Law Firms

No 'Deweyesque Charade' at K&L Gates: Chairman Fights Bad Press in Impressive Memo

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K&L Gates chairman Peter Kalis is responding to negative press coverage about lawyer departures in the Chicago office with a firm-wide memo touting the firm’s financial stability and its refusal to engage in a “Deweyesque charade.”

Above the Law obtained a copy of the memo, and the blog is impressed. Its story describes the memo as a “tour de force” and admires Kalis’ use of “punchy, short sentences,” his “delicious turn of phrase” and his data-driven defense.

K&L Gates spokesperson Michael Rick confirmed that Kalis wrote the memo and sent a copy to the ABA Journal.

Kalis contrasts K&L Gates’ good financial outlook with the findings of a law firm survey by Wells Fargo, and concludes that his firm is outperforming the market.

Wells Fargo believes profits will be down in 2012, Kalis says, but K&L Gates is expecting an increase in revenues and profits per equity partner. Wells Fargo says bank lines of credit increased by 14 percent in the first six months of the year, but that’s not a problem for K&L Gates.

“At K&L Gates,” Kalis says, “we have never used a single dollar of bank line of credit and indeed have never had any bank or other third-party debt. Never. No short term debt. No long term debt. We distribute only our earned profits to our partners and do not engage in the Deweyesque charade of paying partners out of debt. Even if we were tempted, which we’re not, we have no debt out of which to pay them.”

Kalis also said the firm does not have active unfunded retirement programs, it doesn’t guarantee lateral compensation, its turnover is healthy, and its profits for the first half of the year are up by about 20 percent.

Crain’s Chicago Business reported earlier this week that K&L Gates is losing lawyers in its Chicago office, shrinking from 170 lawyers in mid-2011 to 128 today. The firm established its Chicago outpost when it acquired Bell Boyd & Lloyd in 2009, which had 218 lawyers at the time. Another article in Law 360 (sub. req.) spoke of a “alarming rate” of departures. Kalis disagreed with that assessment.

“And what of our poor and forlorn Chicago office where many of our partner departures this year did in fact occur?” Kalis writes. “Well, it’s not feeling so poor and forlorn these days. With a more efficient office headcount, its utilization is 5 points above plan and 7 points above the same period last year. Although most of the departures occurred early in the year, its billings are up over 10 percent through Aug. 31. And the corrosive effect of the disaffected has been externalized from the firm—a group that, incidentally, left behind $2.3 million in bad accounts when they departed. Chicago is doing quite well, thank you.

“I think you get the picture. There are many great law firms. But I doubt seriously that there is one more financially sound than K&L Gates or one whose partners are more committed to its mission to serve clients around the corner and around the world.”

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