October 19, 2019

The feast or famine life of an O’Melveny partner

       When interacting with O’Melveny's partners, you might have noticed that they sell their services aggressively. Perhaps you've read news reports accusing them of doing unprincipled things for their clients. They appear to be hungry. I was recently informed of a public resource that might explain this behavior. It provides a decade of financials for a particular O’Melveny group.

       Before getting into the numbers please allow me to provide some background. As a preliminary matter, please read this prior post, which explains O’Melveny’s “eat what you kill” culture and "margin." Margin is the profit distributed to partners at the end of the year. Below you’ll see a real-world example of that margin.
 

       This number, call it margin or profit, is apparently calculated as follows. The firm first allocates expenses to a group of partners, and it then allocates revenue to that group. The difference between these two is the group's profit. Another calculation is then performed, to allocate the group's total profit among the partners in the group. 

       How are a group’s expenses and revenue calculated? It’s partly based on economics, e.g., how many hours did the attorneys in that group bill, and at what rates? That would go into the group's revenue. How much was the group’s salary, real estate, administrative and other costs? Those would go into the group’s expenses. Standard economic notions of revenue and expense.
 

       But that’s not where the calculation ends. There is a political component to it. I recall partners complaining about their profit distribution; they wondered if the firm had unfairly adjusted the numbers to reduce their profit. I don’t know if such adjustments occurred, but they might have. One can easily imagine plausible scenarios. For example, if there is an older, politically powerful partner who needs to be paid millions of dollars per year, even though he does not do much, then that money has to come from somewhere. Perhaps management could allocate additional expenses to other partners, to reduce their profit (and thus transfer that profit to the old and inactive partner). Or management could reduce the revenue allocated to other partners, which would have the same effect. Of course none of this would be wrongful, as the relevant agreements would be written in a way that allows for such adjustments. So the revenue and expense numbers below may or may not include such non-economic adjustments. Who knows.

       Any way, let’s get into the numbers (sourced from here; click the "Full accounts" documents.)



       As you can see, although the average O'Melveny partner made a reported $2.2 million in profit per partner in 2018, this is not distributed evenly. This particular group appears to earn less than the rest of the firm. So an O'Melveny partner's income varies greatly. They could make over $5 million or even $10 million per year, or they could make much less. Notice also that this group’s profits per partner fluctuates. In 2012, the number was almost seven times what it was in 2017. This might explain why they're so hungry. If they don't sell, they might not get paid. 
Brad Butwin, George Demos, O'Melveny profits per partner, careers, salary, O'Melveny equity partner requirements

September 17, 2019

Allen & Overy walks away from O'Melveny merger

       Allen & Overy and O’Melveny called off their planned merger. The deal reportedly collapsed because O'Melveny's partners wanted more money, and Allen & Overy decided to walk away. 

       Allen & Overy is known to overpay for American lawyers, as they are trying to grow their presence here. For example, a report came out five years ago claiming that they lost £250 million on their United States operations as part of this growth effort. So it's curious to see them say no. There may have been other issues.


omm, omelveny, mergers and acquisitions

September 1, 2019

O'Melveny's revenue-obsessed lawyers might not give the best advice

       The judge ruled against Johnson & Johnson and O'Melveny in the Oklahoma opioid trial. The decision received quite a bit of press, and it might have permanently tarnished Johnson & Johnson's reputation. Yet in all of the analysis, no one discussed the law firm economics aspect of the ruling -- i.e., that O'Melveny might view it as a flow of funds down a revenue "pipeline." 

       Not all law firms are the same, and not all lawyers give the same advice. I never heard of Johnson & Johnson during my time at O'Melveny and certainly don't know what O'Melveny is telling them. But based on O'Melveny's rapacious culture -- I do wonder if their advice is designed to drag the case out, to maximize its partners profits.

       If O'Melveny is doing that, it may have exacerbated the damage to their client's reputation. The opioid crisis isn't just another case. It could kill more Americans than World War II. In terms of public relations, there is a big difference between what the two other law firms did for their clients, Purdue and Teva, and what happened here. Those other firms negotiated deals to quickly get aid to the victims. Here, the case went to trial. And although I haven't looked into the factual and legal issues, and only watched a small part of the trial, the video clips of testimony that I saw seemed damning, and so did the front-page articles.

