridge Beck Price & Hecht lost four more lawyers, including former acting managing partner Tom Warren, who was earlier chair of Baker & Hostetler’s national appellate practice. The four left to start their own boutique. (American Lawyer)

Laterals, Moves

  • As firms get ready for a wave of Covid-19 employment litigation, Holland & Knight said it created a national team of attorneys focused on ERISA and employee stock ownership plan litigation, as well as labor and employment law. The Atlanta-based team is led by partner Todd Wozniak, who was previously a shareholder at Greenberg Traurig. Partner Lindsey Camp also arrives from Greenberg, while partner Peter Hall arrives from Chamberlain Hrdlicka but was earlier also at Greenberg. (HKLaw.com)

  • Orrick’s Paris office added French M&A and private equity adviser Olivier Jouffroy as a partner. He arrives from Clifford Chance. (Orrick.com)

  • Katten added two commercial finance partners, getting Kirby Chin in New York from Schulte Roth & Zabel, and Brian Stern in Los Angeles from Milbank. (Katten.com)

  • Cleary Gottlieb Steen & Hamilton added international trade and national security lawyer Chase Kaniecki as a counsel in Washington. He arrives from Jones Day and focuses on CFIUS foreign investment reviews, economic sanctions, and export controls. (ClearyGottlieb.com)

  • Sheppard, Mullin, Richter & Hampton added zoning and land-use attorney Jodi Stein as a partner in its real estate, land use and environmental practice group in New York. Stein, who joins from Herrick Feinstein, is the New York office’s 10th real estate attorney hire in 14 months. (SheppardMullin.com)

In-house

  • Toronto-Dominion Bank internally appointed a veteran in-house leader, Norie Campbell, to return as group head and general counsel of TD Bank Group, a job she held as recently as November 2017. Campbell replaces former legal chief Ellen Patterson, who recently left to lead Wells Fargo & Co.'s legal group. (BLAW)

  • The Guardian Life Insurance Co. of America appointed longtime in-house lawyer Margherita DiManni as interim general counsel, after the company’s former top lawyer left last month. A handful of other insurance companies have also recently appointed top lawyers. (BLAW)

  • The Minority Corporate Counsel Association said The Hershey Co. top lawyer Damien Atkins will, in April 2021, start a two-year term as chair of the association’s board of directors. (Corporate Counsel)

Legal Education

  • Deans of 17 ABA-accredited law schools in California urged the state’s supreme court to create a temporary licensing program for applicants scheduled to take the July 2020 bar exam, a test that looks likely to be postponed or canceled due to Covid-19. (The Recorder)

  • Meanwhile, legal educators hoping national bar pass rates would finally improve after years of decline got some bad news as the national average score on the Multistate Bar Exam part of the test fell to a record low in February. (Law.com)

To contact the correspondent on this story: Rick Mitchell in Paris at rMitchell@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Rebekah Mintzer at rmintzer@bloomberglaw.com; Darren Bowman at dbowman@bloomberglaw.com

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