Photo: dirk_pepperd via Flickr
Once-powerful law firm Dewey & LeBoeuf had a breathtaking fall last month before going bankrupt.The problems that sank Dewey – from disloyal partners to way too much debt – have also plagued other firms that went down in spectacular fashion in recent years.
Now that Dewey is decomposing in bankruptcy court, we thought we’d reflect on some law firms that have suffered the hardest and farthest falls from greatness.
Firm: Finley Kumble
Year of death: 1987
Cause of death: Finley Kumble grew from roughly 50 lawyers to 700 attorneys in less than a decade by aggressively poaching lawyers from other firms, industry experts said.
Like Dewey that came after it, Finley also promised Senators and other superstars in the legal world exorbitant salaries to come on board, The New York Times reported at the time.
'That was the first sort of modern law firm that was put together overnight through raiding other partners,' Robert Hillman, an industry expert and professor at the University of California, Davis law school, told BI.
But a firm composed entirely of new lawyers without long-term ties proved disastrous.
Heavy debt and infighting ultimately killed the firm even though at the time it was the fourth-largest in the country. The downfall was so precipitous that it inspired the book 'Shark Tank: Greed, Politics, and the Collapse of Finley Kumble, One of America's Largest Law Firms.'
Firm: Brobeck, Phleger, & Harrison
Year of death: 2003
Cause of death: San Francisco law firm Brobeck, Phleger & Harrison ran into money trouble after the dot-com collapse, but its former chairman Tower Snow kept saying again and again that the firm wouldn't resort to layoffs.
'When their fortunes started to decline, the chairman announced that nobody would get laid off, which was nice of him to say,' Jonathan Landers, a nationally recognised expert on bankruptcy law, told BI.
But, he added, 'Most people can't support large numbers of people hanging around, waiting for work to appear.'
The 77-year-old firm lost scores of lawyers anyway, The New York Times reported in 2003. It had 900 lawyers in 2000 but only 500 when it finally sputtered out three years later.
Firm: Coudert Brothers LLP
Year of death: 2006
Cause of death: Coudert Brothers' global ambitions likely killed the 153-year-old law firm.
Coudert was known for its huge international presence, especially in France, and foreign offices can be difficult to manage from the U.S., bankruptcy expert Landers, told BI.
'They had a lot of foreign offices; they were almost like a franchise,' Landers said. 'One of the problems they had was they didn't have central control over those offices and the money in those offices.'
If a foreign office failed to make money, then Coudert had to go through significant red tape if it wanted to shut that office down, Landers said.
And he hinted that foreign offices might not make as much money as those stateside. 'The lawyers in France don't work that hard,' Landers said. 'They just don't.'
Firm: Thelen LLP
Year of death: 2008
Year of death: Thelen LLP took a nosedive after an ill-advised merger with Brown Raysman Millstein Felder & Steiner in 2006, which some legal experts said had way too much debt, the ABA Journal reported in 2008.
'It just kind of didn't work, and they wound up losing a lot of people who didn't want to stick around in a newly merged company,' Steven Harper, a BigLaw partner turned analyst, told BI.
High-profile partner defections became 'toxic' and fed on themselves, legal recruiter Gary Klein told the San Francisco Chronicle after Thelen's demise in 2008.
'It became Darwinian,' Klein said, referring to the need to jump ship to survive.
Firm: Heller Ehrman LLP
Time of death: 2008
Year of death: Heller Ehrman--another storied San Francisco firm--also fell apart amid financial turmoil, in part because it counted on Washington Mutual and Lehman Brothers as clients, The New York Times reported in 2008.
Heller also reportedly suffered when a number of lawsuits it was working on settled, leaving lawyers idle and the firm cash poor.
Firm: Dreier LLP
Time of death: 2008
Year of death: While Dreier LLP was never a massive international law firm, its founder Marc Dreier did his best to lure top talent with fancy offices, massive paychecks, and a lot of prestige.
Too bad he was a crook. In addition to running the prestigious, 250-lawyer firm, Dreier eventually admitted to robbing investors and clients of $400 million, New York Magazine reported.
The Harvard Law-educated law firm founder reportedly went out of his way to impersonate executives and even stage conference calls as part of a scheme to fabricate bogus investments from nothing.
His arrest immediately spelled doom for his Park Avenue law firm.
'Bank accounts have been frozen; they're shutting down our BlackBerrys on Monday,' one litigation partner told the Wall Street Journal at the time.
Firm: Howrey LLP
Year of death: 2011
Cause of death: Howrey partners began to flee the firm amid serious financial problems, which the firm's CEO blamed partly on so-called contingency fee agreements.
Under those deals, which clients started demanding more during the recession, Howrey only got paid if it won a case.
Firm: Dewey & LeBoeuf LLP
Year of death: 2012
Cause of death: Well, according to ex-partner Henry Bunsow, Dewey's top brass ran a Ponzi scheme. He recently sued the big bosses at his bankrupt firm, claiming they inflated revenues to lure him to Dewey.
It's well known that ex-chairman Steven Davis--whom New York prosecutors are investigating--spent quite a bit of money during Dewey's last days, bringing in top talent with promises of multi-million dollar bonuses.
The firm's bankruptcy promises to be long, and filled with legal battles with partners and plenty of acrimony. Stay tuned.
Business Insider Emails & Alerts
Site highlights each day to your inbox.