       Beyond damaging their client's reputation, dragging this matter out could kill people. Just yesterday, an autopsy revealed that it was opioids that killed a star Angels pitcher. This happens every hour, and people will likely die because -- unlike the Purdue and Teva settlements -- the life-saving abatement funds ordered by the Oklahoma judge will not be paid until all of O'Melveny's appeals are complete. 

       And of course there is the direct cost. Those other two settled for a combined $355 million, whereas the judgment against Johnson & Johnson was for $572 million, not to mention the higher legal fees. 

       At the end of the day, both Johnson & Johnson and the victims may be harmed by extensive litigation, with the only winners being O'Melveny's partners.

       In closing, I want to re-emphasize that I'm not accusing O'Melveny of giving their client bad advice to drag this matter out for profit. I don't know what they told them, and I'm far from an expert on the facts and law of this case. Rather, the point of this post is to make readers aware of the incentives that might guide their advice, and the possibility of perverse outcomes.

       [Addendum: Here is O'Melveny's chair, Brad Butwin, boasting about the money his firm made on the Oklahoma opioid trial, as well as the money he expects to make on future opioid trials.]

       [Second addendum: The Oklahoma Supreme Court ruled in favor of Johnson & Johnson in the appeal. See this follow-up post.]
Johnson & Johnson, Michael Ullmann Executive Vice President and General Counsel, J&J, Janssen Pharmaceutica, opioid, opiate lawsuit, Charles Lifland, Richard Goetz, Sabrina Strong, Steve Brody, Michael Yoder, O'Melveny

August 11, 2019

Subjective, false and misleading

       Last week, legal reporters covered an O'Melveny employee's attempt to remove information from Wikipedia. 

       A Wikipedia article stated that O'Melveny "supported" the Trump administration by "defend[ing] Donald Trump against a lawsuit over Trump University, . . . vett[ing] the president's nominees, . . . represent[ing] the Trump inaugural committee when it was investigated, . . . [and] represent[ing] President Trump's commerce secretary, Wilbur Ross, over allegations of conflicted investments."

       According to Merriam Webster, this seems like a truthful statement. But after Mr. Trump was roundly criticized over chants of "send her back" -- an O'Melveny employee said the above quote was "subjective, false and misleading" and demanded its removal from Wikipedia. They also claimed that the vetting was performed by "an ex-partner . . . independent of his relationship to O'Melveny." In reality, an O'Melveny partner used a team of O'Melveny attorneys to perform the vetting. This is all public information.

       Any way, this is a really insignificant story relative to the others on this blog. A lot of victims would be in a better place if all O'Melveny did was edit Wikipedia. But I'll include it, since the purpose of this blog is to use news stories to warn people about what they might expect from O'Melveny, and this is a small example. Whatever your political views, please be careful about believing the things O'Melveny says.


July 24, 2019

Did O'Melveny ruin Vault's honor system?

       The career advice website Vault released its "best firm to work for" and "best firm for diversity" rankings. These are released each year and, as I explained in a prior post, they rely on the honor system. A firm's score is based on the opinions of the firm's own lawyers, and only the firm's lawyers. The idea is that if asked about their firm's diversity or quality of life -- lawyers would be conscientious, thoughtful and ethical enough to answer honestly.

       The problem with this approach is that O'Melveny would pressure its attorneys to give positive reviews -- so that it could receive a high ranking. Pressure works. Pressure was reportedly how Trump University achieved a 98% student approval rating, and I suspect it's how authoritarian regimes achieve curious 100% approval ratings. (For comparison, O'Melveny's approval rating was 99.5%. Remember, this is a firm that reportedly hired investigators to identify associates who criticized the firm online.) Beyond employer pressure, attorneys might themselves choose to lie, especially if they're part of an unethical and rankings-obsessed culture. Vault knows how unreliable this approach is. That's why for its most widely-read ranking, the "Vault Law 100" ranking -- it does not allow attorneys to rank their own firm. 

