Tag Archives: Dewey & LeBoeuf

Is Lateral Hiring Good for Law Firm Business?

Posted on February 13, 2013 by | 1 Comment

Thanks to the dissolution of Dewey & LeBoeuf, lateral hiring had a record year—both in the United States and in U.S.-based London firms. Am Law Daily reports that 2012 lateral hiring hit a three-year high with 2,691 moves, a 9.7 percent increase over 2011. In London, U.S.-based firms fueled an almost 40 percent increase in senior lateral recruitment over the last year. But is lateral hiring good for business? Perhaps, perhaps not.

Reporting on an American Lawyer article that examines the profitability of aggressive lateral hiring, the ABA Journal states:

By one measure, aggressive lateral hiring doesn’t work. The authors find no statistically significant relationship between an aggressive lateral strategy and profits per partner. In fact, the most profitable firms tend to have the lowest rates of lateral hiring. But on a different level, [William] Henderson and [Christopher] Zorn say, lateral hiring works because it can bolster a law firm’s ability to survive.

An ALM LexisNexis survey cited in the American Lawyer article found that “96 percent of managing partners said they expected to grow through lateral partner hiring over the next two years, yet only 28 percent reported that lateral hiring had been a highly effective strategy in the past.”

And it’s inefficient and expensive, or so reports Am Law Daily:

At the same time that many firms are wooing expensive lateral talent, they are also shedding dozens of lawyers at home every year—their associates. Finding, recruiting, and teaching these younger lawyers isn’t cheap. Wouldn’t more careful training and management of associates and junior partners help firms avoid the need for so many lateral recruits in the first place?

The Am Law Daily article further urges firms to look closer to home, asking:

[W]hat would happen if firms made more of an effort to take the long view? What if they tried to figure out which practice areas and regions of the world will be strong in 10–15 years (even if they aren’t now) and tried to train more associates in those areas? What if they identified companies for the associates to learn about (even if they aren’t yet clients)?

Lateral hiring, however, remains the fastest way to grow a firm, increase its ability to serve the market and, therefore, to bring in more business and profits. And “large, profitable firms are least likely to fail since they are better able to weather a loss of a large group of lawyers,” the ABA Journal article states. “These big firms may also be better positioned to pitch for work requiring a global reach.”

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Lateral Moves Increased in 2012

Posted on January 31, 2013 by | Leave a comment

Lateral moves were up in 2012, thanks in part to the demise of Dewey & LeBoeuf.

According to a survey by American Lawyer, the number of partners who left or joined an Am Law 200 firms increased 9.7 percent over last year (2,691 partner moves in 2012 vs. 2,454 in 2011). When compared to the number of 2010 moves, it increased by 33.6 percent.

The numbers held up even when taking Dewey out of the equation. “Excluding the Dewey departures, there were still 2,411 moves in 2012—only a bit lower than in 2011 and consistent with the annual average of 2,458 partner moves from 2005 to 2009,” the American Lawyer article states. And of the 280 former-Dewey partners, most ended up in Am Law 100 firms.

Where did the majority of partners go? Most moved to DLA Piper, which gained  97 partners—although they lost 34, for a net gain of 63. The other top gainers were:

  • McKenna gained 76 new hires
  • Jones Day gained 56
  • Greenberg gained 50
  • Baker & McKenzie gained 48

After Dewey & LeBoeuf, the firms who lost the most included:

  • SNR Denton lost 57 partners
  • K&L Gates lost 40
  • Winston & Strawn lost 40
  • Hogan Lovells lost 39
  • Greenberg Traurig lost 38

You can see all of  “The Top-Gaining Firms” results, which includes a breakdown of where the new hires came from, here. For the full “Firms with the Biggest Losses” list. which includes a breakdown of what sector they moved to, click here.

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Law Firm Financial Woes Go Primetime (TV)

Posted on October 12, 2012 by | Leave a comment

Earlier this season on the CBS drama The Good Wife, character Will Gardner turned to his co-founder at the law firm of Lockhart/Gardner and asked, “Why are we being punished for Dewey & LeBoeuf?”

