Meg Hogans Utterback by Rock Hall Wave

COUDERT, HELLER RISE TO SUE AGAIN

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THE $7.2 BILLION SETTLEMENT LAWYER

americanlawyer.com

FEBRUARY 2011

THE LATERAL REPORT

GOING NATIVE A growing number of Western lawyers are finding their future at Chinese law firms. PLUS: ■ ■ ■

KING & WOOD’S MEG UTTERBACK IN SHANGHAI

Ten-year low for lateral partner moves Partner compensation findings Star laterals of the year

THE

L AT E R A L REPORT

More and more, Western partners are making the once-unthinkable jump to Chinese firms. Call it the ultimate expat experience.

Mary “Meg” Utterback, then the head of Pillsbury Winthrop Shaw Pittman’s Shanghai office, had a litany of responses for clients when they asked why they should pay as much as 40 percent more to hire an international firm, like Pillsbury, for China work instead of a local one. The quality of Chinese firms could be inconsistent. They had a different conception of client service. Chinese lawyers only focused on narrow issues and didn’t think outside the box. Some were all too willing to take ethical shortcuts. “We have this international mind-set, fed by people like me at international firms, that says, ‘You really have to have a Western firm overseeing things. You’ve got to have me involved in this,’ ” Utterback says over coffee in Shanghai’s trendy French Concession neighborhood. But things are different—now that she’s at a Chinese firm herself. “The notions and concepts I had turned out to be dated by at least three years,” says Utterback, who last summer joined the Shanghai office of China’s 800-lawyer King & Wood. “I caution a lot of my friends at international firms now to be careful forming opinions until they’ve walked both sides of the street.” A growing number of her peers are willing to do exactly that. Though associates, especially those of Chinese origin, began switching sides years ago, the past several months have seen a new wave of partners and other senior lawyers making once-unthinkable moves from Western to Chinese firms. In May, Robert Lewis, Beijing managing partner for the former Lovells, left that firm to join Shanghai-based Allbright Law Offices. Around the same time, leading Beijing corporate partner Rupert Li left Clifford Chance, where he was a member of the firm’s partnership council, to join King & Wood as international managing partner [see “The New Mandarin Class,” page 60]. A month later, DLA Piper partner Ghislain de Mareuil also made a move to Allbright. In November, Jun He Law Offices recruited corporate lawyer Stephen

JUST A YEAR AGO OR SO,

F RO M T H E I N S I DE

BY ANTHONY LIN P h o t o g r a p h B y D A N I E L E M AT T I O L I

“I SAW THE WRITING ON THE WALL,” SAYS MARY “MEG” UTTERBACK, WHO MOVED FROM PILLSBURY TO KING & WOOD LAST SUMMER. “I’M A LOT BUSIER NOW THAT I’M AT A CHINESE FIRM.”

