“Six Lawyers Switched Firms and Big Law Will Never Be the Same” —

• “At the Jean-Georges restaurant Nougatine near New York’s Central Park, Wachtell co-chair William Savitt received an offer in late May that would turn the legal world on its head. Savitt met with a Gibson Dunn partner, who dangled before him the once-unthinkable prospect of leaving Wachtell—the Wall Street firm where the elite corporate litigator had worked for two decades—in favor of a global juggernaut with some 2,200 lawyers and more than 20 offices around the world.”
• “‘Wouldn’t it be fun to practice law together? Here, the sky’s the limit for you,’ Orin Snyder, a litigator at Gibson Dunn who represents stars such as LeBron James, Bob Dylan and Lady Gaga, said over breakfast. It wasn’t just fun Snyder offered—or even a multimillion-dollar raise that would bring Savitt’s compensation to at least $20 million a year.”It was an offer of scale—power at the kind of gigantic law practice that is increasingly the winning ticket in the frenzied law firm talent wars, where rainmakers play high-stakes musical chairs, lured by annual pay packages that rival those of NBA stars.”
• “The move punctured Wachtell’s invulnerable image, and it cuts to the debate roiling the legal industry about what law firms will look like in the future.”
• “When Savitt informed Wachtell leadership that he and five other partners would be leaving for Gibson Dunn, people familiar with the conversations said leaders made emotional pleas. Firm leaders say they were disappointed that a top partner negotiated a deal to leave without discussion. “
• “Wachtell, which has about 80 partners, has lost some 16 partners since last year. Some of the departures went to work in-house or retired. The firm also hired two partners, one from Paul Weiss and the other from Sullivan & Cromwell.”
• “The news set off a feeding frenzy across the top echelons of corporate law, with rival firms reaching out to Wachtell lawyers who now seem poachable, and partners at the elite firm eyeing the exits and calling competitors, according to people familiar with the matter.”
• “To recruit a Wachtell co-chair ‘would have been absurd five years ago,’ said Barbara Becker, the chair of Gibson Dunn, which did just that. As one lawyer put it, the exodus prompted the question: ‘What is Wachtell?'”
• “Some of the old-guard firms have already shuttered or been forced to merge, including Shearman & Sterling and Cadwalader, New York City’s oldest firm at the time, which suffered a wave of departures before folding into a much larger rival.”
• “Others, such as Davis Polk, have pursued rapid growth. Two firms at the top of the prestige pyramid, Cravath and Wachtell, are among the few that still hew to a more traditional model.”
• “A new breed of mega-firms now dominates the industry. These firms, with roots in places like Chicago and Los Angeles, include Gibson Dunn, Kirkland & Ellis and Latham & Watkins. They provide one-stop services to banks, hedge funds and other large financial clients, raking in as much as $10 billion a year.”
• “‘You can be a predator one day, and prey the next. They all changed their compensation models and walked away from culture,’ said Thomas Reid, the chief legal officer at Comcast and former chair of Davis Polk. ‘There is a point where if it all becomes about cash, no one is safe.’ “
• “One of the biggest shifts that put Wachtell and its brethren on the back foot was a move away from the so-called lockstep model, in which partner pay is closely tied to seniority. Firms that abandoned that model were able to lure stars with ever-bigger pay packages, while the few holdouts didn’t have that flexibility. There are now huge disparities in what firms pay their top earners: At some, they command as much as $35 million, whereas at others the ceiling is $7 million.”
• “‘The model of law firms compensating people based on how many years since they graduated law school, rather than their contribution to the enterprise, is not sustainable in a capitalist society,’ Kirkland’s chair Jon Ballis said of the lockstep model.”

