What's Going On At Boies Schiller Flexner?
The firm has faced significant challenges this year. But David Boies and Natasha Harrison are calm, confident, and excited about the future.
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In an extensive and wide-ranging interview yesterday, their most detailed comments to date about recent issues at BSF, David Boies and Natasha Harrison pushed back against negative narratives about the firm, which has experienced significant partner attrition in 2020.
Partners are excited about the likely election later this month of Harrison, 47, to the role of deputy chair — making her the heir apparent to Boies, 79 — after an admittedly messy and drawn-out leadership transition.
Bonuses for associates on BSF’s traditional formula compensation system will be strong this year, with some first-years earning over $100,000, some second-years earning over $200,000, and one more-senior associate earning $450,000.
Meanwhile, billable-hour requirements for associates who elected to move to a market-based bonus system have been “significantly relaxed” because of Covid.
The firm has zero debt, and its fee in one recently settled class action, if approved by the court, will exceed $100 million.
“Will Boies Schiller still be around, 24 or even 12 months from now?”
It might have been an impertinent or impolitic question on my part, especially aimed at one of the most distinguished figures in the legal profession: David Boies, one of the country’s greatest living trial lawyers. And it might have been a bit of a buzzkill, given that it was a gorgeous day in late September and we were sitting on the patio of his Georgian mansion, looking out over his 17-acre estate in Armonk, New York (and enjoying pigs in blankets, one of his favorite snacks).
But it’s a question that has been on the minds of many recently, as the law firm that Boies founded almost 25 years ago, Boies Schiller Flexner (“BSF”), has shrunk significantly amid extensive partner departures. And I figured that if anyone can handle aggressive questioning, David Boies can.
“I’m not worried about the firm not being around a year or two from now or even many years from now,” Boies said, without defensiveness or irritation. “It has too many strengths for that to happen.”
Over the past few months, I’ve been engaged in an ongoing, candid conversation with Boies about, well, everything — his life, his legal career, and his law firm. Turning 80 in March, the reflective and expansive Boies has basically taken an “ask me anything” approach — and I’ve been happy to oblige, posing rather direct questions that he hasn’t been shy about answering.
In 1997, David Boies, already famous for successfully defending IBM in antitrust litigation and CBS in a libel lawsuit from General William Westmoreland, left the legendary Cravath, Swaine & Moore to start his own firm. He was soon joined by two other leading litigators, Jonathan Schiller from Kaye Scholer and Donald Flexner from Crowell & Moring, and the firm became known as Boies Schiller & Flexner (now Boies Schiller Flexner, after the firm dropped the ampersand a few years ago).
Over the next two decades, BSF thrived. It represented big-name clients in big-ticket cases, including the federal government in antitrust litigation against Microsoft (U.S. v. Microsoft), Al Gore in the disputed 2000 election (Bush v. Gore), and same-sex couples seeking marriage rights in California (Hollingsworth v. Perry). It grew from a half-dozen lawyers working out of a loft in Armonk to more than 300 lawyers working out of 15 offices. It broke into the Am Law 100, the nation’s 100 largest law firms by revenue, in 2008. It posted revenue of $405 million in 2019, according to the American Lawyer, with enviable metrics — $1.4 million in revenue per lawyer and $3.4 million in profit per equity partner.
The past few years, however, have been challenging, for Boies personally and for BSF. For a period of about 12 months in 2017 and 2018, David Boies, for decades a media darling, went through something of an annus horribilis. In October 2017, Boies’s then-client and friend, film producer Harvey Weinstein, was exposed as a sexual predator. In May 2018, in the bestselling book Bad Blood: Secrets and Lies in a Silicon Valley Startup, John Carreyrou of the Wall Street Journal detailed the role that Boies and his colleagues played in attempting to intimidate and silence whistleblowers at Theranos, the once-celebrated blood-testing company later revealed to be a fraud.
But a period of keeping a low profile, followed by subsequent developments — some of his own making, some not — have brought Boies back into the spotlight for positive reasons. The most notable is his ongoing pro bono work on behalf of Virginia Giuffre and other women who suffered horrific sexual abuse from the late financier Jeffrey Epstein and his associates. Boies began representing Giuffre in 2014, well before the New Yorker and New York Times exposes of Harvey Weinstein, so his work with her can’t be dismissed as a public-relations stunt to atone for Weinstein.
