From the introduction, we get some hints:

Key to success of [a large Blackstone deal, creating the world’s second largest vodka company] was White & Case’s global footprint, internal collaborations, and the ability to show what the client considered unusual behavior. Tom Lauria, the White & Case partner on the deal, was described as an “atypical” lawyer. […]

In early FT Innovative Lawyer reports, atypical behaviour meant anticipating instructions as well as being commercial and intensely committed; in effect, being in the driving seat of the car. But as the bar to entry rises, it has begun to mean having a key role in designing that car. […]

Brad Karp, chairman of Paul Weiss, says, “We had another record-breaking year but we understand that we cannot be complacent in this market. The stakes are higher, the problems more intractable but the opportunities are more transformative.”

First of all, I warmly agree with Brad Karp—indeed, his words about high stakes and gnarly problems, but bringing enormous opportunities with them, succinctly capture the most important features of our landscape today. Yet I have to laugh when the most flattering thing a highly sophisticated client can say about a lawyer’s standout performance was that it was—”atypical”—presumably for that poor category of lost souls also known as lawyers.

Moving right along, we find Simpson Thacher advising Smithfield Foods (the US pork producing colossus) in its takeover by Shuanghui International of China for $4.7-billion plus assumed debt. No national security implications were anticipated. As Larry Pope, the Smithfield CEO, quipped, “We’re not exporting tanks and guns and cyber security—these are pork chops.” Not so fast. Turns out the US Treasury thought sausages were an issue of national security. I’m actually not surprised. As the FT acknowledges, this deal (which did go through) could bring Chinese flags to a small town in rural Virginia.

Next, Cravath, representing Vivendi, created an important precedent in securities litigation by rebutting a “fraud on the market” presumption, a judicially blessed theory that had dominated securities class action jurisprudence since 1987. Basically, the doctrine permits plaintiffs to achieve class action status without having to prove they made investment decisions in reliance on the defendant’s alleged misstatements.

Kudos due indeed. I’ve never been a fan of the “fraud on the market” theory, which seems to disembowel reliance, materiality, and indeed the epistemological bedrock of the very notion of fraud itself, but I’m struggling with what’s innovative about zealous advocacy for one’s client. I won’t go on in this vein.

We do come to an interesting creature distinctively different from the rest of the innovators presented by the FT, however:

Dewey & LeBoeuf continues to cast a shadow, nearly 18 months after its demise. The biggest law firm failure in history had many causes; perhaps one was its opaqueness over its financial position, not only with the outside world but also with its own partners. That it misstated its financial health to closely watched annual rankings compiled by the American Lawyer magazine was one shocking detail of the tragedy, but one that revealed a wider truth about how unaccountable firms’ financial reporting is, particularly in the US, where if figures are released at all they can consist solely of revenue and profit per partner.

In that context, K&L Gates’ decision to publish detailed annual reports of its finances to a US Securities and Exchange Commission reporting standard – from bank debt to overheads and partner capital – was groundbreaking among its peers.

While it is true that UK-headquartered firms have long published their results with a similar level of detail, particularly those that are structured as limited liability partnerships with certain reporting obligations, this culture has not permeated the US. Perhaps the bold move by K&L Gates will help change that.

When I think “innovation,” this is the kind of thing I’m thinking about. I wrote about it quite approvingly last February when it was released (“We Can Do Better”). Certainly, K&L’s move was innovative in the dictionary sense of not having been done before. But it’s also the essence of what innovation means to me: It’s a business innovation, not a legal innovation. Here’s a bit of what I had to say about it at the time:

As a securities lawyer, I’ve read my share of financial disclosure documents, but I’ve never seen one in our industry-until today, when K&L Gates released its 2012 results (the figures were unaudited on the release date, but they will be audited shortly).

When you think about it, this is a preposterous state of affairs.

  • We are the profession that excels at disclosure, but we don’t apply that liberating discipline to ourselves.
  • We are, actually, more transparent in terms of our internal compensation practices (whose business is that?), to our clients, prospective recruits (partners and associates alike) and in a weird way to ourselves, than any industry I can think of not subject to the Freedom of Information Act, yet we have no control over the message or the medium it’s delivered in.
  • We have allowed this parlous state of affair to develop while standing mutely by, assuming we had no power over what the world knows about us.
  • Meanwhile, the publishers of all this disclosure and the associated ratings, unintentionally I’m willing to grant them at first but with exhaustive knowledge of the power of their decades-long work at this point, say essentially that they’re on the path history set them on and they’re only the messenger, after all. (And did I mention they note they didn’t invent invidious envy?)

We’ve been limited to the AmLaw rankings for 25 years, a quarter of a century. Now, the trouble with ratings systems has long been known, and even popularized two years ago by Malcolm Gladwell in the pages of The New Yorker (“The Order of Things“).

And I added:

Rankings mislead, and one-dimensional rankings intrinsically mislead. (See: Gladwell, supra.)

Isn’t a list of firms by gross revenue (the venerable Fortune 500) kind of fascinating? Undoubtedly, but beyond the mere impression of one sort of relative size, what do we really learn? Nothing. For example, Wal-Mart’s gross revenue according to the 2012 Fortune 500 was $447-billion, making it #2 on the list. Exxon was #1 at $453-billion.

Think for just a second.

How different could these businesses possibly be? Wal-Mart sells at a very small retail markup stuff that somebody else made. Exxon has to find, produce, transport, refine, and transport again everything it sells, creating and maintaining in the process one of the most complex supply chains ever created, traversing some of the world’s nastiest neighborhoods, and requiring sophisticated and temperamental technology.

Calling one #1 and the other #2 is beginning to look a bit nonsensical, is it not?

But a law firm is a law firm is a law firm, right?

Not in my book.

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