“Should Wachtell Litigators Launch Their Own Boutique Firm?” —

• “Last month, star litigator William Savitt left Wachtell Lipton, where he had co-chaired both the executive committee and litigation department, and joined Gibson Dunn. Five other litigation partners moved with him, reducing Wachtell’s litigation partnership by more than a quarter. Today, only 17 of the firm’s 73 partners are litigators, according to its website.”
• “This made me wonder: With so few litigation partners left, should Wachtell just spin off its litigation department? Put another way, should Wachtell’s remaining litigators leave to launch their own boutique?”
• “The idea of firms parting ways with particular practices, such as their patent prosecution or trusts and estates groups, isn’t new. These splits tend to involve practices that are relatively less lucrative or no longer core to a firm’s identity. This is arguably the case with litigation at Wachtell — ‘first and foremost a transactional platform,’ as Rose Corbett, a managing director at search firm Macrae, put it.”
• “In some instances, firm leaders pressure partners in the disfavored group to depart; in others, the lawyers leave of their own free will. And some situations lie somewhere in between: The partners depart on their own, but perhaps because they no longer felt as welcome as they used to be at the firm.”
• “M&A was, and still is, the primary driver of Wachtell’s profitability — which is why I suspect that spinning off litigation would actually increase the firm’s already astounding $12 million in profits per equity partner. It would also allow the firm to focus even more on its corporate practice, in an increasingly competitive market for deal work.”
• “Wachtell would occasionally need litigation support for its transactions, such as defending deals in Delaware Chancery Court. In these situations, the Wachtell dealmakers could simply work with their former partners at the litigation spinoff (just as the litigators who left Paul Weiss to launch Dunn Isaacson Rhee continue to work as co-counsel with their former firm).”
• “Having their own firm could also benefit the former Wachtell litigators. First, they’d no longer feel like they’re playing second fiddle. Lawyers are highly status-conscious, and I can’t help thinking that at least some of the litigators who have left Big Law to launch boutiques wanted to step out of the shadow of their corporate counterparts.”
• “Second, the ex-Wachtell litigators could accept a broader range of cases and clients. They would no longer be reliant upon their corporate colleagues for much of their work, constrained by the client conflicts of a large transactional practice, or pressured to maintain profitability commensurate with a market-leading M&A practice. Indeed, boutique founders have cited fewer conflicts and greater rate flexibility as virtues of their model.”
• “Even Wachtell’s clients could benefit. Imagine a situation where a transaction handled by the firm winds up in litigation. Today, that deal would likely be defended by Wachtell litigators, and that’s usually fine.”
• “But as a matter of legal ethics, occasionally a client’s interests exist in tension with the firm’s interests — such as situations where the adequacy of the firm’s transactional advice is at issue. In those cases, clients of a post-spinoff Wachtell would need to retain an independent, entirely conflict-free firm.”
• “Professor John Coates of Harvard Law School, a former corporate partner at Wachtell, reminded me that litigators at transaction-focused firms do much more than litigate cases in court. A key part of their work is providing ongoing advice and consultation about litigation-related issues in deals — which is far more difficult to do when the deal lawyers and litigators don’t work at the same firm.”
• “‘Even if Wachtell and the spun-off firm had a good ongoing relationship, the quality of quick advisory consults would become less reliable,’ Coates said. ‘And the need to do conflict checks and to retain a separate firm could impede even the ones that still made sense.'”
  “And what about the Wachtell litigators? They have many reasons for staying — millions of them.”
• “‘It’s an interesting idea, but I’m skeptical,’ said a former Wachtell litigator who’s now at another firm, speaking anonymously to protect ongoing business relationships. ‘While the litigators at Wachtell are absolutely top-shelf, they’re not generally used to generating their own cases. It’s hard for me to see how they suddenly start doing that, let alone doing so in a way that allows the spun-off firm to match Wachtell compensation.'”

“LGBCoin Defendant Looks To DQ Judge From Contempt Case” —

• “The defendant who lost a default judgment last week in favor of ‘Let’s Go Brandon’ meme coin investors has now asked to disqualify a Florida federal judge from his related criminal contempt case after the judge accused him of acting ‘to disparage the court.'”
• “Attorney James Koutoulas told Judge Paul G. Byron in a filing last week that a ‘judge may be entirely certain of his own fairness and still be required to step aside, because the statute protects the appearance of justice as well as its substance.'”
• “Koutoulas was named in the class action for his alleged role in creating the fraudulent ‘Let’s Go Brandon’ meme coin. Last week, Judge Byron issued an order granting the default against Koutoulas for his vexatious conduct, including willfully disobeying court orders, submitting fabricated legal authority and false discovery responses.”
• “During the case, Judge Byron said Koutoulas referred to him as an ‘Obama-appointed’ judge who ignored statements by the U.S. Securities and Exchange Commission that LGBCoin wasn’t a security.”
  “The federal court ordered Koutoulas to post a proposed class notice plan to LGBCoin’s Telegram and Discord channels, but a judge said he modified the specific language required by the court.”
  “Rather than posting the ordered notice, Judge Byron said, Koutoulas ‘tampered’ with the notice and instead framed it as a ‘legal update.'”
  “The modified statement undermined the court’s authority, attempted to persuade the class that its lawsuit is flawed and suggested that the case is overseen by a judge who is biased and politically motivated, according to Judge Byron.”
• “In his motion, Koutoulas argues that under Federal Rule of Criminal Procedure 42(a)(3), Judge Byron must be disqualified from presiding at his contempt trial or hearing, and he states that he does not consent to the judge conducting the trial or hearing. Additionally, Koutoulas argues that under 28 U.S.C. Section 455(a), Judge Byron must disqualify himself from the proceedings that remain against him and those matters should be reassigned.”
• “‘[The motion] does not accuse the court of subjective bias,’ Koutoulas wrote, later adding, ‘A judge may be entirely certain of his own fairness and still be required to step aside, because the statute protects the appearance of justice as well as its substance.'”
• “Koutoulas said the judge’s Aug. 4 order describes his conduct as ‘efforts to undermine the court’s authority’ and ‘disparage the judicial system.’ He also said the judge announced an intention to file a bar grievance against him, but he has yet to be notified about one.”
• “‘Defendant states the limits of what he knows. He has not been notified that any such grievance has been filed, and he does not assert that one has been. He relies on the announcement itself, which was made on the record and directed to him by name,’ Koutoulas said.”
• “The Aug. 4 order also responds to Koutoulas’ statement about Judge Byron being an ‘Obama-appointed’ judge with a footnote describing his government service under multiple presidents, including Ronald Reagan, Geoge H.W. Bush and George W. Bush.”
• “‘What [Koutoulas] submits is that an expanded autobiographical response, in an order, to a litigant’s description of the judge contributes to an appearance of personal involvement in the controversy, and that [Section] 455(a) exists to address appearances of that kind,’ his motion argues.”