       So when reading Vault's diversity and "best firm to work for" rankings, it's important to know if the respondents were being honest. In prior posts, I offered a way to do that. First, you can compare the "best firm for diversity" ranking with actual diversity data. Second, you can compare the "best firm for compensation" sub-ranking with actual compensation data. Third, you can compare the "best firm for hours" sub-ranking with actual hours data. If a firm ranks itself high on diversity, compensation, and hours -- when the objective data states otherwise -- you can conclude that the firm's attorneys were lying when they filled out the Vault survey.

       This year, O'Melveny again graded themselves at the top of the rankings, and issued a press release congratulating themselves. But this may have been for naught, because the rankings have lost some relevance. Last year, a reporter told me that she doesn't write about Vault's diversity ranking, because it's self-graded. A few weeks after this year's results came out, I did a Twitter search for the words "Vault" and "law" to see all tweets about them. I did this so that I could take a minute and reply to the tweets, to let them know about the flawed methodology. But only a handful of people mentioned the rankings in that two-week period. Almost nobody cared. Gamesmanship may have ruined what could have been a useful tool.


Firsthand, First hand, Akin Gump Strauss Hauer & Feld, Bracewell, Cahill Gordon & Reindel, Carlton Fields, Choate Hall & Stewart, Cleary Gottlieb Steen & Hamilton, Clifford Chance US, Covington & Burling, Cozen O'Connor, Crowell & Moring, Debevoise & Plimpton, Dechert, Eversheds Sutherland (US), Fenwick & West, Finnegan, Henderson, Farabow, Garrett & Dunner,, Fish & Richardson P.C., Foley Hoag, Fried, Frank, Harris, Shriver & Jacobson, Gibbons P.C., Gibson, Dunn & Crutcher, Goodwin Procter, Haynes and Boone,, Jackson Walker, Kelley Drye & Warren, Kirkland & Ellis, Kramer Levin Naftalis & Frankel, Latham & Watkins, McDermott Will & Emery, Milbank, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Morgan, Lewis & Bockius, Morrison & Foerster, Munger, Tolles & Olson, Orrick, Herrington & Sutcliffe, Paul Hastings, Perkins Coie, Proskauer Rose, Ropes & Gray, Schiff Hardin, Sheppard, Mullin, Richter & Hampton, Sidley Austin, Simpson Thacher & Bartlett, Thompson & Knight, Vinson & Elkins, Weil, Gotshal & Manges, White & Case, Williams & Connolly, Willkie Farr & Gallagher, WilmerHale, Vault most prestigious law firms, winter bonus, annual bonus, bonus news

July 3, 2019

O'Melveny's opioid "pipeline"

       The first in a series of opioid trials is being televised. (And for good reason. An article suggests that hundreds of thousands of people might have died because judges sealed evidence of pharmaceutical companies' wrongdoing.) The plaintiff in this trial is the State of Oklahoma, and they seek funds to mitigate and abate the crisis. The situation is dire, as one study estimates that opioids could kill half a million Americans in the next decade. 

       As I predicted, O'Melveny and their local counsel are the only attorneys billing hours to fight the state, as the other law firms negotiated settlements for their clients (Purdue and Teva.) One can only imagine how big O'Melveny's opioid pipeline must be. ("Pipeline" is O'Melveny's word for the number of hours they expect to bill. Here is a quote from their chair Brad Butwin, explaining how settlements reduced their 2017 pipeline and revenue.)

       By the way, if you're wondering how the few lawyers you see in court can bill many millions of dollars' worth of hours -- remember that O'Melveny's partners profit mainly by collecting a 300% mark-up on their junior attorneys' time, and there are likely dozens of attorneys billing behind the scenes. Also, keep in mind that O'Melveny may have planned for years of revenue from these cases and appeals. For example, O'Melveny billed time on the Exxon Valdez tragedy for over a decade, from the verdict in 1994, until the last appeal fourteen years later. They know how to milk a case.

       If you want to get a sense of the trial . . . Here is a video of a state employee in tears, because an O'Melveny attorney repeatedly tries to get her to say something she finds offensive - while refusing to let her show a Johnson & Johnson chart that maps out their plan to boost opioid sales. Or here is a Johnson & Johnson employee testifying about how the company incentivized its sales force to boost opioid prescriptions. I have only watched a small bit of the trial, but I suspect it's that sort of thing all day long.

