Bingham To Go Bust In Wake Of Morgan Lewis Raid
Bingham To Go Bust In Wake Of Morgan Lewis Raid
By: David Lat
226 out of the roughly 300 partners at embattled Bingham McCutchen will be joining Morgan Lewis by the end of this month. The Bingham partners will be followed to Morgan Lewis by an undetermined number of other lawyers and staff. After the dust settles, Morgan Lewis expects to be a 2,000-lawyer firm with offices in 28 cities and $2 billion in annual revenue.
So yay for Morgan Lewis, which has a history of raiding flailing firms for talent (most notably Brobeck, from which it acquired about 150 lawyers, including 50 partners). But what is the fate of Bingham? To that sad subject we now turn….
The key point to understand about what’s taking place between Bingham and Morgan Lewis is that it is not a merger. The firms had been in merger talks for months, Bingham prepared itself for a union by squaring away a messy malpractice claim, and the Bingham partnership not surprisingly voted in favor of being rescued. But in the end, Morgan Lewis opted for cherry picking over eating the whole burrito (to mix culinary metaphors). Several astute ATL readers predicted this turn of events.
Yes, MLB is picking a lot of cherries — about three-quarters of the Bingham partners — but it’s still leaving a fair amount on the tree. The passed-over Bingham partners must be feeling pretty sad, like rotten (or at least bruised) fruit. And the likely fate of Bingham won’t lift their spirits. Casey Sullivan of Reuters has this report (sub. req.):
“By the end of the month, Bingham McCutchen, a 123-year-old law firm once thriving off work like the litigation stemming from the BP Deepwater Horizon oil spill, will be no more….
When the [Morgan Lewis] deal closes, which is expected to happen in the next couple of weeks, the Bingham partnership will be dismantled, according to two sources, putting an end to Bingham’s two-decade push to transform itself from a regional Boston firm into a global one.”
Consider this an object lesson in the dangers of ambition. If Bingham hadn’t binged by gobbling up other firms, maybe it wouldn’t find itself about to enter dissolution. (On the other hand, hindsight is 20/20; defenders of Bingham’s expansionist strategy would probably argue that the firm wouldn’t have fared well by merely standing in place.)
What will happen to the Bingham partners who don’t migrate to Morgan Lewis? They will (hopefully) find homes at other firms. For example, according to Reuters, Seyfarth Shaw is hiring four litigation partners in Boston, including William Berkowitz, former co-chair of Bingham’s antitrust and trade regulation practice.
What will Morgan Lewis be picking up besides the 226 partners? The precise contours of the deal aren’t clear, but reports suggest that Morgan Lewis will assume some of Bingham’s liabilities, including certain leases for office space. Am Law reports that Morgan Lewis also might use some of Bingham’s accounts receivable and work-in-progress to pay down Bingham liabilities — but if this is really not a merger, that would have to be handled very, very carefully.
If many of the Bingham lawyers and staff find new professional homes, at Morgan Lewis or elsewhere, who is the real loser here? Perhaps Citibank, which held some of Bingham’s reported $100 million in debt, if that debt ends up not being repaid in full over the course of Bingham’s dissolution (which could take years). But according to Reuters, many Bingham partners joining Morgan Lewis will be borrowing from Citi for their capital contributions — recall that Bingham didn’t require its partners to put in capital — and some of those contributions will be used to pay down some of Bingham’s debt with Citi. Presumably bankruptcy lawyers are quite involved in this process; if Bingham ends up being insolvent, other creditors of Bingham will surely complain if Citi gets preferential treatment, especially because of a banking relationship with Morgan Lewis as a firm or individual Bingham-turned-Morgan-Lewis partners.
Many questions remain about the fate of Bingham. Will the firm wind up in bankruptcy as the dissolution process unfolds? What will happen to Bingham’s costly back-office operation in Lexington, Kentucky? What about benefits for retired Bingham employees? As one of them recently told Above the Law:
“Above the Law has been told by Bingham benefits that if the [transaction] with Morgan Lewis goes through, Bingham retirees will no longer be able to get health insurance coverage through the firm for both future retirees and current retirees. Right now open enrollment for everyone is on hold pending the merger/non-merger. This is in spite that a letter was sent to select Bingham employees a few years ago who met certain qualifications (years of service, age at that time) stating that the recipients would be able to get health insurance coverage through the firm in their retirement.”
Lat, David. “Bingham To Go Bust In Wake Of Morgan Lewis Raid.” Above the Law. Above the Law, 17 Nov. 2014. Web. 20 Nov. 2014.