More recently, an outbreak of (meritless) litigation surrounding the 2020 election reminded many of Boies’s ultimately unsuccessful but widely admired attempt to secure the presidency for Al Gore in Bush v. Gore. This gave Boies the chance to opine in dignified fashion about the state of American election law, for everyone from CNN to the American Lawyer.
So in terms of his personal brand, David Boies is in stable and improving condition. But his eponymous law firm is not yet out of the woods — and, quite to the contrary, many have been wondering and worrying about its future.
Since January 2019, more than 80 partners and counsel have departed from Boies Schiller Flexner. In the first eight months of 2020, 50 partners left the firm, including superstar trial lawyers Karen Dunn and Bill Isaacson, who joined Paul Weiss. Today BSF’s headcount hovers just above 200 lawyers, down about 40 percent since last year.
Yesterday brought news of another major move: the departure of Nicholas Gravante Jr., one of BSF’s two co-managing partners, who will be moving with three other partners — Philip Iovieno, Karen Dyer, and Lawrence Brandman — to Cadwalader, Wickersham & Taft. Nick Gravante’s departure is notable because, as Sara Randazzo of the WSJ noted, he has spent the past year defending the firm together with his co-managing partner, Natasha Harrison, saying that many of the departures were part of a firm restructuring, as opposed to defections by partners the firm wanted to keep.
As longtime observers of the legal world know, partner departures are sometimes the beginning of the end for a law firm. But they aren’t always the beginning of the end. I can think of several law firms that suffered massive defections but remain with us today, perhaps smaller than before, but still alive and well.
Reporters and commentators gather facts and turn them into narratives; it’s our job. But sometimes we try too hard to squeeze facts into a narrative that happens to be sexy, click-generating, or familiar, but maybe not entirely accurate. And in the case of Boies Schiller, I wonder if some of us have been trying to shoehorn the BSF story into the familiar “partner departures culminating in collapse” narrative — the Brobeck/Thelen/Heller/Howrey/Dewey tale — even if it doesn’t quite fit.
Now, if we’ve learned anything from the year 2020, it’s the truth of the old adage that it’s difficult to make predictions, especially about the future. Despite years of following the world of Biglaw obsessively, I make wrong predictions all the time. So I can’t predict what the future holds for Boies Schiller Flexner, and I’m not going to try.
But I’m not sure the haters can predict BSF’s future either. Maybe the firm isn’t long for this world — or maybe it’s going to be just fine. Before we declare Boies Schiller to be the next Dewey & LeBoeuf, let’s hear out the other side.
David Boies and Natasha Harrison, for the defense.
I spoke with David Boies and Natasha Harrison yesterday over Zoom, asking them tough questions about the future of the firm. (I initially reached out to discuss the Nick Gravante departure, which I had heard about a few days ago and hoped to break as news in these pages, but the WSJ beat me to it.)
Boies, wearing a blue and white striped Oxford shirt — Lands’ End, if I had to guess — called in from Armonk. Harrison — sporting a floral top and double-strap Apple watch, and sitting in front of a massive and magnificent fireplace — called in from London.
Exhibiting a comfortable and easy rapport with each other, the duo fielded my queries without flinching. Despite all the negative media coverage, they are keeping calm and carrying on — and seem confident in the firm’s future.
They began by walking me through leadership changes at the firm, scheduled to be voted on by the partnership at its upcoming firm meeting (typically held in Florida or the Caribbean, but this year being held virtually because of the coronavirus pandemic). These changes were underway well before Gravante’s departure — and perhaps contributed to it.
First, the firm’s Executive Committee (“ExComm”) has voted to recommend to the partnership that the 47-year-old Harrison, currently co-managing partner, be elected deputy chair — making her the heir apparent to the 79-year-old Boies, BSF’s longtime chair. This is an excellent development for the firm because it represents a clear succession plan and transition of power to the next generation, after several years of failed experiments and false starts.