       [Addendum: Here is O'Melveny's chair, Brad Butwin, boasting about the money his firm made on the Oklahoma opioid trial, as well as the money he expects to make on future opioid trials.]

Johnson & Johnson, Michael Ullmann Executive Vice President and General Counsel, J&J, Janssen Pharmaceutica, opioid, opiate lawsuit, Charles Lifland, Richard Goetz, Sabrina Strong, Steve Brody, Michael Yoder, O'Melveny, omm, omelveny

May 4, 2019

Giving up revenue to help opioid victims

       In addition to dubious sexual abuse investigations, another of O'Melveny's revenue generators is a massive multi-state opiate addiction case. Another firm defending such cases recently started a public campaign to settle the matter, to "get the monies to the communities that need them, to the people that are addicted ... rather than to pay attorneys’ fees for years and years and years to come.

       I don't think you will ever see such a campaign by O'Melveny. In fact, O'Melveny just reportedly "trash[ed]" the victims' complaint. O'Melveny's partners valued money far too much to think of giving up revenue. They seemed like the type to milk every last dollar out of whatever they could get their hands on.

       [Addendum: Here is O'Melveny's chair, Brad Butwin, boasting about the money his firm made on the Oklahoma opioid trial, as well as the money he expects to make on future opioid trials.]
 
Johnson & Johnson, Michael Ullmann Executive Vice President and General Counsel, J&J, Janssen Pharmaceutica, opioid, opiate lawsuit, omm

March 25, 2019

An O'Melveny alumnus got arrested while negotiating an "independent investigation" retainer

       Under the "independent investigation" business model, alleged wrongdoers pay O'Melveny's white collar practice millions of dollars to investigate and judge their acts. For example, when USC was accused of mishandling sexual abuse, they hired O'Melveny to investigate and decide who was at fault. When a Lionsgate executive was accused of sexual misconduct, they hired O'Melveny to perform a "thorough and independent" investigation and decide whether there was any wrongdoing.

       One reason I started this blog, was to warn victims about these "independent" investigations. Back in 2015, I went to O'Melveny with wrongdoing. Seeing how they responded -- I realized that these were not the most ethical of people. So I created this blog, hoping that victims would find it and be informed about who they are dealing with.

       Soon, corroborating stories came out. For example, O'Melveny had witnessed Harvey Weinstein's behavior back in 2004, and did nothing (actually, they reportedly threatened the victim.) The nondisclosure and arbitration agreements that I wrote about in the original post were discovered by law students, who created a movement to ban them. Eventually, things got so heated that O'Melveny threatened to sue me for the blog -- but then a saint of a woman appeared and vindicated my original post. She revealed that the attorney whose investigation I criticized in my original post, Adam Karr, also reportedly performed a sham investigation at Lionsgate. (And this woman gave back a large seven-figure settlement to go public. Imagine that in our day and age. She went into her bank account, took out over a million dollars, and gave it back to the people who harmed her -- so that she could inform and protect others.)

       Common sense states that you can't handpick someone and pay them a fortune to investigate and judge you. On an academic level, it goes against the fundamental principle of the common law legal system. Under the adversarial system, the alleged victim and defendant are each supposed to be represented by their own attorney, who argue before an impartial judge. When O'Melveny acts as an "independent investigator" -- for example when they investigated the USC sex abuse scandal -- they are ostensibly helping the victims, but in reality they are picked and paid by the defendant. On top of that, they act as the impartial judge -- deciding who is at fault and for what -- having now assumed all three roles of the adversarial system. It's a risible fiction.

       And it begs so many questions. For example, how does one get hired as an independent investigator? How do you convince a client to pay you many millions of dollars to investigate them? Are you competing against other firms for this work? To beat those other firms, do you have to explicitly or implicitly promise an outcome, or promise to put your thumb on the scale? Imagine Robert Mueller asking Donald Trump to be hired for an "independent investigation" of Trump's campaign, and having to compete with Mr. Trump's long-time attorneys for this work, and having to get Mr. Trump to sign a retainer paying Mr. Mueller $10 million.

