Tuesday, May 29, 2012

More Complex Than Greed

Amlawdaily_mastheadThat is the title of an essay I just published at The Am Law Daily.  It is on the demise of Dewey & LeBoeuf, which officially filed for bankruptcy yesterday.  I wrote the essay because I think the lessons drawn from the Dewey collapse are all-too-likely to follow the "lawyers are greedy" storyline.  This problem is bigger than our collective flaws as lawyers and as people.  Below are the first two graphs:

Dewey & LeBoeuf, an amalgam of two storied New York City law firms that merged in 2007, has died.  Understandably, this has prompted a lot of soul-searching among lawyers.  One storyline that will attract many followers is that large law firm lawyers, long viewed as the profession's elite class, have lost their way, betraying their professional ideals in the pursuit of money and glory. This narrative reinforces that lawyer-joke mentality that lawyers just need to be become better people.

And that narrative is wrong. Yes, we all need to become better people, but that still won't begin to cure the larger structural problem affecting large U.S. law firms. At its core, Dewey's collapse has less to do with individual moral failings than with aging organizational structures that worked remarkably well for over a century yet, but for a variety of reasons, now inhibit law firms' ability to adapt to a changing legal marketplace. 

Full story here ...

[Posted by Bill Henderson]


Current events, Law Firms, New and Noteworthy, Structural change | Permalink


If you want to argue that the BigLaw business model is broken, Dewey is no basis for doing so. Asuming public reports about the firm to be true, its compensation structure, allegedly secretive and insular leadership, and debt are or were quite unusual. In addition, the commodity work done by Axion and Novus Law may affect many law firms' models, but generally not the top-end global firms based in New York--at least to any material extent.

Posted by: Doug Richmond | Jun 7, 2012 7:57:04 AM

Doug, Dewey was at the extreme, true. But guarantees on lateral is now the norm, and many firms are very active in this market.

Further, business conditions have changed quite a bit for all large firms. There is very little organic growth of client bases. This is a fight over market share. And Axiom and Novus and other organizations like them are getting a share that used to go to Big Law. The top-end global firms based in NYC will be the last to be significantly affected. But being last is not to say they will not be affected -- they have already dramatically slowed their growth, which requires adjustments in their business model.

Paradigm shifts are always accompanied by minimization and rationalizations. I see large law firm partners dismiss firms like Axiom and Novus without any idea of (a) what they do, (b) how they do it (quite differently than Big Law), (c) who they work for, and (d) how fast they are growing. I am pretty confident many will be surprise on quickly things change for BigLaw.

Posted by: Bill Henderson | Jun 7, 2012 10:51:41 AM

Guarantees are the norm if you listen to voices representing a small slice of the large law firm market. But even accepting that they are common, they are typically only for a year or two in order to allow a lateral some comfort as she either builds or retains her book of business. Such short-term guarantees are a far cry from what Dewey is reported to have done. And of the guarantees offered to lateral partners, many are tied to benchmarks--again a departure from the reported Dewey model. Actually, Dewey's collapse--again based only on public-reprorted information and assuming the truth of the public reports--is eerily similar to the 1988 collapse of Finley Kumble, when Axiom and Novus Law were unknowns. I realize that perspective does not fit your narrative, but I don't think that Dewey's collapse evidences a paradigm shift. There may be a paradigm shift and, even if change is not so dramatic to earn that description, it may nonetheless be significant and for some firms wrenching, but none of that necessarily reveals a Dewey link. It is, however, plausible that the minimalization and rationalization you dismissively ascribe to large law firm partners--who, of course can't possibly be right because they do not share your views--are reasonable. Perhaps they aren't and your views will ultimately be proven correct. But one way or another, Dewey signifies little in the debate. At most it is a warning to law firms that growth through mergers and lateral acquisitions can sometimes be destabilizing. That's old news.

Posted by: Doug Richmond | Jun 8, 2012 5:20:52 PM

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