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Prestigious Law Firm Goes Bust; Lawyers Boxed Out by Changing Industry

The prestigious international law firm Dewey & LeBoeuf is going bust, as 67 of 300 partners have jumped ship since January. The firm’s troubles began after Dewey and LeBoeuf, two separate firms, came together in 2007 and started reporting disappointing financial performance shortly thereafter. As a result the firm has been slashing partners’ salaries. At first, partners disappointed by reductions in their previously guaranteed compensation packages packed up; now most of the firm’s lawyers are bolting for the doors before the firm collapses entirely.

The NYT interviewed Michael Trotter, a well-respected lawyer and author on the economics of law firms, about the issue. Not surprisingly, Trotter says that Dewey’s fiscal crisis and ongoing bankruptcy reflects the woes facing the entire legal industry:

There are now far more capable lawyers and law firms than there is work for them to do. The financial costs of legal services have gotten so high that most clients are determined to reduce them. Many legal services have become commodities that can be supplied by a large number of firms with sufficient quality to meet the needs of most clients in most situations, and corporate general counsel now know that they can get what they need at a lower cost if they force the major firms to compete for the work.

With declining profits and grueling 70-hour work weeks, law has long since left behind its genteel heyday as a fulfilling and patrician lifestyle. The legal profession is just one of many undergoing seismic changes in the face of transformational technologies and new economic realities. No doubt many enterprising young lawyers will find creative ways of dealing with these changes, but in the meantime, we wish the 45,000 students graduating law school this year the best of luck.

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  • Ronald Whitehead

    Profession – any field of endeavor in which those practicing it feel that the more competition you have the more expensive your services should be.

  • Jim.

    I’ll take a page from Luke Lea here– if they cut their workweeks in half, wouldn’t they solve most of their employment problems? Maybe the pay wouldn’t be as good, but some of the old genteel feeling might return.

  • dearieme

    I’ve never understood why firms pay top dollar for legal work done by exhausted youngsters. Nor why youngsters work the sort of hours that preclude their enjoying the money they are making. All bonkers.

  • John Burke

    I knew a highly regarded and partner in the corporate business of Wall Street’s white shoe firms way back in the late 60s who laughingly described his work as that of “one of the world’s most highly paid proof readers.”

  • Raymond King

    “There are now far more capable lawyers and law firms than there is work for them to do.”

    Amazing, yet the student mills just keep pumping those students out of the mills, uh, universities. Universities have become a big ponzi scheme, pay ridiculous amounts for a degree that promises but does not guarantee success. Success IMO does not solely function on ones academic pedigree, but in conjunction with ones drive and ingenuity. Too many of our young adults leave college thinking they are a hot commodity with that degree in hand. Unfortunately, Mr. Trotter articulated it all too well.

    Now who’s making money, (universities)? While students are neck deep in debt that they can NEVER file bankruptcy on, if they should ever find themselves in financial dire straights.

  • Tulsa Jack

    Lawyers are staff. An overhead expense. They do three things: 1) Make contracts legally enforceable; 2) Ensure that contracts say what the client intends; and, 3) Ensure that clients act in accordance with law. Attorneys are not businessmen. No competent executive allows them to offer strategic advice, because they have no responsibility for the outcome. When their pretensions and outrageous fees attract the attention of a responsible board of directors, they get pulled up short. That time has come.

  • Denver

    Denny Crane!

  • OldRedJoe

    ‘Big Law’ has always been a Ponzi scheme; too much money for mediocre work done by youngsters who have no idea where the courthouse is. I’ve been in solo/small practice for 21 years and shed not a tear; let these guys (and gals) become legal entrepreneurs and do some good for society as well as making some decent money, or just do i-banking if you don’t really want to be a lawyer. Quit whining.