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ERIC POWELL

there were no Chinese law firms. Expat lawyers were really Wozencroft, the former co–managing partner of Arthur the only ones who could guide multinationals like The CoMarriott & Associates, a Hong Kong–based firm affiliated ca-Cola Company or General Motors Corporation into the with Dewey & LeBoeuf. Last year, Jun He also recruited China market through the country’s newly drafted foreign two counsel from Baker & McKenzie: trademark lawyer investment laws. Just a few years ago, despite practice restricPaul Schmidt in Beijing and labor and employment spetions introduced in the early 1990s, it still seemed that forcialist Jeffrey Wilson in Shanghai. In the United States, Jun eign firms would continue to dominate China practice. But, He lured James Zhu from Perkins Coie and King & Wood step by step, the relatively new Chinese firms made inroads. hired Matthew Seiden from Arnold & Porter. “Starting from 2000, I started to see a lot of the plainTheir numbers are still relatively small, but that such vanilla [foreign investment–related work] start to move,” moves are taking place at all illustrates how far leading Chinese firms have moved up the practice food chain in recent years. International firms originally poured into China—and continue to do so—largely to represent multinationals investing or operating there. But increasingly those multinationals are turning to local firms for such “inbound” China Allbright’s Robert Lewis says he used to think work. Last year Pfizer Inc. turned to King & Wood to get its $68 billion that inbound M&A was “a safe harbor for the merger with Wyeth through China’s foreign firms, something of a protected market.” new antitrust regulations. Jun He is advising The Dow Chemical CompaNot any more. ny on a $10 billion joint venture with Shenhua Group Corporation Limited, China’s largest coal mining company. For Chinese firms, bringing aboard experienced Western lawyers is a way to deepen and expand recalls Allbright’s Lewis. “By the 2005 time frame, when relations with multinationals. And for many Western lawwe were starting to see significant activity in inbound yers, moving to a local firm may represent their best chance M&A, I thought that was going to be a safe harbor for the of preserving a vibrant China practice. While their old firms foreign firms, something of a protected market. But what carefully danced around restrictions barring them from local we’ve seen over the past several years is that market has law practice, they now find a plethora of once-forbidden asalso moved to a significant degree.” Though their placesignments close at hand. Those who felt forgotten in small ment in league tables varies year to year, Chinese firms are branch offices now work in humming headquarters with frequently near the top in mergermarket’s Greater China scores of colleagues. M&A ranking by both volume and number of deals. In parBut there are new challenges, too. Routine functions like ticular, 2009 was a banner year, with Chinese firms taking marketing, training, or even billing may not be routine at four of the top six slots. all. And practice restrictions haven’t gone away completely: Now Lewis sees a lot of private equity and venture capLawyers who are not Chinese nationals, even those working ital work going to Chinese firms too. Shanghai’s Fangda at Chinese firms, cannot be admitted to the bar in China and Partners regularly represents The Carlyle Group, Bain therefore still cannot sign most documents or make court Capital LLC, The Blackstone Group, TPG Capital, and appearances. How big a professional obstacle that proves to others. “A lot of those clients are quite comfortable workbe is just one of many questions these Western lawyers will ing with local firms,” Lewis says. “The start-up tech firms face in navigating their new Chinese careers. now making acquisitions in the China area also quite willing to give consideration, if not priority, to local firms.” Despite the rise of large domestic Chinese companies as AT BASE, THERE’S A SIMPLE REASON why Western lawyers a new client base, major Chinese firms like King & Wood are joining Chinese firms. It’s where the work is. “There’s and Jun He say multinationals account for more than half definitely a large segment of the market, both among doof their revenues. mestic clients and multinationals, that has decided they Price is clearly driving a lot of the movement. Though only want to work with local firms,” says Lewis, who works the rates of domestic firms have gone up in recent years, in Allbright’s Beijing office. Although he declined to name they are still considerably lower than those of internaclients on the record, he mentions a global luxury hotel tional firms. Allbright’s Lewis estimates that his hourly rate chain, an international professional services firm, and a dropped by over 40 percent by moving to a Chinese firm. well-known American brand as recent clients—and recent Meanwhile, Chinese firms have brought on more Chinese converts to local firms. lawyers who studied at U.S. law schools and worked at interKing & Wood’s Utterback says she’s seeing the same national firms. King & Wood says a third of its 200 partners trend. “I saw the writing on the wall [with my clients],” she have previously worked at international firms—usually as says. “I’m a lot busier now that I’m at a Chinese firm.” associates—and half have earned law degrees abroad. That wasn’t always the case. When international firms Foreign firms, Lewis believes, will continue to have an like the now-defunct Coudert Brothers and Baker & Mcedge when it comes to the highest-end cross-border work. Kenzie came to China in the late 1970s and early 1980s,

“If it’s outbound, and it’s a billion-dollar deal,” he says, “you’re going to see a major international firm on that because everybody needs that comfort. But if it’s down at [the] $100 million level or below, that’s a toss-up.” EVEN WITH THE CHANGED economic realities, it still takes a particular kind of Western lawyer to join a Chinese firm. There are performance expectations, of course. “I am not just a token laowai,” says Utterback, using the Chinese term for foreigner. “ . . . King & Wood did not hire me just be-

