The BLT: The Blog of Legal Times

Hogan and Lovells Partners Approve Merger

BY JEFF JEFFREY AND CARRIE LEVINE

Partners at Hogan & Hartson and Lovells signed off on their megamerger in separate votes that ended at midnight on Monday. The move is one of the last big hurdles before the two firms officially set up shop, which is planned for May 1.

In spite of the vote, the two firms still have several issues to work out, including client conflicts, leadership details, and overlapping offices and practice areas. If successful, the merged firm will be called Hogan Lovells and with about 2,500 lawyers and roughly $1.9 billion in revenue will be just over the size of Skadden, Arps, Slate, Meagher & Flom and Jones Day.

“We’re really excited. It’s not often that I get to drink Dom Pérignon at 7:30 in the morning, but this is a great day for us,” Hogan’s chairman J. Warren Gorrell Jr. said today. “There is a lot of work ahead of us to put it together and make it work, but everybody at both firms is up for it.” Gorrell would not say how many votes there were for or against the deal, but said the vote showed “overwhelming support.”

Voting on Merger Has Begun at Hogan & Hartson and Lovells

The partnerships of Hogan & Hartson and Lovells have begun voting on whether to approve a combination of the two firms, according to Legal Week. The voting kicked off last week.

Legal Week reports that Lovells needs approval from 75 percent of the partnership in order for the deal to move forward. Voting at Lovells closes on Tuesday, Dec. 15.

Hogan needs two-thirds of its partners to approve the merger for it to go through. The U.S. firm will vote on the merger on Monday, Dec. 14, when the firm has scheduled a meeting to hold an official vote. Hogan chairman J. Warren Gorrell Jr. declined to comment on the vote.

The merger of equals, which would be called Hogan Lovells, would have headquarters in both Washington and London. As previously reported, Hogan Lovells would maintain separate profit pools with a combined pool for bonuses. The combined firm would align compensation structures on both sides of the Atlantic.

See the full Legal Week story here.

Details Leak on Hogan Lovells Structure

Updated (6:08 p.m.)

We already knew Hogan & Hartson and Lovells intended to merge their names into Hogan Lovells if the proposed combination is approved by the two firms' partnerships, but Legal Week has more details on the proposed merger. According to Legal Week, Hogan Lovells would have two partnerships and two profit pools.

Lovells' U.S.-based partners would join Hogan's partnership, and Lovells would take on Hogan's international partners.

Hogan Lovells would, however, bring the compensation structures of the two firms into closer alignment, with Lovells implementing a structure similar to Hogan's merit-based model for partner pay. Legal Week reports that 85 percent of Lovells’ profits for equity partners would be allocated on a point-based system.

The changes to Lovells’ pay structure, Legal Week reports, would mark the latest step taken by the firm to move away from the lockstep approach traditionally used by U.K.-based firms. Lovells has already made significant changes to its lockstep structure, rewarding revenue contributions over seniority. There are also expected to be some minor adjustments to Hogan's current pay model.

Read the full Legal Week story here.

And It Shall Be Called. . .

Legal Week is reporting that if approved by the partnerships at both firms, the firm produced by the union of Hogan & Hartson and Lovells will be called Hogan Lovells. The combined firm will drop the name of the late Nelson Hartson, a former IRS attorney who joined the firm founded by Frank Hogan in 1925.

A partner vote at both firms is expected to be held next month.

Legal Week also reports that Hogan Lovells will have two operational centers in London and Washington. Lovells managing partner David Harris and Hogan chairman J. Warren Gorrell Jr. will lead the combined firm. Lovells will also implement performance-related bonus for Lovells partners -- a move that has been under consideration since before the merger talks.

The Am Law Daily has more on the history of Hogan & Hartson here.

Hogan, Lovells Management Recommend Merger

The management of Washington-based Hogan & Hartson and London-based Lovells have unanimously recommended proceeding with a merger, according to a statement released early Thursday. The AmLaw Daily has more here on what's next in the merger process.

The firms' confirmation of the planned merger comes three weeks after talks were first reported by London's LegalWeek and The National Law Journal.

Crowell's Gardiner Won't Comment on Merger Buzz

Is Crowell & Moring in merger talks? The National Law Journal's sibling publication, The Recorder, this morning said there are reports that the Washington-based firm is in talks with San Francisco's Folger Levin & Kahn.

In an interview with an NLJ reporter, Crowell & Moring Chairman Kent Gardiner said he wouldn't confirm or deny the reports. "I unfortunately can’t comment on that," he said.

