Wednesday, February 16, 2011

Smoke 'em if ya got 'em

So what's going on in Winston world?

It looks like a high percentage of Howrey's partners have accepted Winston's conditional quasi offers, particularly in the Washington and Houston offices.  It's just that we are down to less than a week for Howrey partners to make their final decisions, Howrey would like to start winding down its operations by March 1, and just about everyone outside of DC and Houston has left the fold.  Next week will be quite interesting indeed.

I recently came across a fascinating court document detailing what happened during Brobeck's final days.  This document is the report of Brobeck's bankruptcy trustee, which has some juicy details on pages 5-6 about Brobeck's rise and epic fall.  The language could just as easily apply to Howrey today.  The details might be a bit different, but the pattern is definitely the same:


In the late 1990s and early 2000s, Brobeck adopted a business plan, which required continual rapid growth. Fueled by a booming technology-sector practice, Brobeck rapidly expanded through 2000, nearly doubling the number of its attorneys in just over three years. During that period, Brobeck also opened several lavish new offices and expanded others in like manner, incurring substantial debt and excessive and expensive lease obligations.  Brobeck’s aggressive growth strategy constituted an enormous one-way bet on its continued expansion. ... In the first quarter of 2001, when the expansion had failed to materialize, Brobeck dramatically increased its bank borrowings from approximately $34 million to over $71 million. As set forth in more detail below, these factors—excessive leasehold commitments and other costs, rising debt obligations, declining revenues, and excessive distributions to partners—combined inevitably and predictably to create a death spiral from which Brobeck could not recover ... .


There is a fascinating (really!) chart detailing how Brobeck took out more and more office space measured in square feet per partner at greater and greater cost as Brobeck's collapse approached on page 7.  I think about all of Howrey's spare square footage in the Warner Theater, Houston, Irvine, Chicago, New York... .  Wow.  Those leases can kill you.

The document is definitely worth the read, and a very likely a good sneak preview of the process that Howrey's partners can expect to face.

Cheers,
Howrey Doody

16 comments:

  1. Howrey partners are going to take it up the ass, thanks to Ruyak. Hope they like it because they committed to his leadership in the last few years.

    Doesn't matter if they leave en masse; they're still on the hook.

    Yes, I'm dancing with glee because I'm losing my job thanks to those jerks.

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  2. "The Recorder reports that another Howrey IP litigator, James Batchelder in Palo Alto, is headed for Ropes & Gray, according to two lawyers familiar with the move."

    http://amlawdaily.typepad.com/amlawdaily/2011/02/howrey-jones-day.html

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  3. http://amlawdaily.typepad.com/files/bye-bye-finley-kumble.pdf

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  4. Amen to 6:14m post... this f'ing slow death is getting on my nerves, and while I am trying to leave before all hell breaks loose, it is a easier said than done.

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  5. @8:43, is any work getting done at Howrey?

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  6. ...and the sound of crickets prevailed...

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  7. That Brobeck report is amazing. By Dec. 31, 2002, Brobeck had 7,687 square feet of leased space at an annual occupancy cost of $302,340 . . . per partner.

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  8. So it's basically all of DC and Houston to Winston? Any major partners in either office choosing to go elsewhere?

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  9. All of DC or all DC partners? Are associates hosed?

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  10. Any scuttlebutt on what will become of the Northern Virginia office? Any reason that Winston would want to keep it?

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  11. I cannot imagine that NoVa will fit into the Winston & Strawn carcass picking.

    What is clear to me is that with the dwindling number of partners, Howrey's partner to leased square feet ratio is rapidly increasing at an even faster rate. Howrey has succeeded in some efforts to sublease space (a floor in Houston), failed at others (GE in DC, even more unused office space in Houston), and has a whole lot of other vacant space to wrestle with (the vacant Salt Lake City, the floor of CitiBank in Manhattan, most of Europe, and probably most of CA, including the two empty floors in Irvine, three leases in NoCal (SF, Day Casebeer's old space, East Palo Alto), and LA. And of course, NoVa.

    Even with the physical office space that might remain within Winston's control (the massive DC space, the way-too-large Houston space) seems like a bad move.

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  12. If there's a reasonable chance that Winston's carcass picking will be held to be a de facto merger (see http://abovethelaw.com/2011/02/howrey-going-to-survive-the-storm-board-the-winston-lifeboats-leaders-urge/), the downside to Winston could be huge in view of all that leased space that Winston can't use and other potential liabilities (e.g., WARN Act). What's the point of bringing in new partners (who will probably demand proper compensation for the amount of work they're bringing in) if they come as a package deal with a potentially huge liability?

    The intelligent deal would be to contractually place the downside of that risk squarely on the shoulders of the incoming ex-Howrey partners.

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  13. Feb 16, 910pm. Most of us here in DC and Houston are happily swamped with work.

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  14. There's always a lot of work involved in winding down a firm. It will be very busy until suddenly... it's not.

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  15. @ 12:45 -- and that's exactly the work that Winston wants to strip from you and dole out to its current roster of attorneys. Trust me.

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  16. @2:50 ur an idiot.

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