Lower Profits Cited in Troop Defections at Akin Gump
By AMANDA BRONSTAD
Akin Gump Strauss Hauer & Feld LLP, the nation’s 10th largest law firm, bought its way into L.A. just over a year ago, using the promise of big paydays and a national scope to acquire Troop Steuber Pasich Reddick & Tobey LLP.
Less than 18 months and a recession later, Akin is finding the projected cash isn’t there and that’s causing the relationship to fray.
In the first of what some expect to open a floodgate of departures, Tony Oncini, a former Troop partner and head of Akin’s labor and employment group in L.A., has left with three associates to become partner at Proskauer Rose LLP’s L.A. office.
Oncini said other Akin attorneys have expressed interest in coming over to Proskauer, but declined to be specific.
“When a group falls apart, everybody starts to panic,” said Jill Strickstein, of Strickstein Beckman Search, who placed Oncini at Proskauer. “When Tony left, everybody started to panic. He really is the first to start this domino effect.”
David Allen, partner in charge of Akin Gump’s L.A. office, and Cecil Schenker, who opened Akin Gump’s L.A. office in 1997 and now a partner in the San Antonio office, did not return calls for comment.
Oncini leaves four partners, four associates and four of counsel attorneys in Akin’s labor and employment group. A source familiar with the situation said at least three former Troop partners in the labor and corporate departments are looking to leave.
Calls to those partners were not returned.
“From the beginning, there were reports of conflicts between the Akin and Troop lawyers,” said Rick Kolodny, president of L.A. legal search firm Portfolio Group. “Merging law firms and acquiring large practice groups isn’t just driven by economics, books of business and potential profitability. Lawyers aren’t widgets, they’re people. If people don’t get along that’s why firms fail.”
Promised pay cut
Only 61 of Troop Steuber’s 140 attorneys made the move when the firms merged on Jan. 1, 2001. A group of 28 litigators left for Howrey Simon Arnold & White LLP’s L.A. office and the rest are now sprinkled among various L.A. firms.
The merger vaulted Akin, founded in 1945, to among the 10 largest firms in L.A., with 120 lawyers. The firm has 1,060 attorneys nationwide.
“There’s always a lot of disillusionment in these mergers,” said Bobbie McMorrow of McMorrow Savarese, the consulting firm that represented Troop in the Akin merger. “Sometimes you can foresee some of them, and sometimes you can’t.”
Several industry sources said the Troop partners were promised a higher percentage of profits than the Akin partners already in the L.A. office at the time of the merger. But several sources said that doesn’t appear to be happening now.
At Akin, partners are allotted a certain number of points with a value that changes each year based on projections of what the partner will make for the firm.
The point system is a standard way for law firms to determine the share of profits a partner will receive, Strickstein said. Points, akin to an equity interest in the firm, are assigned to partners at the start of the fiscal year based on how much the firm projects will be generated in revenues. Points are assigned a range of dollar figures, say $13,000 to $15,000, that becomes definitive at the end of the year when the firm calculates its total revenues and profits.
Because projecting profits is inexact, few firms offer guarantees at the beginning of the year, Strickstein said.
She said the Troop partners were guaranteed a minimum of $15,000 per point at the time of the merger. A source familiar with the situation said profits were guaranteed in order to entice Troop partners.
By March 2002, when points and profits were set for this fiscal year, the profits anticipated were more like $13,200 per point, the source said.
Strickstein said the Troop partners knew the profits weren’t guaranteed into 2002, but “they were hoping the points would be more toward the high end.”
Lack of support
Besides receiving less compensation than anticipated, the former Troop partners were said to lack support from Akin’s Washington, D.C. headquarters required to drum up new business, Strickstein and others said.
Support, she said, includes providing connections and contacts from other Akin partners. And it includes managing potential conflicts of interest that may eliminate clients when partners join a large law firm, she said.
“For a firm to be successful in the type of venture that Akin took on, they really need to have a significant amount of work coming from clients who are local,” Strickstein said. “They also need to grow at a pace that is consistent with the amount of support they can provide.
Oncini’s clients, some of which Oncini developed while at Akin, are largely entertainment-related and include E! Entertainment Television Inc., Creative Artists Agency and Universal Studios. In its press release describing Oncini’s hiring, Proskauer Rose described him as having a “multi-million dollar book of business.”
The “book” is defined as the amount of fees generated by the lawyer’s clients.
But McMorrow said many of the Troop partners are to blame for not bringing in new business. Many failed to meet what she described as a “higher bar” that larger firms like Akin expect from their partners, she said.
The defections on the horizon at Akin are simply a “weed out” process, she said.