Folger's Web site lists 56 attorneys, and the firm has offices in both San Francisco and Los Angeles. Folger's Web site has a long list of clients, including Citibank, Johnson & Johnson, and Hilton Hotels. The Recorder reports the two firms have some overlapping practice areas, including complex litigation, antitrust, corporate matters and IP.

Michael Goecke, a senior associate at Lerch, Early & Brewer who left Crowell in May, said he had no knowledge of any merger discussions between Crowell and Folger, but they would not be out of step with the firm's growth strategy.

"When I was there, the message from management was that there would be no major merger with a larger or equal sized firm," Goecke said. "But they were willing to acquire a smaller firm that bring complementary practices to the firm."

Goecke said Crowell was "always looking for opportunities that made sense," noting the firm's 2006 acquisition of King Pagano Harrison, a health care and labor and employment boutique. The KPH acquisition added 20 lawyers, including nine partners, to Crowell's offices in New York and Washington.

Crowell has made several other smaller acquisitions. In 2007, the firm raided Buchanan Ingersoll & Rooney to add an eight-lawyer financial institutions practice to its New York office. In 2008, Crowell opened a Los Angeles office with the acquisition of seven lawyers from Lightfoot Vandevelde Sadowsky Crouchley Rutherford & Levine.

- Jeff Jeffrey contributed to this blog post.

Georgetown Taps Former Gibson Dunn Managing Partner for General Counsel

Stephanie Tsacoumis, who recently finished a six-year term as co-managing partner of Gibson, Dunn & Crutcher's Washington office, has left the firm to become Georgetown University's general counsel. Tsacoumis will start work in her new post on Nov. 2.

Tsacoumis succeeds Jane Genster, a former Williams & Connolly counsel who is stepping down to become senior counselor to Georgetown President John DeGioia. Genster has served as the university’s top lawyer since 2000.

Tsacoumis had been a partner at Gibson Dunn since 1996, focusing on transactional and advisory matters for public and private entities. She has also advised clients on mergers, acquisitions and corporate finance issues.

Most recently, Tsacoumis (College of William and Mary, UVA Law) helped advise Watson Wyatt Worldwide, a public human resources consultancy, on the company's merger with its privately held rival Towers, Perrin, Forster & Crosby. The companies valued the all-stock transaction at $3.5 billion.

Tsacoumis has also worked in the corporate practices of Morrison & Foerster and McKenna, Conner & Cuneo, now McKenna Long & Aldridge. She has served as an adjunct professor of law in the L.L.M. program at Georgetown University Law Center since 2001.

At Georgetown, Tsacoumis will advise the university’s president, its governing boards, and its senior academic and administrative officers. She will provide counsel on the legal implications of university policies.

“I am pleased to welcome Stephanie to the Georgetown community as the next phase in her distinguished legal career,” said DeGioia in a statement.

Former Nixon Peabody Lawyer Faces Criminal Charges for Alleged Insider Trading

Federal prosecutors in Washington have accused former Nixon Peabody associate Melissa Mahler, who was hit with civil insider trading charges by the Securities and Exchange Commission last month, of making false statements to SEC investigators.

As The National Law Journal previously reported here, on July 28, 2004 Mahler, then a lawyer for Nixon Peabody in Rochester, N.Y., was asked by client Roger Tichenor, the chief executive officer of Teleplus Consumer Services Inc., to draft a letter of intent involving a potential merger with Rooms.com, an online travel company. Less than an hour later, Mahler was allegedly on the phone with her Florida-based broker, instructing him to buy 10,000 shares of Teleplus for $1,200. Teleplus was trading at 12 cents a share.

When the deal between Teleplus and Rooms.com was announced on July 30, 2004, Mahler allegedly called her broker and instructed him to sell the 10,000 shares of Teleplus for a profit of $5,800. Rooms.com later terminated the letter of intent.

Mahler resigned from Nixon Peabody in January 2005. She is now a solo practitioner in New York.

The federal charges against Mahler, filed in the U.S. District Court for the District of Columbia yesterday, offer a few more details about the SEC’s investigation. In November 2004, the charges say, the SEC was investigating Mahler for possible insider trading in connection with her purchase and sale of Teleplus stock. The charges do not say how the SEC was alerted to the allegedly illegal activity.

On Nov. 29, 2004, two SEC lawyers interviewed Mahler over the telephone and asked her about the Teleplus trade. In that interview, Mahler allegedly denied that she placed the order and said she only found out about the trade when she received her account statement from her broker. She also said her husband had the authority to make purchases on her account.

