Howrey VC Recounts Problems: Quick Growth, Lower Profits and Partners Who ‘Bailed on Us’
Corrected: A critical mass of Howrey lawyers has reportedly indicated an interest in joining Winston & Strawn, bringing the deal to acquire many of Howrey’s remaining lawyers closer to completion.
This past weekend was crucial, according to the Recorder’s blog Legal Pad. Citing confidential sources, the blog says Winston partners were set for a vote on the deal after a sufficient number of Howrey partners indicated they would make the move. The Lawyer, however, reported on Saturday that a Winston vote could be delayed by two weeks as the firm discusses whether to acquire the Howrey name.
The news comes just two years after Howrey’s most profitable year ever. Howrey vice chairman Sean F.X. Boland looks back on the firm’s troubles in an interview with the Washington Post. He sees problems with the firm’s quick expansion after a string of big verdicts starting in 2003. In 2008, Howrey acquired 40 construction lawyers from the disbanding Thelen law firm, even as other law firms were cutting back because of the recession.
“Howrey grew very quickly, and there is sometimes a price to pay for growth,” Boland told the Post. “In hindsight, we should have probably cut back some. Buying a construction practice in the middle of the recession, I think people could legitimately look back and criticize that. We just didn’t see how long the recession was going to last and how bad it was going to be.”
The firm’s revenues peaked at $573.2 million in 2008, the Blog of Legal Times reported last year, but $35 million of the total was from contingency fees boosted from a big $76 million verdict that year. A year later, profits per partner had dropped 35 percent to about $846,000.
In the spring of 2010, the Washington Post says, lawyers at the firm’s annual partnership meeting in Florida wanted to know how management was going to deal with the issues. The critics weren’t satisfied, though, when management offered what the unhappy lawyers considered to be minor tweaks, such as a new accounting system to track alternative fee cases.
Lawyers began to leave, including key rainmakers in European offices who left to form a new firm.
“Some people, including some fairly high-level people, sort of bailed on us when they didn’t get exactly what they wanted,” Boland told the Post. “You have to ask your partners to be patient until it pays off, and not everyone is patient enough.”
Meanwhile, as another ABAJournal.com post details, some observers are wondering how Winston could, in essence, acquire what remains of Howrey yet avoid successor liability.
ABAJournal.com: “ ‘Revolution of Rising Expectations’ Has Hurt Howrey, Where $600K PPP Was Once the Norm”
ABAJournal.com: “Recruiters ‘Attack Like Piranhas’ as Law Firms Start to Crumble”
ABAJournal.com: “Will Howrey Defections Become an ‘Avalanche’? Answer Could Come in Days”
ABAJournal.com: “Accept Winston & Strawn Offers ASAP, Howrey Chairman Reportedly Urges Colleagues”
Updated March 3 to correctly state Howrey’s 2008 gross revenue figure.