The job of unwinding Bernard L Madoff?s huge fraud and recovering money for its victims has been lucrative, reaping hundreds of millions of dollars in legal fees. Late last year, a New Jersey law firm tried to poach the legal team handling that assignment.
It was an audacious move that would have transformed the New Jersey firm, Greenbaum Rowe Smith & Davis, giving it a powerful presence in New York and the enormous stream of legal fees being generated by the Madoff litigation.
Irving H Picard, the court-appointed Madoff trustee, and his chief counsel, David Sheehan, carefully considered leaving their firm, Baker Hostetler, but decided to stay after additional resources were committed to their group.
Though the deal never materialised, the dalliance highlights the intense demand at corporate law firms for lawyers with large, established books of business. While lateral hiring is nothing new, some of the country?s biggest law firms are recruiting top producers more aggressively than ever and offering record pay packages with multiyear guarantees, legal industry specialists say.
?We have entered the era of the superstar megarainmaker,? said Peter Zeughauser of the Zeughauser Group, a law firm consultancy.
This year, DLA Piper, a giant law firm at the forefront of this trend, hired James D. Wareham, a litigator in Washington who represents big corporations including Capital One and Chevron. DLA Piper is paying him more than $5 million a year, a substantial increase from his salary at his former firm, Paul, Hastings, Janofsky & Walker.
Last month, O?Melveny & Myers lost nine corporate partners that have Apollo Global Management, the large private equity firm, as a prized client. Seven of them left for Paul, Weiss, Rifkind, Wharton & Garrison; two went to Weil Gotshal & Manges.
Latham & Watkins recently picked off seven partners from three competitors, including Proskauer Rose and WilmerHale, to establish an office in Boston, an important location for profitable legal work in the technology and life sciences industries.
The competition for top legal talent has caused the spread between the highest-paid partners and other partners at law firms to widen in recent years. The average partner at a US firm earns $640,000 a year, according to a recent compensation study by Major, Lindsey & Africa, a legal recruiting firm. Top producers at some of the biggest firms are paid as much as 10 times what an average partner at their firm earns, roughly double the gap of a decade ago, legal industry consultants say.
A number of factors are driving ever-higher compensation for top producers. A persistently weak economy continues to put pressure on the revenues of these firms, making them desperate to capture business that can generate big fees. Large corporations also continue to reduce the number of outside law firms they use, a trend that has forced firms to pay up for teams of lawyers in important practice areas where they lack a specialty.
Some corporate law firms, like Cleary Gottlieb Steen & Hamilton and Cravath Swaine & Moore, eschew the star system and maintain a more traditional partnership culture
with compensation in a more narrow range. Still, the free-agent market for rainmakers has altered the corporate law landscape.
?We?re increasingly seeing big firms pay up for large teams of lawyers built around a rainmaker, or a big client, or a complex case,? said Jeffrey A. Lowe, a managing partner at Major, Lindsey & Africa. ?You could certainly see the appeal that the Madoff trustee and his team of lawyers would have to another firm,? he added.