Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. Chadbourne Partner launches $100 million class action
Efforts to improve gender equality within the legal sector were hit with a reality check this week, as Washington D.C. Litigation partner Kerrie Campbell filed a $100 million class action complaint against her employer Chadbourne & Parke on Wednesday.
The complaint, filed on behalf of current and former female Chadbourne partners since 2013, claims that the firm routinely underpays women and offers them fewer leadership opportunities in comparison to men.
A spokesman for Chadbourne has denied the gender discrimination claims.
The root of this, Campbell claims, is the five-person all-male management committee who consistently made compensation and promotion decisions that discriminated against her and other women by arbitrarily awarding male partners more points.
Last year, 11 of Chadbourne’s 18 female partners were allotted a significantly lower number of points than male colleagues, a long term trend as women were awarded up to 1,000 points in the firm’s compensation system from 2013 to 2015, whilst male partners got up to 2,250.
The firm’s culture has been further called into question by the fact that, of the 20 non-partner lawyers who left Chadbourne’s Litigation team last year, 17 of them were women.
Despite having combined experience of 27 years at two major law firms, being a partner and consumer product safety head at each, Campbell contends that the management committee assigned her 500 partnership points for the $2 million she was projected in her first year.
This was well below the 1,000-1,400 points a number of less productive male colleagues received, with the complaint stating that one male partner received 850 points despite only billing $253,000 in 2014.
Campbell also claims to have brought in more than 20 clients and $5 million in revenue in her less than three years at the firm, placing her amongst Chadbourne’s highest earners. Despite this, she contends that she received a smaller paycheck with no annual bonus that left her in the bottom third of partner pay, and that Chadbourne has underpaid her by more than $2.7 million dollars during her time there.
Upon taking her case of gender and pay discrimination to the management committee in early 2015, citing gender and pay-based discrimination, the compliant claims that management rallied against her – refusing to provide adequate staffing for her cases, manipulating her collections to undermine her origination fees and refusing to acknowledge Campbell by name in the firm’s marketing and promotional materials.
Eventually, in January 2016, Campbell was asked to leave and was told that her practice representing clients with defamation, First Amendment and consumer product safety issues was not a good fit with the firm.
The complaint further alleged that upon immediately asking her to leave, the firm slashed her pay without benefits to $180,000 – well below that of a first year associate at the firm – and withheld more than $440,000 in her capital account.
Unfortunately, Campbell’s case is not an isolated one, with Insurance partner Traci Ribeiro launching a class action suit against San Francisco-based firm Sedgwick last month.
Cases such as this do not bode well for future diversity in the profession, especially within the highest levels of law firms. In the US, women only hold 18% of big law partnerships, only rising from 16% a decade ago, with female partners routinely earning 20% less than that of their male colleagues (Female partnership numbers in the UK don’t fare much better, averaging 19% across the Top 20).
Perhaps more challenging is the fact that, despite offering an insight into closely-guarded law firm compensation, this case shows the way in which law firms ‘push out’ partners that they no longer want. In a highly competitive legal market place, law firms need to seriously rethink their culture in order to attract and retain the best talent.
For a copy of our Research article A Path to Parity: Reassessing Gender Balance within UK Law Firms please contact email@example.com
2. Digital currencies make their way into financial markets
The world of digital currencies and blockchain may be about to enter the mainstream financial market as a new digital currency is being developed by four of the largest banks.
The consortium, pioneered by UBS, consists of global banks Deutsche Bank, Santander, BNY Mellon, as well as broker ICAP, who have developed the “Utility Settlement Coin” (USC), a new digital currency that is able to use blockchain technology to clear and settle securities trades in financial markets.
There have been a number of digital and virtual currencies entering the market since their inception, the most famous being Bitcoin introduced in 2009, but the issues surrounding price volatility and lack of confidence in the decentralised system (that is where no individual party oversees the transaction) has led to a number of obstacles for growth.