       Well, O'Melveny alumnus Michael Avenatti just gave us a window into one such negotiation. Mr. Avenatti wanted Nike to pay him to do an "internal investigation" of Nike. So he allegedly gave them three options: (a) Nike could pay Mr. Avenatti $15 to $25 million to perform this investigation, after which Nike could self-report the items they choose to reveal, (b) Nike could pay Mr. Avenatti and his client $22.5 million to keep everything confidential, or (c) Nike could refuse those offers, and Mr. Avenatti would reveal the wrongdoing at a press conference that would harm Nike's stock price. Unfortunately for him, the FBI was listening and arrested him shortly thereafter. (And please note I'm not accusing O'Melveny of using this particular tactic. I don't know what O'Melveny tells clients when asking to be hired as their "independent investigator.") 

       I wasn't surprised to see an O'Melveny alumnus act this way. I've personally never overvalued money (one of my first law review articles was about mammonism.) But at O'Melveny you were surrounded by ravenous money-grubbers, the sort of thing you'd see in a stereotypical boiler room or sales hustle. I don't want to repeat the prior two posts, but at O'Melveny the law was just a tool to get rich, and that's all Avenatti was trying to do.

       [Addendum: O'Melveny boasted about the money they received from USC, for their "thorough and independent" investigation of USC's alleged wrongdoing. By they way, that investigation has been criticized because it is not going as promised.]

       [Second addendum: In 2022, Rick Caruso ran for mayor of Los Angeles. Mr. Caruso was Chair of the USC Board of Trustees when the college hired O'Melveny to investigate the school's sexual abuse scandal. During that campaign, he was repeatedly grilled over his failure to keep his promise regarding O'Melveny's investigation. (Links one, two, and three.) It may have contributed to his narrow loss in that race.]
white collar, omm, Apalla Chopra, Brad Butwin

February 28, 2019

O'Melveny shows off money they made off of an alleged rape victim's misery

       Two years ago, I started this blog, partly to inform and protect others, and partly to cleanse my soul. And it worked. But it's grown much larger than I expected. It was only meant to be one post, but things keep popping up in the news.

       In December, after being troubled by her story, I wrote a post about a young woman. I haven't spoken with her and don't know her, but in reading her tweets, this is not an average woman. Despite tragedies during her childhood, like losing her father at a young age, she somehow jumped the hurdles required to get into Harvard University. Her focus was social work. There, she was allegedly raped, and it threw her life down a different path. After months of anguish, during which she sought help from the school, she eventually filed a lawsuit against the school. This suit not only sacrificed her time and energy, but it also resulted in the revocation of her dream job offer. You can read about the suit in the prior post. She is still dealing with this life-altering event. She calls herself a survivor and her tweets are sprinkled with flashbacks.

       People with poor character are corrupted by injustice, but not her. She responded by working to help others. She had never known an attorney prior to being assaulted and presumably had no interest in the law, but the injustice she felt forced her to take out loans to go to law school, with the hope of helping other victims.

       Getting back to her lawsuit . . . In my prior post I talked about the profit motive of lawyers, and whether it interferes. As an example, I wondered if O'Melveny had done a disservice to their client Harvard University, by dragging out this young woman's trauma to maximize the "margin" that O'Melveny's partners were obsessed with. I don't know the answer to that question, as I don't know anything about her case and how litigation decisions were made. It was just a thought; a speculative comment on what I saw in the firm's culture.

       Then I saw this article. The article brags about O'Melveny's income and revenue. O'Melveny's chair Brad Butwin boasts that "the firm hit on all cylinders in the last year" and earned millions of dollars of profit per partner. How did they make so much money? Part of it was from her case. O'Melveny specifically brags about the money they made off of her case.

       Maybe one day I'll write about how excited partners got when a tragic case showed up on the docket alert system, and the frantic effort to pitch for the work. Imagine thinking you've entered a dignified profession -- only to see people sitting around waiting for something awful to occur, so they can use 300% markups to get rich off the misery.