Saturday, January 25, 2014
James Stewart, a Pulitzer prize winning journalist and former associate at Cravath, has an article appearing in today's New York Times business section about the "looming glut" of non-equity partners at large law firms and the financial pressures they face just to keep their jobs. The story is told from the perspective of a non-equity partner at White & Case who, from outward appearances, is the "embodiment" of success yet recently had to file bankruptcy (in part due to a divorce settlement) and has job security equivalent to a contract attorney. Mr. Stewart reports that many in the swelling ranks of non-equity partners face similar circumstances with respect to financial pressure and lack of any job security.
Anyone who wonders why law school applications are plunging and there’s widespread malaise in many big law firms might consider the case of Gregory M. Owens.
The silver-haired, distinguished-looking Mr. Owens would seem the embodiment of a successful Wall Street lawyer. A graduate of Denison University and Vanderbilt Law School, Mr. Owens moved to New York City and was named a partner at the then old-line law firm of Dewey, Ballantine, Bushby, Palmer & Wood, and after a merger, at Dewey & LeBoeuf.
Today, Mr. Owens, 55, is a partner at an even more eminent global law firm, White & Case. A partnership there or any of the major firms collectively known as “Big Law” was long regarded as the brass ring of the profession, a virtual guarantee of lifelong prosperity and job security.
But on New Year’s Eve, Mr. Owens filed for personal bankruptcy.
According to his petition, he had $400 in his checking account and $400 in savings. He lives in a rental apartment at 151st Street and Broadway. He owns clothing he estimated was worth $900 and his only jewelry is a Concord watch, which he described as “broken.”
Mr. Owens is an extreme but vivid illustration of the economic factors roiling the legal profession, although his straits are in some ways unique to his personal situation.
The bulk of his potential liabilities stem from claims related to the collapse of Dewey & LeBoeuf, which filed for bankruptcy protection in 2012. Even stripping those away, his financial circumstances seem dire. Legal fees from a divorce depleted his savings and resulted in a settlement under which he pays his former wife a steep $10,517 a month in alimony and support for their 11-year-old son.
But in other ways, Mr. Owens’s situation is all too emblematic of pressures facing many partners at big law firms. After Dewey & LeBoeuf collapsed, Mr. Owens seemingly landed on his feet as a partner at White & Case. But he was a full equity partner at Dewey, Ballantine and Dewey & LeBoeuf. At White & Case, he was demoted to nonequity or “service” partner — a practice now so widespread it has a name, “de-equitization.”
Nonequity partners like Mr. Owens are not really partners, but employees, since they do not share the risks and rewards of the firm’s practice. Service partners typically have no clients they can claim as their own and depend on rainmakers to feed them. In Mr. Owens’s case, his mentor and protector has long been Morton A. Pierce, a noted mergers and acquisitions specialist and prodigious rainmaker whom Mr. Owens followed from the former Reid & Priest to Dewey, Ballantine to Dewey & LeBoeuf and then to White & Case.
“It’s sad to hear about this fellow, but he’s not alone in being in jeopardy,” said Thomas S. Clay, an expert on law firm management and a principal at the consulting firm Altman Weil, which advises many large law firms.
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Continue reading here.