For fans of the show who also happen to work in the real life legal industry, the moment offered an odd sense of recognition.  In the past few weeks, several lawyers have mentioned the moment to me, noting their surprise at hearing the words “Dewey & LeBoeuf” on a television program, particularly a primetime drama.  The Wall Street Journal Law Blog found it notable enough to recount the episode for their readers.  But this is not the first time The Good Wife has used the real financial woes of the legal industry to inform its portrayal of the fictional firm.  While the show exaggerates everything to keep viewers interested, the writers have found a way to infuse episodes with many of the realities of contemporary law firm life.

Lawyers are a permanent fixture of television and movies.  From L.A. Law to Law & Order, along with the entire John Grisham oeuvre, producers and screenwriters have long turned to legal drama to help drive storylines.  Yet, despite decades of portrayals, Hollywood rarely gets lawyers, and particularly law firms, quite right.  On L.A. Law, Ally McBeal, and Boston Legal, the firms were buzzing social playgrounds where lawyers were always either arguing in court or flirting with their colleagues.  In movies like The Firm and Michael Clayton, firms were simply fronts for criminal activity.  Storylines have occasionally nodded at the business side of legal practice with references to billable hours or the importance of a major client.  But I cannot recall a film or television program that found much drama in the real challenges of keeping a law firm running, until now.

To be fair, The Good Wife is full of many of the classic tropes of legal television shows.  There is the requisite focus on personal relationships, and it seems not a day goes by without the show’s lawyers appearing at trial – it is hard to believe the firm is having financial trouble given its apparent litigation workload.  And as WSJ points out, even the firm’s bankruptcy proceedings have unrealistic timing.  Yet, for viewers who have watched the show since its 2009 debut, there has often been a ring of truth to the business of Lockhart/Gardner.  After one of the founding partners left the firm in acrimony, taking major clients with him, the firm struggled to pay its bills amid a nasty recession.  The managing partners fretted about high expenses and too few paying clients.  A merger kept it afloat, but produced resentment and infighting among the partners.  Now the firm is trying to keep its creditors at bay while its landlord raises the rent on their elegant Chicago offices.

Because this is fiction and CBS would like its hit show to have a fifth season, we can expect Lockhart/Gardner to have more success than real life firms like Dewey & LeBoeuf or Thacher, Proffitt & Wood.  The firm will likely survive its creditors, the bankruptcy trustee, and the recession.  But I also anticipate that The Good Wife will continue to keep close tabs on the industry it is portraying, taking fictional liberties, yes, but sometimes also telling the truth.

Posted by Emily Fisher

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Judge approves Dewey & LeBoeuf settlement just 5 months after collapse

Posted on October 11, 2012 by | Leave a comment

While few in the legal industry were surprised by the Chapter 11 filing by Dewey & LeBoeuf in May of this year, many were shocked that a firm of such size and stature could unravel at such speed.

It seems that the bankruptcy proceedings are continuing at a similar pace. This week it was announced by Thomson Reuter’s News & Insights that a $71.5 million settlement between former Dewey & LeBoeuf’s partners and the law firm’s estate has been approved by the bankruptcy judge in charge of the case. The decision comes less than five months after the firm’s dissolution, and provides creditors, who are owed in the vicinity of $500 million, their first and largest recovery in the bankruptcy so far.

It has been estimated that more than 400 of the 670 former partners have so far opted to participate in the settlement, which requires former partners to pay portions of their compensation from 2011 and 2012. In exchange, partners who opted in are released from future liability and litigation over debts. Individual payments reportedly ranged from $5,000 to $3.5 million.

Bankruptcy judge Martin Glenn concluded the settlement was in the best interests of both the estate and its creditors by avoiding years of potential litigation between Dewey’s estate and former partners. He concluded the settlement ultimately “will lead to a quicker wind-down in Chapter 11, and – more importantly – a quicker and more certain distribution to creditors.”

Glenn also rejected a request from a group of retirees and former partners from legacy firm LeBoeuf Lamb Greene & MacRae who opposed the settlement on the grounds that it favoured higher paid partners. Judge Glenn adjudicated that the settlement was independently negotiated with no evidence of one particular party favored over another.

Dewey’s wind-down team now hopes that the judge’s decision will prompt other partners who have yet to accept the settlement to reconsider. The team has offered to waive a late penalty fee for partners who now decide to opt in.

