Dewey & LeBoeuf, the New York law firm crippled by financial miscues and partner defections, filed for bankruptcy on Sunday night, punctuating the largest law firm collapse in United States history.
The filing, made in Federal Bankruptcy Court in Manhattan, marks the final chapter in a turbulent period for the New York-based Dewey, which unraveled after disappointing profits and prodigious debt forced it to slash partners’ salaries. The partners, already owed millions of dollars from prior years, grew concerned over the firm’s finances and their ability to get paid. A partner exodus destroyed the firm.
“This is a very sad day for the legal profession,” said Richard J. Holwell, a former federal judge in Manhattan now in private practice. “Dewey is a fabled firm with a lot of great lawyers and a demise of this magnitude is unprecedented.”
While this is sad news all around, it is also an almost photographic description of what happened to Enron Corporation. The unserviceable debt, certainly, reminds one of Enron. But what seems more germane to me is the exodus of partners. Enron didn’t experience that – at least not exactly. By the time Jeff Skilling, Ken Rice, Cliff Baxter and Lou Pai had left, the company’s culture had changed somewhat, but it was still in good hands with Ken Lay at the helm. But the partners, counterparties, and clients left. They, like Dewey’s partners, weren’t sure they’d be paid. And without that trust in the system, it collapsed seemingly overnight.
It is a sad day for a once-great firm. But I take a little bit of smug pleasure in there being another real-world example of how a good company can collapse without criminal wrongdoing.