“For the past few years, we have been going through the process of identifying the next leaders of the firm,” Boies explained. “Three years ago, we expanded the Executive Committee and expanded the administrative partner role. Two years ago, we set up the four-person Management Committee, which we tried out for a year and then eliminated last year. At that time, we added two new managing partners, Nick and Natasha.”
“Over the course of the last year, Natasha has really distinguished herself as a leader. We have had a number of very talented people in leadership roles in recent years. But you have to pick the best, and there was a real consensus in the Executive Committee that we should elevate Natasha to deputy chair, with the expectation that she would succeed me at some point.”
“Some of the partners who have left the firm in the past did so because they were disappointed with leadership choices or because they had a different vision for the future of the firm,” he added.
(Boies didn’t name names, but for anyone who’s curious, the members of the Executive and Management Committees from two years ago who have left or are leaving Boies Schiller are Karen Dunn and Bill Issacson, who left for Paul Weiss; Damien Marshall, who left for King & Spalding; and Nick Gravante, who’s leaving for Cadwalader.)
Second, the Executive Committee has proposed adding three new managing partners, one to replace Nick Gravante and two additional managing partners. That might seem like a lot of managing partners, when many Biglaw firms have just one. But as Boies explained, given BSF’s tradition of having firm leaders who also maintain busy practices, there’s more than enough management work to go around. In the past, different managing partners have assumed responsibility for different functions at the firm — e.g., billing, collections, personnel — and Boies expects this to continue.
Finally, the partnership must vote to fill two vacancies on the 11-member Executive Committee — vacancies created by partner departures. I asked Boies and Harrison: are more departures on the way?
Both said yes, they do expect additional departures, although not as many as this year. They believe the firm could lose a few dozen more lawyers, before stabilizing and then growing again.
“We grew a lot over the years, and we grew in a way that wasn’t always consistent with being a very elite litigation firm,” said Boies. “We took on more lawyers and cases than maybe we should have.”
Boies and Harrison reiterated the firm’s claim, disputed by some former partners, that most of the departures were part of a long-overdue restructuring, which involved easing out less-productive partners, closing unnecessary offices, and overhauling the compensation system. But Boies acknowledged that not all the partner departures were wanted by the firm, and the partners who have left have done so for a number of different reasons.
“The practice of law is very demanding, and some people we thought would work out didn’t always work out,” he said. “There were some people who are very talented lawyers but whose idea for the firm didn’t match our vision for the firm — for example, some who wanted to move away from being a litigation-only firm. There were some lawyers who had a particular case or matter that they could monetize better by going to another firm. And there were some talented lawyers who weren’t picked for leadership — and talented people who aren’t picked sometimes go somewhere else.”
(In an interview with Jenna Greene of Thomson Reuters back in September, Boies was even more pointed about the partner departures. He said the first and largest group were partners the firm “started counseling out years ago”; the second group were departures related to BSF’s “failed acquisition” of Caldwell Leslie & Proctor in 2017, “a bad fit”; and the third were partners who aspired to leadership but “were not picked to lead, and so they decided to leave.")
According to departing partners, compensation has been a major reason, perhaps the most important reason, for leaving. Boies admitted that compensation has played a role in partner attrition, but said that one reason some partners can earn more at other firms is because of factors tied to the unique culture of Boies Schiller — a culture the firm remains committed to keeping.
“The most difficult thing to do is to maintain the culture of the firm in transition,” Boies said. “This is a firm dedicated to diversity and inclusion, doing a substantial amount of pro bono work, and sharing our rewards with our associates. All of these things impact partner compensation. If you’re going to pay associates above market, which I think is the fair thing to do given how hard they work, that comes out of partner profits. The same thing is true of pro bono work. And if you stay as a litigation-only shop, you need to develop clients on your own merits, as opposed to having the benefit of getting litigation work from corporate clients.”
“All of these things impact how much partners make and how difficult their practice is. Our culture has enormous benefits, but it doesn’t come without cost. As we have gone through our transition, we not only have been trying to find the right people to lead, but we’ve also been trying to find leaders who share the commitment to our culture.”