Details of the settlement revealed top contributors include corporate partner Berge Setrakian (who agreed to pay $3.5 million), Washington, D.C.-based white-collar defense rainmaker Ralph Ferrara ($3.36 million), and Mort Pierce, Dewey Ballantine’s former chairman ($1.02 million).

However, the firm’s senior management team – Chairman Steven Davis, executive director Stephen DiCarmine, and former chief financial officer Joel Sanders, were not allowed to participate in the settlement. According to reports by Legal Week, the Dewey estate may pursue claims against them.

The settlement also does not include an estimated $60 million of revenue and work in progress that former partners took with them to new firms at the time of, or prior dissolution, which trustees may seek to recover.

To access a full copy of Tuesday’s ruling by Judge Martin Glenn please follow this link. The final details of Dewey & LeBoeuf’s Chapter 11 reorganisation are scheduled to be decided in November.

Posted by Tricia Pelton

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New Docs from Dewey Bankruptcy Reveal Big Bonuses During Financial Meltdown

Posted on August 2, 2012 by | Leave a comment

Legal news outlets are reporting this week on details found within Dewey & LeBoeuf’s financial statement, filed last week in the firm’s Chapter 11 proceedings.  The statement reveals that the firm’s CFO and executive director were paid more than $2 million in bonuses just months before the dissolution.  The Lawyer explains:

Dewey & LeBoeuf paid special bonuses totalling $1.1m each to CFO Joel Sanders and executive director Steve DiCarmine in the months running up to the firm’s collapse, bankruptcy filings reveal…

The first bonus payment, dated 13 January, came two weeks before the firm’s climax conference call for global partners on 27 January, during which chairman Steve Davis told partners they needed to “own” the firm’s financial crisis.

The proximity of the bonus payout to Dewey’s failure has raised the ire of some – Above the Law’s David Lat calls it “nauseating” in a piece that includes the full payment schedules.  The revelation may add fuel to the lawsuit brought against the firm by a group of former partners who contend they were deceived by firm management about Dewey’s finances.  Thomson Reuters News & Insight reported on the lawsuit’s filing back in June:

Former partner Henry Bunsow claims Dewey managers lured him in 2011 with compensation promises they couldn’t possibly keep. The firm was already teetering under some $300 million of unpaid guarantees to other partners, he says, and its survival was “in serious doubt.” Profits per partner were under $1 million a year, half what he was allegedly told.

The now-defunct firm did receive some good news this week, however, when it won approval for retention and incentive bonuses for the employees who have remained to wind down business.  Reuters reports Judge Martin Glenn approved the bonuses as reasonable over the objections of the U.S. Trustee.

Posted by Emily Fisher

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Dewey’s Demise: Where Have All The Partners Gone?

Posted on June 1, 2012 by | 2 Comments

The news that Dewey & LeBoeuf filed for bankruptcy on Monday came as little surprise to most in the legal industry. The firm has teetered on the brink of collapse for a number of months in the wake of mass partner defections, which have been occurring at an increasing pace since the start of the year. Many market commentators are tracking these defections*, and they paint an interesting picture of how quickly partner exits can take hold within a faltering law firm, becoming a vicious cycle that can be almost impossible to contain.

This illustrates a unique quality of professional partnerships: law firm assets remain largely and inextricably tied to partners’ books of business. In fact, Albert Togut, Dewey’s bankruptcy attorney, produced one of the quotes of the week when he explained that “Our assets went home every night…until one night, they went home and never came back.” Once a critical mass of partners defected, the firm’s ability to meet revenue generation requirements, and to pay partners and its debt obligations, was severely hampered, leading to further defections, and its ultimate demise.

Where did they all go?
Our post earlier in the week discussed the negative impact that the Chapter 11 filing is likely to have on clients, as well as the financial implications it will have on the raft of unsecured creditors. However, a number of law firms around the globe are benefiting from the largest dissolution in law firm history. The largest benefactors in the U.S. have included:

  • Winston & Strawn, which has taken on as many as twenty two litigation partners, predominantly in New York, but also adding strengths in Chicago, Los Angeles and Washington DC.
  • DLA Piper so far has announced the addition of twleve U.S. partners across an array of practice areas including corporate, project finance, litigation and IP. Most will join the New York office, but the group also includes a West Coast-based partner and an addition in Washington DC.
  • Proskauer Rose has added eleven partners in New York and Washington DC focused on bankruptcy & restructuring and securities litigation (the bankruptcy team also included two London-based partners).
  • Willkie Farr & Gallagher took on the much lauded corporate and regulatory insurance practice, a legacy LeBoeuf Lamb practice in New York in March (this team also included two partners in London).

