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Analysis

Sedgwick’s ‘Cautionary Tale’ For Other Firms

Law360, New York (January 22, 2018, 6:40 PM EST) -- Sedgwick LLP formally closed its main office last week, leaving behind a scattered partnership stretching from London to California, as well as lingering questions about what could have been done differently.

As former Sedgwick partners settle into new roles at both global giants and young boutiques, there is divided opinion on how much the firm’s decline can be blamed on market pressures borne by all but the biggest BigLaw firms and how much on mismanagement specific to Sedgwick. The one thing that most Sedgwick alumni can agree on is that the firm’s problems did not crop up overnight.

“What happened to Sedgwick has happened to many firms historically that have grown quickly and had trouble assimilating other offices into the firm’s main presence,” Eugene Brown, a former member of Sedgwick’s executive committee and chair of the firm’s complex litigation division, said on Thursday.

“Sedgwick was a San Francisco firm, but it had offices that were not fully assimilated, at least in my view — in New York and New Jersey and Dallas. As a result of that lack of assimilation, there may have been a lack of common culture, common goals and an understanding of where the firms are headed … and that can lead to problems.”

The lack of cohesion was not limited to offices in New York, New Jersey and Dallas — which collectively saw 40 attorneys leave the firm within days of each other in January 2017 — but was a more widespread problem, according to more than a dozen former Sedgwick attorneys and staffers who spoke to Law360 over the past several months on the condition of anonymity.

Sedgwick’s roots in California remained strong, but its connections to newer, more far-flung offices were more tenuous, former firm partners said. While the firm had grown rapidly in its last decade-and-a-half by acquiring practice groups and opening new offices in Miami, Austin, Washington, D.C., and elsewhere, many partners looking back say those efforts were undercut by a failure to properly incorporate those groups into the firm.

“The fact that you put a Sedgwick letterhead on doesn’t necessarily integrate them into the firm,” one former partner said. “You have to make a concerted effort to communicate with those offices.”

This fragmentation also emerged as a widening rift between longtime partners who had begun their practices at Sedgwick and newer additions who did not feel the same loyalty to the firm, some former partners said.

One former partner in August suggested that some of the departures in the firm’s final years were due to top producers feeling that they were not being compensated enough, which led them to explore their options.

“The people who left, by and large, were people who didn’t start their careers there,” another former partner said. “They were laterals … When you look at that, probably that’s half the problem.”

The former partners also described Sedgwick as a firm in which communication between leadership and the rest of its ranks was scarce. This was particularly apparent in the firm’s fraught final year, which was marked by rumors and reports of a potential merger or acquisition that was never consummated.

Firm leadership began investigating the possibility of a tie-up beginning in spring 2017, according to people with knowledge of the conversations. As the year wore on, a lack of transparency about both the firm’s financial state and the progress of those negotiations created deeper fissures within the firm. Multiple non-equity partners who departed cited an air of uncertainty about Sedgwick’s future as a factor in their decisions to leave.

Many of the former Sedgwick attorneys agree that these issues predated the tenure of firm chairman Michael Healy, who took over from previous chair Michael Tanenbaum in February 2015.

One former partner told Law360 in November that Healy “inherited a lot of problems and made a valiant effort to try to solve them, but was not able to.”

Tanenbaum left Sedgwick, along with five other partners, and formed litigation boutique Tanenbaum Keale LLP in January 2017. Healy joined Shook Hardy & Bacon LLP in its San Francisco office at the beginning of this year. Both former Sedgwick chairs declined to comment for this story.

As for the rest of the partnership, U.K.-based international firms Kennedys and Clyde & Co. each brought over some of the largest groups. Other teams departed for Drinker Biddle & Reath LLP in Dallas, Crowell & Moring LLP in D.C., Robinson & Cole LLP in New York, Akerman LLP, Duane Morris LLP, Hinshaw & Culbertson LLP, and Steptoe & Johnson LLP in California, and Goldberg Segalla LLP in Miami and Los Angeles, among many others.

“I’m glad that the partners have landed at really good firms,” Stephanie Sheridan, former managing partner of Sedgwick’s San Francisco office, told Law360 earlier this month. “[Sedgwick] was the only firm I had been at. I started there when I was 23. And a lot of my partners were similarly situated in that they were lifers … So it’s unfortunate.”

She continued: “When I would see other firms dissolve ... it always seemed so surprising to me. But I really thought it would never happen to us, so it’s definitely a cautionary tale.”

--Editing by Adam LoBelia.

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