On May 30, 2012 Dewey & LeBoeuf filed for Chapter 11 Bankruptcy protection in the United States Bankruptcy Court, Southern District of New York. Dewey & LeBoeuf was formed on October 1, 2007 through the merger of Dewey Ballantine, a firm founded in 1909, and LeBoeuf, Lamb, Greene & MacRae, a firm founded in 1929. The merger created one of America’s mega law firms with over 1,000 attorneys in 26 offices world wide. This was the biggest law firm failure ever.
Dewey & LeBoeuf, like many businesses, ran into financial troubles in 2008 after the collapse of Bear Stearns and the following recession. Dewey’s loss of business is ironic based on the fact that its predecessor, Dewey Ballantine, remained lucrative during the Great Depression by focusing on bankrutpcy law. Rather than pulling back and tightening its belt, Dewey began expanding by hiring new parterns and offering them lucrative employment contracts in an effort to generate additional revenue. For example, Ralph Ferrera, a partner in Dewey’s Washington D.C. office, made more than $10 million in 2011. It takes a lot of very expensive billable hours to cover this mamoth salary.
Unfortunately, for these high priced partners, on July 11, 2012, Dewey & LeBoeuf’s banktrupcy attorney announced that it will be attempting to claw-back and recover over $103 million dollars that was paid to its superstar partners. Former partners are being asked to voluntarily pay anywhere from $25,000 to $3 million to avoid potential lawsuits by the bankruptcy trustee to recover these funds. Apparently, these 130 partners did not delvier the huge client fees they promised. At the end of the day, these partners, who promised the firm big returns, took their business and fled Dewey before it sank. According to Dewey & LeBoeuf’s 2010 Offering Memorandum, the average lawyer billing rate was $600 per hour. Some partners charged as much as $1,050 per hour. $1,050 per hour! Only advice from the Oracle of Delphi could be this valuable.
The legal profession should not be a business, like finance, whose primary concern is making money and generating profits. Lawyers are counselors who take on important problems and issues that affect people. Because we deal with people, and in some instances life and liberty, the law should never become a business whose focus is purely profits. Gerry Spence is a classic example of an attorney who personifies what the legal profession should stand for – Justice and Freedom. As attorneys, I hope that we never lose focus of this creed and allow dollar signs to guide our decisions.
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