The break-up of Dewey & LeBoeuf’s international network has also provided the basis for international growth and expansion of a number of U.S. firms. It has allowed four firms to launch new international offices, while numerous others have strengthened their international capabilities, as they added Dewey incumbents. A round up of the international moves includes:

  • In London, Morgan Lewis has been the biggest benefactor, taking on up to seven corporate and litigation partners. The firm has also taken on the majority of the Russia & CIS practice based in Moscow and Almaty.
  • Dechert has been another recipient of a large part of Dewey’s international network. The firm has taken on a three-partner corporate team in London, as well as the Dubai and Tbilisi offices (to launch new offerings in the UAE and Georgia respectively).
  • The fifty-lawyer Polish office has moved to Greenberg Traurig, allowing a launch in Eastern Europe for Greenberg.
  • The Italian arm opted out of the U.S. LLP in May to operate as a stand-alone outfit. It has joined forces with ex-Clifford Chance corporate partner, Vittorio Grimaldi, to rebrand as Grimaldi Studio Legale.
  • In Germany, the Frankfurt office has been split between McDermott Will & Emery (to launch a new Frankfurt office for the firm) and U.K. firm, Simmons & Simmons; while DLA Piper and SJ Berwin have also picked up individual partners.
  • In Asia, the three-partner Hong Kong office has joined DLA Piper.
  • Finally, in Africa, Baker & McKenzie this week announced that it was launching a new office in Johannesburg focused on projects, energy and mining sectors after taking on Dewey’s South African-based operations.

Partner Moves by Region

*These include AmLaw Daily, 3 Geeks and a Law Blog, and Law Shucks

Posted by Tricia Pelton

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The Dewey & LeBoeuf Bankruptcy: A News Round-up

Posted on May 31, 2012 by | 3 Comments

On Monday evening, following months of partner defections and rumors of financial difficulties, Dewey & LeBoeuf filed for Chapter 11 bankruptcy in the Southern District of New York.  Though few in the legal industry were surprised by the filing, it has set off a flurry of discussion over what led to the firm’s collapse and what the bankruptcy means for creditors, former clients, and former lawyers.

Nate Raymond and Nick Brown of Reuters explain why Dewey’s Chapter 11 proceedings are unique:

In a typical Chapter 11, a corporation uses its existing assets to continue generating revenue to fund a reorganization. The theme park Six Flags, for example, continued to sell tickets while in Chapter 11 in 2009. The company also had tangible assets — the theme-park rides themselves, real estate, merchandise — which could have been sold off to raise money for creditors had it been necessary.

Dewey has different kinds of assets: Its lawyers and their books of business, or clients. Once the lawyers walked away — by now nearly all of its 300 partners have left the firm – the company had little means to produce revenue.

“Our assets went home every night,” Togut said, “until one night, they went home and never came back.”

Even among law firm bankruptcies, Dewey’s is different.  Christine Simmons explores some of these unique properties for the New York Law Journal, including the firm’s 2010 decision to raise funds through a bond offering:

Rather than a more traditional scenario where the secured creditors are the banks, the Dewey bankruptcy will involve hundreds of millions of dollars of secured bank and bondholder debt.

Despite the unique nature of the filing, the New York Times’ DealBook is reporting that Dewey is looking for a swift resolution.  The firm apparently waited until Monday to file for Chapter 11 while it took the first steps toward dissolution, including shutting down offices and laying off attorneys and staff.  But there is no guarantee that the firm will obtain a quick settlement:

Albert Togut, a lawyer representing the Dewey estate, said in a hearing on Tuesday afternoon in federal bankruptcy court in Manhattan that the firm was working on a settlement, which could resolve a legal matter that could otherwise take years to figure out. He declined to give details after the hearing.

Still, a settlement is likely to take time. Mark C. Zauderer, a lawyer representing about 50 to 60 former Dewey partners, said in court that he and his clients had not heard what the basis of such claims would be.