cause I am a Westerner. Like any other firm, King & Wood brings on partners because of their overall value, including book of business.” One of Utterback’s longtime client relationships illustrates that value proposition. Dallas-based Dresser, Inc., a maker of equipment for the energy industry, has around $500,000 to $1 million a year in China-related billings. Linda Rutherford, Dresser’s general counsel, is pleased that King & Wood’s rates are lower, but adds: “We wouldn’t have [switched firms] just for a rate change.” Utterback was the real draw: With a relatively small on-the-ground presence in China, Dresser was more comfortable working with someone like Utterback, who serves as the company’s general lawyer for all China work, including licensing, investigations, and litigation. “Meg is really one of the best lawyers I’ve ever worked with,” says Rutherford. It is still not clear how Dresser’s pending acquisition by General Electric Company will affect its legal operations, Rutherford says. But GE is already a King & Wood client, and the firm— and Utterback—are working on the China antitrust filing. Most of the Western partners now joining local firms are fluent Chinese speakers with long experience in the country. (Foreign lawyers who can’t read or speak Chinese are probably not cut out for Chinese firms, says Jun He’s Wilson: “It’s simple things, like the operating system on your computer’s in Chinese, so you need to be able to read that. You don’t want to have to call someone for help every time you log into your computer.”) Allbright’s Lewis, for instance, has worked in Beijing for 14 years, both at Lovells and as Asia general counsel for telecom equipment maker Nortel Networks. Jun He’s Wilson, who spent time in China before going to law school in the United States, practiced at Taiwanese firms for almost a decade before joining Baker & McKenzie in mainland China. “For me, [moving to Jun He is] not this big sea change,” he says. But for those accustomed to experiencing China from the remove of an international law firm or a multinational corporation, a local firm can seem a bigger leap. “Before, I was knee-deep in China,” says Lewis. “Now I’m neck-deep in it.” Says Utterback of her move to King & Wood: “I did a lot of due diligence first.” Money isn’t the issue. Though associates and other junior lawyers are paid sharply less at Chinese firms than at most U.S. firms, partners can fare

The A merican Lawy e r | Fe b r ua ry 2 0 1 1

THE NEW MANDARIN CLASS When King & Wood announced last May that it had recruited Rupert Li from Clifford Chance, the news set off shock waves in the China market. His high-profile move was followed by other prominent hires at his new firm as well as at Jun He.

➜ Rupert Li

➜ Matthew Seiden

➜ Stephen Wozencroft

➜ James Zhu

❨ Moved to ❩

King & Wood

Jun He

Li, a former top corporate partner at Clifford Chance and member of that firm’s partnership council, is one of the biggest names to have made the move from a Western to Chinese firm.

Seiden, a former intellectual property partner for Arnold & Porter in Washington, D.C., last summer became the first U.S. lawyer to join King & Wood’s New York office.

Wozencroft led Hong Kong corporate practices for Denton Wilde Sapte, Barlow Lyde & Gilbert and a Hong Kong affiliate of Dewey & LeBoeuf before he joined Jun He in Hong Kong in November.

An IP specialist, Zhu was Beijing managing partner for Perkins Coie before he helped launch a Silicon Valley office for Jun He in May.

quite well. King & Wood, for instance, says it had around $200 million in revenue in 2009 and, in its highest-yielding Beijing, Shanghai, and Hong Kong offices, profits per partner comparable to those at many Am Law 100 firms. “In my experience, comp is at [the same level] or higher, or we would not move,” says Utterback. Western lawyers’ hesitancy stems more from the sort of issues that get taken for granted in large Western firms. “To have a foreign partner come in, when not all the systems and procedures are similar to where they came from, that’s difficult,” says King & Wood’s Handel Lee, who came from Vinson & Elkins in 2005. “It’s one of the reasons you haven’t seen more foreign partners make these kinds of moves until now.” Utterback says recent modernization efforts at King & Wood, including the introduction of a computerized billing system, helped put her mind at ease. “A lot of my concerns centered on things like a billing system, a conflicts check, a decent engagement letter—the mechanics of working with clients,” she says. “I had friends at local firms and, at the end of the month, they’re typing their own bills. I couldn’t work like that.” The way Chinese firms are organized can make implementation of firmwide systems difficult. Most operate as collections of rainmakers leading relatively self-contained, highly leveraged practices. Communication among these groups can be scant, and top partners are loath to pay for things that benefit the firm, rather than their own practices. “There’s much less consensus about the need to spend money on things like marketing, recruiting, training, and infrastructure,” says Lewis. He joined Allbright largely because it had ambitious plans to expand beyond its Shanghai base into Beijing. Yet the past several months have seen slower progress than expected. The firm’s gleaming new Beijing offices are still around 80 percent empty, except for Lewis and a handful of associates. “It took them four months to put me on the Web site,” Lewis says.

