In an op-ed in the May issue of The American Lawyer (on-line version here – subscription required), Peter Kalis, the chairman of K&L Gates, argues that by treating independent firms within a Swiss verein as a single law firm for purposes of the AmLaw 100 rankings, the magazine “has debased the financial results upon which its ranking rests.” As I understand it, a verein is an association of member organizations that remain separate legal entities but can operate under a common brand. The individual member firms do not share profits or losses. Kalis asserts that law firms structured as vereins “avoid financial integration and common ownership even where permitted by local law” and thus “you’re dealing with firms that wish to simulate rather than to combine as a global law firm.” Calling a number of AmLaw 100 peer firms “spin and mirrors” is pretty strong language from a BigLaw leader.
I take no sides on the issue of how to account for vereins in the AmLaw 100, nor do I claim any particular expertise in the tax, regulatory and other issues that have lead some law firms to choose the verein structure. However, I do think Kalis’ comments that “shared values, goals, and standards” are important, and that “financial integration allows all incentives to be geared toward the institutional goal of seamless client service” are worth pondering when choosing an outside firm for a project or relationship that will require multi-jurisdictional expertise and support. Seeking an understanding of how your potential BigLaw firm – whether a verein, a single partnership, or somewhere in between – structures and manages the financial incentives to provide the seamless service you require is fair game in any outside counsel selection process. If you don’t ask, you may diminish your chances of achieving the crossborder efficiency and consistency you’re seeking.
Note: my colleague Mark Brandon has also blogged on vereins, and I recommend his post for those interested in a U.K. perspective on these topics.