(For a more in-depth explanation of blockchain technology, please see this article by the Wall Street Journal)
However, USC concentrates more on the use of blockchain technology than it does acting as a widespread currency. It will be linked to global currencies and the central bank, which will provide stability for the digital currency unlike some others which are publicly issued, such as Bitcoin. The currency will be used to speed up transaction and clearing processes as cash from a trade will be converted into utility settlement coins, to then be placed on a distributed ledger (i.e. the blockchain) and immediately exchanged for the financial securities being traded. The ledger bypasses the need for third-party verification, and enables trades to be carried out in a matter of seconds as opposed to two or three days.
They first announced the development of USC in September last year and are now planning to test it in a real market environment. The banks are hoping to launch the product in early 2018.
Regulation of fintech products such as digital currency and blockchain has been the largest question when implementing these new technologies in financial markets. Integrating digital currencies to current securities transactions may leave a number of grey areas that could cause failures if they were to be introduced too soon. Regulators need to be certain that the complex, sophisticated workings of blockchain technology will comply with rules already laid out, and if not, how regulation needs to be adapted in order to incorporate the potential risks involved.
The FCA is the leading regulator in Europe to focus on new technology and enabling start-up fintech businesses, as demonstrated by the revolutionary Project Innovate. It’s widely praised “Regulatory Sandbox”, which allows new technology and businesses to be tested in a live market under predetermined parameters, has allowed London to remain the fintech hub across Europe. It is key for the development of the banking system, which is still antiquated in its technology and speed of process that new digital currencies such as USC are allowed to develop whilst also being fit for purpose.
Financial crime is another crucial element to consider with digital currencies. Without full regulatory coverage, these currencies can become attractive for criminal activity, such as money laundering and terrorist financing. On the other hand, it has been said that the blockchain technology used to operate these currencies, if executed correctly, can in fact play a major role in the fight against financial crime. It would introduce complete transparency across all parts of a financial transaction, and in turn reduce fraud, by providing a common, visible platform for transactions.
If the Utility Settlement Coin does become an industry standard, used in transactions by all major banks and financial institutions, it could pave the way for further use of blockchain technology within financial services as well as other industry sectors generally.
Movers & Shakers of the week
Tamara Box becomes EME Managing Partner in management shake up at Reed Smith
Reed Smith has carved up Rodger Parker’s role as EMEA Managing Partner, with Tamara Box taking the reigns in Europe and the Middle East
M&S appoint new GC
Marks & Spencer’s general counsel Robert Ivens will be retiring from his role after 31 years at the company, with Verity Chase being promoted into the role
W&C hires 10 partners from HSF to launch Australian team
Eight partners from Herbert Smith Freehills’ Sydney and Melbourne offices will be moving to White & Case, along with two partners in Asia
CC hires another high profile partner in Germany
Funds partner Sonya Pauls leaves King & Wood Mallesons to join Clifford Chance’s Munich office and head up their private equity funds practice
Hogan Lovells hires innovation director
Former DLA Piper innovation director Stephen Allen will take on a new position at Hogan Lovells as head of legal services delivery, exiting DLA after one year in the role
Cadwalader builds out City offering
Bird & Bird’s co-head of dispute resolution Stephen Baker has joined Cadwalader, Wickersham & Taft to sit in their litigation & international arbitration practice
Proskauer boosts PE capability
Partner Eleanor Shanks is set to join Proskauer Rose from Dentons in London where she will add to their global corporate and M&A practice
Proskauer loses two partners to fellow US firms in London
Private equity partner James Howe will be leaving Proskauer Rose to join Gibson, Dunn & Crutcher whilst Olivier Rochman is moving to Morrison & Foerster in their global private investment funds practice
Ashurst looses four finance partners to US rivals
Paul Hastings picked up structured finance trio Michael Smith, Diala Minott and Cameron Saylor, whilst regulatory partner Nicola Higgs joins Latham & Watkins
Slater & Gordon’s former UK CEO leaves the firm amid restructuring
Former S&G UK CEO Cath Evans returned to Australia amid the firm’s restructuring and office closures in March
Office Openings & Closings