Compensation is likely to become less of an issue driving departures going forward, Boies and Harrison believe. In September, the partnership voted overwhelmingly in favor of a new compensation system, replacing a more formula-based system with a more flexible and modern approach, based on compensation tiers or bands. The new scheme incentivizes non-billable contributions and teamwork, allows for the flexibility to reward rising stars, and makes partner pay more predictable — important at a firm that does as much contingency-fee work as BSF, since that work doesn’t always pay out or, when it does pay out, does so years later.
Harrison, who spearheaded the overhaul of the compensation system, expressed pride in how quickly the firm got it done — in less than a year, when other firms often take three to five years for the process. And she said it’s just one example of improvements the firm has made and is making, on a variety of fronts.
“We’ve achieved a huge amount in the past year,” she noted. “We accomplished the overhaul of our compensation system. We launched a strong diversity and inclusion initiative, involving both outside consultants and appointing a dedicated D&I professional. We are updating our intranet, launching a BSF academy for rising stars, and implementing a state-of-the-art financial system. Investing in technology is very important if we are going to be an agile law firm.”
The firm revamped associate as well as partner compensation this year, giving associates the option of either staying on the traditional formula-based system, which can give very rich rewards to big billers, or moving to more of a market-based system, with more predictable bonuses based on the standard Cravath/Biglaw scale.
Boies expected that many associates, asked to make the election in July, in the middle of a pandemic, would opt for the safety of the market scale. But the majority opted to stay on formula comp — and many will be glad they did, when bonuses get paid in the next week or so.
“As you’ll see in next few days, the bonuses people will get under formula comp will be considerably higher than what people are getting at other firms under the market scale,” Boies told me. “We have people in the class of 2019 making over $100,000 in bonuses, people in the class of 2018 making over $200,000, and in the higher classes, people making over $300,000 — including one associate at $450,000.”
As for the associates who chose the market-based bonus system, I raised the issue of the billable-hours requirement. Could it have been harder for some associates to meet their hours during this rather challenging year?
“The hours requirement has been significantly relaxed this year because of Covid, and the work doesn’t all have to be billable,” Harrison said. “Hours can include approved non-chargeable activities, including things that further the firm’s strategic goals, such as work on diversity initiatives and business development, including writing.”
Staying on associate compensation, I asked Boies: what about the rumor in a Law.com piece in October that the firm failed to pay raises to the associates who opted for the market system because of “cash flow issues”?
Boies dismissed the gossip as “silly.” As the firm previously explained to Above the Law, the slight delay — which affected no more than 10 associates and was quickly rectified — arose from a payroll processing problem, and “[t]he suggestion of delay caused by cash flow issues is both absurd and flat-out wrong.”
But what about BSF turning to the PPP — no, not profits per partner, but the federal government’s Payroll Protection Program? Wasn’t that a sign of financial weakness? Records released this week showed that Boies Schiller received $10 million in federal pandemic assistance loans, and it was the only firm in the Am Law 100 to avail itself of the program (although six Am Law 200 firms also took out PPP loans).
“During the pandemic, a lot of firms laid people off, especially staff,” Boies said. “We wanted to keep as many people as possible employed. Some firms reduced people’s salaries. We didn’t want to do that in a time when people were already suffering. So our view was — and is — that this situation is exactly what PPP loans were for. It would have been better if more law firms had taken PPP loans and kept more people employed and at full salary, as opposed to conducting layoffs or cutting salaries.”
Fair point; I hadn’t thought of it that way. Many of the firms that implemented Covid-19 austerity measures later reversed them — but maybe they wouldn’t have had to implement them in the first place if they had just swallowed their pride and taken PPP.
Offering more of a big-picture response to my probing questions about money matters, Boies gave me chapter and verse on BSF’s firm finances. His comprehensive comments reminded me of Peter Kalis’s epic 2012 memo smacking down similar speculation about K&L Gates, which at the time was also experiencing significant partner departures that triggered dark predictions about the firm’s future. (Eight years later, K&L Gates is still very much with us.)
“Boies Schiller is different than most firms in a number of respects,” Boies explained. “First, we have no debt — not even a revolving credit facility — and we are set up in a way that makes it almost impossible to borrow. To get a revolver would require amendment of the partnership agreement.”
