Company in Trouble? Just Let Him Loose
By ADAM LIPTAK
The New York Times
6/09/02
DAVID BOIES is a more passionate litigator than softball player. His teammates at last Sunday's game at the home of Steven Brill, the journalist and entrepreneur, were therefore not surprised when he sat out an inning or two to conduct some business. Mr. Boies found a spot on the bleachers at Mr. Brill's private softball diamond in Katonah, N.Y., and listened in by cellphone on a board meeting of Adelphia Communications, the cable operator facing questions about its accounting and its dealings with its founding family.
The post- Enron world has given rise to a hot new legal specialty: the defense of companies accused of dubious accounting and worse. In addition to Adelphia, Mr. Boies and his firm now represent other big clients including Tyco International, which is being scrutinized for its complex accounting and for its financial relationship with its former chief executive; Qwest Communications International, which is facing an inquiry by the Securities and Exchange Commission into its accounting practices; and Andrew S. Fastow, the former chief financial officer of Enron.
Mr. Boies represented the government in its attempt to break up Microsoft on antitrust grounds, Napster in its losing battle with the record industry and Al Gore in the post-election litigations. There is perhaps no lawyer alive in higher demand. That he has moved into the defense of embattled corporations and executives could be a signal to law students that this field will be as hot as mergers and acquisitions law was in the late 1980's, bankruptcy was in the early 1990's and intellectual property was during the dot-com boom.
On Thursday, Mr. Boies grabbed lunch in a restaurant beneath the Manhattan offices of Tyco on West 57th Street. He was running to a meeting with the S.E.C., on behalf of Adelphia. He said these two clients would account for 80 percent of his time in June.
"My wife says I have a hard time saying no," Mr. Boies said.
A discussion of the post-Enron era in the law engaged Mr. Boies, but he was not eager to talk about his firm's representation of Mr. Fastow. He said the firm took the case as a favor to Richard B. Drubel, a partner at the firm and friend of Mr. Fastow's. "Would we have preferred that he didn't know Fastow?" Mr. Boies asked. "Of course we would have."
Mr. Fastow "doesn't fit our profile," Mr. Boies said. "He doesn't raise any important legal issue."
Did he regret, too, that the conflicts created by the representation precluded his firm from taking on more significant Enron-related work?
"No question about it," he said.
In the whole, though, Mr. Boies is relatively agnostic about the kinds of cases he will pursue.
"I was asked: Could I have conceived of myself being on the other side of Napster, Microsoft and Bush v. Gore? I said yes, yes, no."
The election still rankles, he said. "I've had a pretty strong view that people had a right to vote and have their votes counted fairly," he said.
The corporate defense cases only add to an already large workload for Mr. Boies, who still appears boyish at 61. His secretary prepares his schedule, using italics where two appointments conflict, and boldface where three overlap.
Competitors grumble that one man cannot handle as much as Mr. Boies does and do it well.
"In the ramp-up over the last few years, he's clearly taken on much too much work," said Charles S. Sims, a partner at Proskauer Rose in New York. Mr. Sims represented Reed Elsevier in a case brought by a client of Mr. Boies's, Jurisline.com, in a dispute over copying legal materials.
"In our situation, he seemed to be flying by the seat of his pants and was clearly unprepared," Mr. Sims said. "He filed his complaint evidently without having obtained the contracts from his client that would have shown that his case had no merit. When he appeared in court, he was woefully unprepared."
Mr. Boies looked confused when asked about the case and did not seem to recognize his client's name.
After a briefing, he said, "I think I probably did not spend as much time on that case as I might have."
"It is fair to say in that case I came in to do one argument," he added. "I was not involved in much of the litigation that preceded or followed it."
Jurisline.com ultimately dropped its case and agreed to accept a judgment against it in a related litigation.
Mr. Boies has a stock answer to the stock question of how he can do it all.
"It's not possible to do it without working harder than you would sometimes like to work," he said. "Choosing between some of these really exciting cases and more leisure, I choose to do the cases."
On the other hand — he flashed a raffish smile — "more leisure is a very desirable goal, and one that I don't mean to minimize," he said.
Karma M. Giulianelli, now a lawyer in Denver, saw a different side of Mr. Boies when they worked together on the Microsoft trial. She recalled preparing for the cross-examination of a witness in a Justice Department conference room while Mr. Boies sat several feet away.
"He had two phones up to his ears, literally carrying on two conversations at once," she said. "At the same time, he was listening in on a conference call. We would think he was fully engaged in those calls, and we'd say something David would find interesting, and he'd talk to us from across the room."
Mr. Brill hired Mr. Boies recently. "I used him to negotiate a very messy divorce with Primedia," Mr. Brill said, referring to his partner in a publishing venture that once included Brill's Content magazine. "It was quite complex, quite tense," Mr. Brill added, "and at the same time David was doing two other litigations. David was totally focused and totally available."
