Citing an exodus of its top partners and the lessening demand for legal services, the New York-based law firm Dewey & LeBoeuf has filed for Chapter 11 bankruptcy protection, as reported by the Washington Post and others.
Some of the firm's top lawyers in Washington also left the firm prior to the bankruptcy filing.
Dewey & LeBoeuf had built a prestigious reputation in the field of corporate law. In the last five months, however, the company known for aggressive growth in a lessening market, began its descent from profitability.
Washington-based law firm, 55-year old Howrey, filed for bankruptcy 14 months ago due to pressure from a group of its unsecured creditors – and analysts are speculating whether this will now be a trend for large firms.
Dewey & LeBoeuf, beginning operations in 2007, was created via a merger of Dewey Ballantine and LeBoeuf, Lamb, Green & MacRae. The group employed over 1,300 lawyers, had 26 international offices and gained over $900 million in annual revenue according to reports.
In January and February of 2012 things decidedly changed when 17 partners left Dewey & LeBoeuf to work with other firms. Others that chose to leave included 22 more in March. By April that number of exiting lawyers nearly doubled to 40 and then, by May, that number tripled: 125 also left to seek greener pastures.
Partners equal the primary assets to a law firm – as they usually take their clients with them when they leave to join new firms.
The former head of public policy at Dewey & LeBoeuf, Charles Landgraf, is now at Arnold & Porter. Landgraf commented, "It's a sad day. It was eventually inevitable when the practice groups left that something like this was going to occur."
The bankruptcy was filed in U.S. Bankruptcy Court in the Southern District of New York on May 28. Assets were listed as $13 million in cash and $255 million in accounts receivable and current legal work. Liabilities were listed at $315 million. Banks are owed, according to the filing, $225 million of the $315 million total debt.
The largest unsecured creditor, Pension Benefit Guaranty Corp., sued the firm this past May to take over $80 million in underfunded pensions to nearly 1800 employees and retirees.
Former Dewey & LeBoeuf partners claim that they exited the firm due to a policy of offering payment guarantees – in the multi-millions – to top lawyers they could hire away from other firms.
According to Dewey & LeBoeuf, lower profits and high debt left the firm short in paying the 37 top lawyers brought over in 2011, as well as other salaries, and forced the necessity of the bankruptcy filing.
Just prior to the filing, Dewey & LeBoeuf leaders entertained the idea of another merger and met with other firms. Those talks did not provide the help that was needed.
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