Debt, of course, has played a major role in pretty much every major law firm dissolution. I’m hard-pressed to think of a law firm collapse that didn’t involve a bank calling its loans or pushing the firm into bankruptcy.
“Second, when people become equity partners, they do not have to ‘buy in’ — we have no capital contributions. The capital we do have is capital built up over the years by not distributing all of the firm’s profits. So when partners leave, they do not withdraw any capital from the firm.”
“Third, our pipeline is very full in terms of receivables. Take the Blue Cross Blue Shield case, easiest to discuss because of its public quality,” Boies said, referring to the $2.7 billion tentative settlement in a massive antitrust case that BSF filed back in 2012.
“The judge still has to approve the fee award, but the defendants have agreed to it, and the requested fee is well within the range of target fees in class actions in the Eleventh Circuit. If approved, the total fee will be $665 million. BSF was one of two co-lead counsels. You can’t tell today exactly what our fee will be, but if you look at the percentage that co-lead counsel ordinarily get, our fee will be a nine-figure fee.”
Yes, that’s right — a nine-figure fee, enough to keep the lights on at BSF for a while. Considering that the firm is about 40 percent smaller in terms of headcount compared to a year ago, but on track to receive a payout in just one litigation of more than $100 million, equal to or greater than 25 percent of last year’s revenue, BSF probably won’t close its doors anytime soon (at least not before that wire transfer comes in).
And as Boies reminded me, the Blue Cross Blue Shield case is just one example of the firm’s contingency-fee work, to which it devotes about 25 percent of its resources.
“This work is all done years before you collect anything,” he noted. “But if you’re preparing a balance sheet for the firm, you need to take into account all the money we will collect over time for cases that are still ongoing. So the stability of the firm is enhanced not only by our lack of debt, but by the fact that we have all this contingency-fee work out there.”
While on the topic of firm finances, I asked Boies: what about the so-called “royalty payments” to you and Jonathan Schiller? Former partners have complained that the two name partners get a large cut off the top of the firm’s annual revenues each year.
“This has to do with the way the compensation system was set up when we were transferring equity to new partners,” Boies explained. “The only people who have ever contributed equity to the firm are Jonathan, Don [Flexner], and myself. Over time, we transferred enormous amounts of equity to our partners pretty rapidly, without requiring capital contributions, and these so-called ‘royalty payments’ simply reflect that. Also, these payments don’t go on forever; the way the system is set up is that they will eventually come to an end.”
During the course of our call, Boies and Harrison candidly acknowledged mistakes in BSF’s past, such as expanding too much and too quickly, not starting the leadership transition earlier, and not overhauling the partner pay system sooner. These mistakes led to a messy restructuring process, extensive partner departures, and bad publicity. But the longtime chair and the presumptive deputy chair expressed the belief that Boies Schiller Flexner is now in a good place, well situated for the future.
“I just want to convey how strong the firm is,” Boies said in his closing statement. “There have been a number of people who have left who have some incentive to say something negative because we disappointed them, or they disappointed us, or both. It’s always interesting to the media to identify problems.”
(“Interesting” is perhaps a charitable way to describe our attraction as journalists to train wrecks; I feel that some writers have almost reveled in piling on to David Boies and Boies Schiller. But I guess that’s how celebrity journalism works, whether in Hollywood or in Biglaw — and I’ve contributed more than my share to it over the years. We love to build up idols, we love to take them down — and the bigger they are, the harder they fall.)
“Some of our problems have been real,” Boies admitted. “Transition is difficult. We did have a challenging period from March through September. But I am now increasingly confident that at least for the next generation, we have leaders who are committed to the culture of the firm, including our values of diversity and inclusion, pro bono work, a mix of billable-hour and contingency-fee work, and a culture of collegiality. Getting the transition right meant getting the right people to lead the firm. And we are now in a position where I believe we have those people.”
It seemed only fitting to give Natasha Harrison — the next leader of Boies Schiller Flexner, and one of the few women in a top leadership role at an Am Law 100 law firm — the last word.
“It has been a challenging year for the world, and for us,” she said. “But the DNA of the firm is unique, the infrastructure of the firm is sound, and the future of the firm is exciting. I’m privileged to be taking on this leadership role and to be taking the firm into the future.”
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