Tonight Above the Law is reporting that “the end is near” for Dewey & Leboeuf and staff departures are scheduled to begin on Friday. It is a story that has become all too familiar, Heller, Brobeck, Howrey, Coudert Brothers… the mysterious alchemy of missteps, hubris and changed law firm economics. Dewey has the distinction of being the first truly “white shoe” law firm to join this solemn procession.
When Dewey’s esteemed law library Director Gitellle Seer announced her retirement last fall, the firm recruited for her replacement. The position was filled “in house.” One can only assume that former candidates for the position are breathing a collective sigh of relief at their “good fortune” at missing that particular “golden ring.”
When I entered my law firm library career in New York in the early 1980’s. Dewey Ballantine was considered one of the finest “white shoe” firms along with Cravath, Swaine and Moore and Davis, Polk and Wardwell. Wikipedia cites William Safire’s definition of “white shoe” as deriving from white buckskin shoes, long popular among upper-class New Englanders, especially at Ivy League colleges.
Having grown up in Queens and never having seen a grown man in white footwear that didn’t bear a “Keds” label, I assumed that this was “code” for lawyers who didn’t ride the subway where a “white shoe” wouldn’t last for “a New York minute.” Tom Wolfe coined a new phrase, “masters of the universe” in In Bonfire of the Vanities,to describe these powerful legal and financial elites.
Who would ever question the wisdom of these men (and the rare woman) who steered these rarefied partnerships? Who would not jump at the chance to work “below deck” pulling one of the small “staff support” oars on these ships of power and prestige? I was honored to have a seat aboard the “good ship Shea & Gould”
Since the American Lawyer started the AmLaw 100 in 1986, approximately 10% of the original 100 firms no longer exist. Sadly one of those early casualties was the late, great Shea & Gould. If the best and the brightest law firms have a “one-in-ten” odds of collapse in 25 years, I think it is time to rethink how we assess and compare law firms as potential employers during the recruiting process. It is time to take responsibility for our own “due diligence.”
Mismanagement 101 or New Law Firm Economics
James B Stewart’s weekend New York Times article “Dewey’s Collapse Underscores New Law Firm Realities” reveals an old and now unimaginably charming billing practice which he was privy to as an associate at one of Dewey’s peers. After reviewing the billing reports a partner prepared a one-sentence bill — in calligraphy— on beautiful stationery which read: ‘For professional services rendered,’ followed by the time period covered and a large number with a dollar sign. (Bold and italics added) Such was the depth of trust between lawyers and clients. It is hard to imagine a more dramatically changed environment than today’s world of AFA’s, outsourcing and “beauty contests.”
In Leverage We Trust
Law firms have long term debts but not necessarily long term assets. Dewey offered unusually lucrative long term contracts to attract lateral partners. They floated bonds. They had lines of credit. Their greatest assets were the lawyers with a book of business and as soon as those started walking out the door the model was doomed to collapse. Law Firm consultant Bruce MacEwen is quoted in the Times story as describing Dewey’s situation as “Mismanagement 101.”
Should Law Firms Have Obligation to Make Financial Disclosures to Staff and Non Partner Attorneys?
Law firms have widely varying cultures and standards regarding the amount of financial information they provide to employees. I have heard of law firms that have completely open internal web applications that allow anyone to view financial data, but most firms strictly limit detailed financial reports to partners and high level staff executives. Many firms offer staff a PowerPoint presentation including key trends and metrics. To tell the truth, reports about Dewey are suggesting that even partners had less than full disclosure of the financial picture… add to this the stunning inquiry by the Manhattan DA into the activities of the former Chairman Steven Davis.
Law firms have no affirmative obligation to their employees regarding the financial stability or future prospects of the firm. Most employees ride the tides of optimism or anxiety from one annual “state of the firm” memo to the next. In between, they “read the tea leaves.” They form a personal holographic construct of firm financial health composed of such things as bonus pools, office openings or closures, partner arrivals or departures, stealth layoffs and the size of the allowance for a summer associate lunch. In short, we are a pretty trusting lot.
Even if you are a diligent reader of competitive intelligence on law firms,you can’t always trust was you read. In an unprecedented action the American Lawyer revised downward the 2010 and 2011 Dewey and Leboeuf financials.
Resources for Due Diligence on Law Firms
The American Lawyer can be credited with opening the door to law firm transparency but the problems at Dewey were still well hidden. In light of this it seems prudent that potential law firm employees should make a habit of conducting their own “due diligence” investigation of prospective law firm employers using as many benchmarks as possible. Here are a selected list of resources for conducting your own “due diligence.”
American Lawyer American lawyer rankings and not just the AmLaw 100 should be investigated. The Mid level associate satisfaction survey, the technology survey, the law librarian’s survey and the pro bono survey provide additional views of firm finances, culture and priorities. If you have access to the ALM Intelligence database, you can perform trend analysis and benchmark firms against peers.
Vault Surveys Vault surveys law firm associates and staff across the country and compiles data and insightful insiders’commentaries. They also produce rankings.
OK so no one has a crystal ball. Dewey and Leboeuf is listed as the 9th Best Law Firm to work for in 2012. Hard as it may be to believe – this seems to disclose that associates were rather sheltered from the storm clouds forming in the boardroom.
Vault’s Verdict: Dewey & LeBoeuf associates are generally happy with their lot. They are perhaps unique in BigLaw in that they have few complaints about the hours and the work-life balance—outside, that is, of what they expected of BigLaw in general—and most report a positive and pleasant firm culture, with excellent associate/partner relations and training.
Dun and Bradstreet provides self reported financials on private companies including law firms. They provide one especially interesting metric… how quickly they pay their bills.
News and Blogs
Free Google news is good. Specialized sources of law firm news are better, Law 360, American Lawyer regional news sources, ABA news, Bloomberg, Thomson Reuters Legal News are great sources. Above the Law blog – the ultimate source for the serious, the silly and the salacious.
Thomson Reuters Financial, Bloomberg and Mergermarket all report league tables which measure and compare a wide spectrum of deal activities by firms. Dewey & Leboeuf website bragged that their rankings had risen in 2011. However there are many league tables each year and a clear picture requires a mulit-year analysis of all the categories to determine whether a firm had dropped in some league tables. You can generate a combined trend analysis of their deals over several years.
Litigation Analysis. Bloomberg, West’s Legal Monitor and Lexis Courtlink all have the capability to generate historical and current reports analyzing a firms’ litigation history which provide insights into who they are representing and what issues and jurisdictions they are active in.