Ten Years On – Bloomberg Releases Documentary on the Collapse of Dewey LeBoeuf

0
8
Ten Years On – Bloomberg Releases Documentary on the Collapse of Dewey LeBoeuf

Bloomberg has posted a short but fascinating documentary Steven Davis and Rise and Fall of Dewey LeBoeuf. Ten years after the spectacular collapse of the ALM 100 law firm, former Chairman Steve Davis  broke his silence. No other former partners agreed to be interviewed for the documentary. Commentary by David Lat, Founder of Above the Law; Vivien Chen, legal analyst at Bloomberg Law and   Prof. David Wilkens, Director of the Center for the Legal Profession at Harvard Law School is woven into the Davis narrative.

Dewey LeBoeuf was not the first ALM 100 firm to collapse.  Heller, Brobeck, Howrey,  Coudert Brothers all succumbed to the mysterious alchemy of missteps, hubris and  changed law firm economics. Dewey LeBoeuf has the distinction of being the first truly “white shoe” law firm to join this solemn procession. They were also the first collapse to result in the indictment of law firm leaders. Lat refers to  Dewey LeBoeuf as “The Lehman collapse of the legal world.”

According to Davis market forces as well as  prestigious consultants suggested in 2005  that LeBoeuf  either needed to shrink into a boutique or find a merger partner  and transform itself into a  “super firm.” The firm opted to grow and began a spectacularly aggressive recruiting spree which included enticing Ralph Ferrara  to leave Debevoise  with a $16 million sign on bonus. For the first time law firm partners were being recruited and paid like athletes. The high risk strategy worked … until it didn’t.  The American Lawyer  described LeBoeuf as a “rainmaker magnet.” But a revolving door spins partners  “in” as well as “out”. And when a group of  rainmakers threatened to leave, Davis  found a merger partner in Dewey Ballantine one of the whitest of white shoe firms where profits per partner had been in decline. The merger took place on October 1, 2007.

Davis‘s take on the merger was that Dewey Ballantine still functioned like an old fashion partnership and they needed Davis’ corporate management style. Both firms succumbed to “the myth of the merger of equals”  But the reality was that each firm was trying to impose their own culture. In less than a year the legal market was shaken by the collapse of the financial market. Overnight corporate practices evaporated.

Davis provides  a sobering  perspective on the the various factors that led to the collapse: the notorious financial guarantees; the trickle of partner departures which turned into a stampede when recruiters smelled blood. Ultimately the absence of “cultural glue”  proved fatal.

On May 28, 2012 Dewey LeBoeuf filed for bankruptcy. Then the New York county district attorne, Cyrus Vance charged three leaders including Davis with “cooking the books.”  Ultimately only the CFO was convicted. Today Davis lives in London and works for a litigation finance firm.

We live in sobering an uncertain times. Headlines predicting the  impact of a recession on law firms profits per partner, belt-tightening and financial, hand-wringing are trending up. Back n 2012 I wrote a post  Dewey Leboeuf and the Due Diligence Imperative suggesting that potential employees should conduct some due diligence when interviewing at law firms.  A place in the Amlaw100 does not guarantee long term viability.