While Dewey’s creditors may be battling it out in the courts for some time, the firm’s collapse has had an immediate impact on its now former clients.  Thomson Reuters News & Insights reports:

“Thousands of former Dewey clients are now seeking new counsel, leaving hundreds of thousands of client records waiting to undergo this process,” a Dewey associate who has since left the firm, Douglas Mateyaschuk, said in a court filing.

Dewey’s major clients included Lloyd’s of London, Allstate Corp and eBay Inc. All of them declined to comment or else did not respond to inquiries about the demise of Dewey.

Among other clients, Oclaro Inc, an optical components maker, moved its proposed $177 million purchase of competitor Opnext Inc to Weil, Gotshal & Manges, after Silicon Valley dealmaker Keith Flaum defected to Weil, Gotshal from Dewey earlier this month. And when the NFL Players Association last week sued the league, claiming that teams colluded to set a secret salary cap, it relied on longtime counsel Jeffrey Kessler, who recently defected from Dewey to Winston & Strawn.

Not surprisingly, some critics of the legal industry believe there are lessons to be learned from the Dewey collapse.  Professor William Henderson, who we’ve mentioned here before, told Forbes’ staff writer Daniel Fisher that the bankruptcy should be a wake-up call for other law firms:

Corporate law revenue isn’t growing much and law firms have resorted to recruiting rainmaker partners to bring in new clients, Henderson said. What they should be doing instead is examining how other professions like engineering, consulting and software run their businesses with close attention to decreasing costs and increasing efficiency.

“The biggest problem big firms have right now is 30, 40, 50 years of incredible success,” Henderson told me. “That breeds reluctance by partners to think of a new mode.”

It may be a stretch to compare Dewey’s difficulties to firms occupying similar market positions.  As the bankruptcy proceeds and more details emerge, it is becoming clear that the firm’s financial troubles were severe.  But as the largest law firm to have ever filed for bankruptcy, Dewey is certain to become a cautionary tale.

Posted by Emily Fisher

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Advocating for Innovation in the Business of Law

Posted on May 11, 2012 by | Leave a comment

The recent accelerated decline of Dewey & LeBoeuf has made some members of the legal community introspective.  Though Dewey’s troubles appear to be mostly unique to the firm, and not representative of industry-wide problems, the public nature in which they have played out may have led lawyers and other members of the legal community to look critically at the current business model.

In an opinion piece this week for the New York Times, Seyfarth Shaw chairman J. Stephen Poor shares some of his insights into how the business of law is changing, or needs to change.  Poor advances the idea that law firms need to be willing to make fundamental changes to their business models.  Half measures, he argues, are not enough:

Too often, I see firms start down a path only to stop at partial implementation or inconsistent philosophies. At Seyfarth, we realized that trying to drive  behaviors would require us to restructure things like associate evaluation (which we did by putting our compensation and advancement structures into a pure competency model) and re-examine our staffing models (for example, we eliminated a traditional summer program and replaced it with an education-based fellowship program).

Poor doesn’t propose that all firms do what Seyfarth has done.  His argument is instead that firms need to be willing break from the pack and try something new.  Although he acknowledges that this kind of fundamental change can be challenging for firms and their clients, Poor believes it will be necessary for firms if they want to hold their value and remain competitive.

At 3 Geeks and a Law Blog, Toby Brown suggests that technology has the potential to offer the kind of fundamental change and innovation Poor is advocating.  Brown is focused on the idea of computer automation as a way of duplicating or even replacing certain lawyer activities.  He recounts an experience from the 1980s to illustrate the potential:

With the program loaded up we began playing with it (which we now call QC). I answered a series of questions about my personal needs related to an estate plan, giving what was essentially ‘the facts of my legal situation.’ Well in to the questioning a yellow screen popped up and ‘gave me advice.’ I do not remember the specific advice, but the gist was that based on the my situation, I should consider changing my answer to the last question about what I thought I would want, since that did not fit with my situation. I recall distinctly sitting back and thinking – Wow. I just witnessed something unique. A computer giving me real legal advice.

But as Brown points out, this technology, now nearly three decades old, has never really been embraced in the mainstream legal community.   Brown, like Poor, believes that greater rewards are possible for those willing to take a chance on this type of innovation.

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