The charges say that Mahler knew about the trade, having allegedly made it herself. The charges also say that her husband does not have the authority to make trades on her brokerage account.

The U.S. Attorney’s Office alleges one count of making false statements. Making false statements to a federal investigator is a felony that carries a maximum five-year prison sentence.

Assistant U.S. attorneys Michael Atkinson and Vasu Muthyala and special assistant U.S. attorney for the Fraud and Public Corruption Section Keshia West filed the charges.

Mahler is being represented by Patton Boggs partners Jamie Gardner and Robert Luskin. Gardner said in an interview, "She’s looking forward to resolving the matter and moving on with her life.”

Mahler, who is licensed to practice in New York, does not currently have any disciplinary actions filed against her, according to records filed with the New York State court system. She could not be reached for comment

The Morning Wrap

Mega Merger Talks: Century-old Washington stalwart Hogan & Hartson is in merger talks with London-based Lovells, The National Law Journal reports. Hogan's chairman, J. Warren Gorrell Jr., told NLJ the firm needs to "build critical mass" in certain markets by adding more lawyers who can handle complicated matters for multinational corporations. Click here for an analysis of the potential merger. The BLT reported on reaction to the news here.

Outside Counsel Spending Falls: A new study out by the legal consulting shop BTI Consulting Group projects a 4.3 percent slide in corporate spending on outside counsel next year, The National Law Journal reports. Outside counsel spending dropped from an average of $20.8 million in 2008 to $18.5 million this year and is projected to dip to $17.7 million in 2010, according to the study.

Fee Award Upheld: The U.S. Court of Appeals for the 3rd Circuit has upheld the $567 million fee award in the fen-phen diet-drug litigation. The Legal Intelligencer story is here. "The amount of the award, though extraordinarily large, is not excessive in this extraordinary case," Judge Kent Jordan wrote in the opinion. Michael Fishbein of Levin Fishbein Sedran & Berman argued in defense of the award to the 72 firms that logged more than 350,000 hours on the case.

Patriot Act Extension: The Senate Judiciary Committee has sent to the floor a bill that would renew provisions of the USA Patriot Act that administration officials say are critical in terrorism investigations, The Washington Post reports. Three provisions of the Patriot Act are set to expire Dec. 31.

On the Exploitation of Mother: The New York Times serves up this analysis of the conviction of Anthony Marshall, son of the late philanthropist Brooke Astor. Marshall, 85, was charged with defrauding his mother and stealing tens of millions of dollars from her as she suffered from Alzheimer’s disease. The jury found Francis Morrissey Jr., a lawyer who did estate planning for Brooke Astor, guilty of fraud and conspiracy charges. Click here for The New York Law Journal write-up.

Reaction to Merger Talks Between Hogan and Lovells

If it were to go through, a merger between Hogan & Hartson and London's Lovells would instantly change the international legal landscape.

The combined firm and its more than 2,500 lawyers worldwide would bring in about $1.9 billion annually and would become one of the 10 largest firms in the world.

But the reaction to a union of two midlevel international players is mixed.

Eric Bernthal, managing partner of Latham & Watkins’ Washington office, said the combination of Hogan and Lovells would have little impact on the Washington legal scene.

"Washington is filled with all kinds of firms. We have a lot of firms that originated in D.C. We have a lot that came from outside Washington. And we've even started to get a presence of Magic Circle firms, so I don't see this affecting Washington all that much," Bernthal said.

Bernthal said the news that Hogan was talking with Lovells, which has a strong presence across Europe did not come as a surprise. "Hogan has had an interest in Europe for some time now. It's not surprising that the two firms would see mutual benefits," he said.

W. Michael House, director of Hogan's legislative group, said the firm found out about the discussions today, but some partners have known about them for "a while." He said he did not know enough about the details of the discussions to comment further.

Law firm consultant Peter Zeughauser, who said it is his policy not to confirm whether or not he is working on a specific deal, said a host of issues make transcontinental deals difficult to pull off, pointing to questions of how to integrate accounting and compensation systems.

“These deals are really tough to put together and this would be a deal along those lines of that scale,” he said.

That said, Zeughauser said he believes the legal scene will eventually be dominated by a small number of global law firms. “If you subscribe to that point of view, the next piece is that it is more time consuming and more expensive to get it done one brick at a time or through small acquisitions and so you need to do significant combinations,” he said.