Today is a "very sad day for the legal profession," if a good one for lawyer-haters. Dewey & LeBoeuf—the product of a 2007 merger between firms Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae—has filed for bankruptcy and trimming its staff down to 90 people before entirely closing up shop. One former federal judge describes the company as a "fabled firm with a lot of great lawyers" whose "demise of this magnitude is unprecedented." The cause of death, apparently, is that it grew too big, too fast.
Recently the embattled firm lost more than two-thirds of its roughly 300 partners amid concerns about compensation and a heavy debt load, which finally forced the firm's hand on Memorial Day. And unlike many bankruptcies, Dewey has no intention of trying to rise from the dead. According to the firm:
Unlike most other Chapter 11 cases, this filing does not anticipate a return to business but rather a managed wind-down of affairs, followed by liquidation. Dewey & LeBoeuf expects the most significant portion of the process to be completed in the next few months. In the interim, the firm will be operating on a budget and according to a timetable to be determined by the Court.
And this is a firm that knows something about bankruptcies. Over its storied career, the multinational firm has handled some massive cases including, for example, the Los Angeles Dodgers bankruptcy.
So how big is the hole Dewey got into? According to Bloomberg, Dewey listed debt of $245 million and assets of $193 million in its filing in U.S Bankruptcy Court. Eek. And this may well not be the last such legal bankruptcy we see. As the Times reports:
Many observers say the root causes of Dewey’s fall are not unique. Several of the largest firms have adopted business strategies that Dewey embraced: unfettered growth, often through mergers; the aggressive poaching of lawyers from rivals by offering outsize pay packages; and a widening spread between the salaries of the firm’s top partners and its most junior ones.[...]
Dewey’s bankruptcy follows a handful of other big law firm collapses in recent years. In 2008, two large firms in San Francisco, Thelen and Heller Ehrman, imploded in part because of a business slowdown. Last year, Howrey, a Washington firm with more than 500 lawyers, disintegrated after financial difficulties.
“Some big law firm whose leaders think that disaster can never befall it will be next,” Mr. Harper said. “We’ll be talking about that firm next year.”