In the five years since he left Cravath, Swaine & Moore, Mr. Boies has built a 150-lawyer firm, Boies, Schiller & Flexner. It is, he said, bigger than Cravath was when he joined that firm in 1966. Last year, Mr. Boies said, his new firm's revenue exceeded $100 million.
Mr. Brill thought to use a baseball metaphor to describe Mr. Boies's break from Cravath in 1997. "In the legal industry," said Mr. Brill, who founded The American Lawyer magazine and created the Court TV cable channel, "it's like it's 1956 and Mickey Mantle is suddenly a free agent."
MR. BOIES'S firm is in some ways a conventional litigation boutique, handling big cases for a dozen core clients, including Northwest Airlines and Philip Morris. "Those big companies don't want to be in the headlines in the worst way," said Donald L. Flexner, a partner at the firm.
The Adelphia and Tyco matters have attracted more attention, he continued, "because of the issues of accountability and transparency that are in the headlines." Mr. Boies and his partners said they expect those matters to be one-shot engagements, like the firm's representation of Napster and of Warnaco in a dispute over licensing of Calvin Klein clothing.
Mr. Boies has also represented The New York Times Company in a dispute about the sale of photographs over the Internet.
Both the core clients and the transient ones generally pay by the hour. An hour of Mr. Boies's time goes for at least $700, his clients said. (When they pay. Napster owes the firm more than $2 million, according to a bankruptcy filing.)
Perhaps 20 percent of the firm's practice is class-action work for plaintiffs on contingency, meaning that the firm takes a portion of the amount clients receive, often from major corporations, as its fee. Such arrangements are unusual for high-end law firms.
"In the old medieval guild days, there were fairly rigid lines between defending the nation's big businesses and assaulting them," said Joel F. Henning of Hildebrandt International, a management consulting firm for the legal industry, referring to the situation a few decades ago. "You now have a small but growing number of law firms that do both."
Douglas L. Abramson, the general counsel at Worldspan, a travel technology company, said his company was the firm's first major client, in an international arbitration.
"We were hoping that David would be involved and he was involved at key points," Mr. Abramson said, "but it was garden-variety tort litigation and David is interested in a lot of things, in constitutional law, and I'm not sure he's all that interested in garden-variety tort litigation. And I'm not sure we wanted to pay for his kind of expertise for our type of litigation."
Mr. Abramson said he was delighted with the work of Jonathan D. Schiller and other lawyers at the firm and with the arbitration's outcome. "We ended up with a $40 million award," he said.
There was some discussion of a contingency arrangement at the outset of the case, Mr. Abramson said, and in retrospect he is pleased that it went nowhere. The arbitration award included more than $3 million in attorneys' fees and related costs.
William A. Isaacson, a Boies, Schiller lawyer who worked on the case, said that with the exception of some hotel bills ("the arbitrators didn't understand that we had a war room"), all of the firm's fees were reimbursed by the defendants.
Had the firm taken the matter on a standard one-third contingency, it would have stood to make more than $10 million. Worldspan would presumably have been responsible for the bulk of that.
In the cases of both Adelphia and Tyco, Mr. Boies said, "we were initially contacted by independent members of the board." Before long, though, "we became retained by the company," as the independent directors asserted more control. Mr. Boies is assisted at his firm by separate teams of 15 lawyers in the Adelphia matter and about 10 in Tyco.
At Adelphia, "at first we were asked to look at accounting issues" and other specific questions, Mr. Boies said.
He added, "We evolved into where we were representing the directors in negotiations with the Rigas family" — the founders, who gave up control last month — "and obviously the board on a range of issues including asset sales and S.E.C. and U.S. Attorney investigations."
Adelphia and Tyco already had counsel who could not have welcomed Mr. Boies's arrival. "There is always a little tension," he conceded.
Stephen Fraidin, whose firm, Fried Frank Harris Shriver & Jacobson, continues to represent Adelphia, said the two teams of lawyers had merged well. "There is a lot of work here," he said, "and we're all focusing on helping the client."
Mr. Boies's firm also represents Qwest Communications International, a longstanding client whose accounting has also drawn attention from regulators.
Mr. Schiller, one of Mr. Boies's partners, handles that work. He said Adelphia, Qwest and Tyco were facing starkly different problems but had some things in common.
"These are very public cases," he said. "They are at the edge in some respects in terms of new accounting issues in the post-Enron era."
One of those cases, Adelphia, was on Mr. Boies's mind as he hurried off after lunch. "One thing you don't want to do," he said, in the tone one reserves for fundamental truths, "is keep the S.E.C. waiting." |