  • Mike Mahoney

    The practice of law must be where a good many of the displaced and once potential students of the arts of manufacturing were once destined before that sector was gutted. Supply and demand. The supply of legal labor has outpaced demand for the services.
    And conversely, the glut supply of students to the law shcools has allowed for the tuitions to grow at a satisfying clip. Solution for older lawyers: enter the professorate.

  • Jbird

    We must be the most over-lawyered society in the history of the universe, the bust was bound to come at some point. As an accountant, I just hope the bell doesn’t toll for me for another 35-40 years. fingers crossed.

  • Ron Coleman

    This analysis (and a lot of these comments) is a little too blunt, not to say facile. There is and always will be a vigorous market for the most highly-qualified, focused and talented corporate lawyers. This is almost an entirely different profession from the one in which the remaining 98% of lawyers (such as myself) are engaged.
    The proof? What doomed Dewey Ballantine, and eventually Dewey & LeBoeuf, had nothing to do with a fall in demand for the services its partners provide. It was their inability, due to management that failed on multiple levels, to retain the most talented and sought-after partners who provided those services. The ones who have left over the last ten years are flourishing elsewhere.
    That doesn’t mean that there is a massive “racket” aspect to corporate law, especially in the capital markets / securities sector. There is. But the failure of Dewey Ballantine is not fundamentally about the inevitable bursting of a Big Law bubble in the near future any more than the failure of Lehman Brothers was a portent of doom for Goldman Sachs. Far from it, at least for the foreseeable future.

  • Ron Coleman

    last comment error: sentence beginning “That doesn’t mean that there is” should be “That doesn’t mean that there isn’t”

  • Kris

    OldRedJoe@8: “let these guys (and gals) become legal entrepreneurs and do some good for society”

    The trouble is that many of the “legal entrepreneurs” become legislators, and it is not quite clear that this constitutes a societal good.

  • TeeJaw

    I was a partner is a law firm that fell apart in the late 1990’s under circumstances similar to those of Dewey & LeBoeuf. Then is was only partly due to external changes in the legal marketplace and the firm’s inability to change with the times. It was mostly caused by a foolish

  • TeeJaw

    I was a partner in a law firm that fell apart in the late 1990’s under circumstances similar to those of Dewey & LeBoeuf. Then, it was only partly due to external changes in the legal marketplace and the firm’s inability to change with the times. It was mostly caused by a foolish merger with another firm that resulted in a struggle for power among the respective prima-donnas of the two former firms. Something of that sort may have contributed to Dewey’s downfall.

    Ego-driven narcissists abound in successful law firms, at least for a while, and they are seldom introspective or prudent.

    After my firm collapsed life was never the same, but in some ways it was better.

  • Jack

    Good comment by Ron Coleman. The corporate law world is very different from the world of small and solo general practice law firms.

  • teapartydoc

    That sound you’re hearing is that of the world’s smallest violin.

  • Theresa McAteer

    I’ve been in practice 29 years; associate to partner in a mid-sized firm; moved to a municipal law office for eight years; in private practice with my husband/law partner sine 2001 (the last move my smartest, but also not likely successful without the background). Quality lawyering is valuable ( you say “keep the client acting within the law” as though that were easy! that dichotomy between legal and policy decisions is often intentionally blurred by the client, and sometimes requires a lawyer to disengage . . . never comfortable but always the right decision). but it doesn’t require billing $700 per hour to obtain.

  • Vinny B.

    The reason these firms are going under is because Bush and the Republicans undermined them for years, especially if they gave money to Democrats. Bush used to equate trial lawyers with terrorists, which scared a lot of people. The reason there are nomRepublicans in law schools is because they are too dumb to get a law degree. Just read the latest scientific report that proves that Republicans are dumb.

  • Kris

    Vinny@19, these firms constitute the 1% of the 1%. Their going under is thus a good thing. How dare you ascribe something positive to Bush?!


  • ppaul

    The scientific reports that claim conservative/religeous/republicans are mentally deficient clearly demonstrate only that social science academics are challenged by accurate thought, right down to the glowing CT brain parts.

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