Tom Stromberg’s departure from Kaye Scholer is the latest high-profile exit from the New York firm’s L.A. office, which has lost half its partners in six months.
Stromberg, who was co-managing partner of the L.A. outpost and a member of the firm’s executive committee, became the eighth L.A. partner to leave since July when he joined Jenner & Block last month.
Kaye is down to 27 attorneys in Los Angeles, once its second largest outpost, with 55 attorneys in 2010. The drop is one of the steepest for a law firm in Los Angeles in recent years. None of the 100 largest firms in Los Angeles ranked by the Business Journal last year reported a greater percentage decline of attorneys since 2010, discounting outright firm dissolutions such as that of Dewey & LeBoeuf.
Stromberg declined to comment on why other attorneys had left, but cited his new firm’s commitment to growth in California as a reason for joining.
“The platform for me at Jenner is stronger, and there’s more of a focus on California and the California practice,” he said. “The willingness to focus on building out here is compelling.”
In an email statement, Kaye Scholer Managing Partner Michael Solow tied the exits to a change in strategy in the office, including the de-emphasis of the firm’s corporate practice in Los Angeles. He praised the departing attorneys, many of whom were corporate attorneys, but said that “their strengths are not in areas for which the firm is and will continue to be known.”
“While we remain a full-service firm, we are realigning our legal capabilities in Los Angeles and elsewhere to focus on those practices and industries for which we are continuously recognized by clients and third-party sources as among the nation’s best: commercial litigation, intellectual property and bankruptcy and restructuring,” he said.
A source familiar with the firm’s management decisions said the departures have been driven by several factors, including a perceived lack of commitment from firm leaders to growing in California, the loss of several high-profile partners in other offices and sliding financial performance.
Revenue and profit-per-partner at the firm decreased in 2011 and 2012, according to American Lawyer magazine. Its revenue dropped 8 percent to $400 million and profit dropped nearly 10 percent to $1.35 million during that span.
Sandy Lechtick, president of legal search firm Esquire Inc. in Woodland Hills, said Kaye had struggled to grow in Los Angeles prior to the departures. Most of the high-end transactional work in the region goes to large local players, leaving middle-market transactional work that doesn’t pay the high rates that Kaye wants.
“It’s always been very difficult for a lot of the East Coast firms to come into Los Angeles and charge the same rates,” he said.
Another challenge is that the talent pool for corporate attorneys in Los Angeles is shallower than in other cities, he said.
Kaye’s losses are now a gain for others. Chicago’s Jenner opened in Los Angeles in 2009 and has been slow to add corporate capabilities. The addition of Stromberg gives the office its second corporate partner and ups the attorney head count to 37 from two in 2009. The office is also looking to add attorneys specializing in entertainment industry litigation, patent litigation and white-collar defense, said office Managing Partner Rick Richmond.
“We very much wanted to develop a corporate practice, but it’s very challenging to do in the Los Angeles market,” he said. “It’s not New York or Boston and not even San Francisco, frankly. You have to be careful about the kind of people you hire, the kind of clients you go after and the kind of work you try to do. We think Tom is a perfect pick in every way.”
Solar-Powered Move
Another East Coast firm that has been slow to build out its corporate practice in Los Angeles is Philadelphia’s Dechert. Firm leaders hope the recent addition of Lloyd J. MacNeil as a partner in the firm’s corporate practice will spur further growth.
The 900-plus attorney firm opened an L.A. outpost in 2011 with a four-partner litigation group. But growth has not met expectations, in part because the trial lawyers who run the office have been busy with litigation outside of California, said Chief Executive Daniel O’Donnell. Dechert now has 11 attorneys in Los Angeles; firm leaders would like to see that grow to about 35.
“It’s not at the size that we had hoped,” he said. “But it’s very focused on litigation and that practice has been extremely successful for us.”
MacNeil specializes in financing for energy and infrastructure projects and was previously at Akin Gump Strauss Hauer & Feld. He said that he came to Dechert because an attorney there reached out for help with financing work on a roughly $1.2 billion solar project in Texas planned by a corporate client in South Korea. It was too good to pass up, as there are fewer new renewable energy projects than before because federal tax credits are set to expire by 2016.
“(The project) is going to be a series of pretty good challenges for the next two and a half years,” he said, “and those types of projects are few and far between.”
Staff reporter Alfred Lee can be reached at [email protected] or (323) 549-5225, ext. 221.