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He acknowledges that such issues are likely less present at the bigger Chinese firms such as King & Wood and Jun He. The former moved to a partial lockstep compensation system years ago and continues to look at ways it can create a more integrated partnership. Utterback says her fears about how Chinese firms operate have largely proved unfounded. “People told me Chinese firms don’t cross-market,” she says, “but I’ve crossmarketed more since I’ve been at King & Wood than I did in five years at international firms.” ONE OF THE ADVANTAGES that foreign firms routinely claim over Chinese firms is their greater resources and practice sophistication. But many Western lawyers who’ve crossed over say it’s just not so anymore. Utterback points out that most foreign lawyers work in relatively small branch offices, so the resources immediately available to them can actually be quite limited. Mark Schaub, one of the first Western lawyers to join King & Wood, says the feeling of being on his own in China was one reason he left the German firm now known as Taylor Wessing for King & Wood in 2000. “I was acquiring most of my clients myself, so I just felt there was a disconnect between people in Germany telling me what to do and the fact that I was doing everything myself,” says Schaub. Utterback notes that Chinese firms have a critical resource that foreign firms lack: practicing Chinese lawyers. Though foreign firms have taken advantage of a loophole that allows them to advise clients on the “Chinese legal environment,” they are still not allowed to directly employ any Chinese lawyers. Local hires must surrender their law licenses for the duration of their employment and work as “legal consultants” or paralegals. “It’s wonderful to have experienced Chinese lawyers to help me,” says Utterback. “Some of them are former judges,

so they can tell you exactly how things are going to be interpreted. I don’t know how you’d access that kind of knowledge at an international firm.” Jun He’s Wilson says that advantage is all the greater because China’s legal system is still developing. “Chinese cases aren’t reported, so when you have a colleague that’s actually argued these cases, that makes a huge difference,” he says. But Wilson still can’t go and argue that case himself. Practice restrictions still apply to foreign lawyers, so while those at Chinese firms now have coworkers free to go to court, file documents, and deal directly with regulators, they still cannot perform these tasks themselves. “It’s a hurdle,” says Utterback. “It’s hard to know right now how much of one it will be. I’ve obviously managed to get by without doing those things before.” Such restrictions were one of the reasons she gravitated more toward arbitration, where there is no clear prohibition on foreign lawyers, rather than litigation. Many of her matters involve outbound investments by Chinese companies elsewhere in Asia. “But even if [the inability to join the Chinese bar is] an impediment,” she points out, “it’s a lot bigger impediment at international firms that don’t have a bunch of active, experienced Chinese lawyers down the hall.” There will no doubt be other impediments ahead, as well as opportunities. Lawyers like Lewis and Utterback are still pioneers. Despite the recent spurt in their numbers, Western lawyers are still relative rarities at Chinese firms. Even at

King & Wood, which has most actively courted non-Chinese lawyers, Schaub counts only “four or five foreign faces.” “I think some of the Chinese lawyers are really enthusiastic about us being here, and some wonder why the firm

Western lawyers at Chinese firms still can’t go to court themselves. But now they have colleagues who can.

bothered,” he says. “Most probably don’t even know about it or think about it.” Indeed, anyone who has worked in China over the past couple of decades has become accustomed to novelty, and the tumult which often accompanies it. “I think people who are in China for a long time, they get accustomed to the chaotic environment,” says Allbright’s Lewis. “You stay for a while and you get addicted to the chaos. I guess I needed to up my dose.” E-mail: alin@alm.com.

Correction In the December 2010 issue of The American

is pleased to announce that Lawyer we erroneously ran an incorrect logo above the professional announcement for Willkie Farr & Gallagher LLP.

Keila D. Ravelo Wesley R. Powell and

Willkie Farr & Gallagher LLP announced that Keila D. Ravelo, Wesley R. Powell and Matthew S. Freimuth joined the firm’s Litigation Department and Antitrust Practice Group in the New York Office. Ms. Ravelo and Mr. Powell joined as partners and Mr. Freimuth as of counsel.

Matthew S. Freimuth have joined the firm’s Litigation Department and Antitrust Practice Group in the New York Office. Ms. Ravelo and Mr. Powell join the firm as partners and Mr. Freimuth as of counsel. New York • Washington • Paris • London • Milan • Rome • Frankfurt • Brussels in alliance with Dickson Minto W.S., London and Edinburgh