The lessons of last September

by Vault Law Editors | September 21, 2009

  • My Vault

In this month of unhappy Lehman/Freddie/Fannie/AIG anniversaries, The National Law Journal asks if  BigLaw has learned any lessons from last year’s demise of Heller et al.   Longtime Heller partner Michael Charlson (now at Hogan & Hartson), believes the dissolution was “a sign of the changing legal world and even a change in why people become lawyers.”  Back in 2000, when Heller associates demanded that the firm match the Gunderson "dot-com bump" of $125,000 for first-years, Charlson recalls that he “warned them to be careful what they ask for”:

When you start paying those salaries, the tolerance for people coming in at 1,500 or 1,600 hours a year, the commitment to pro bono, those tolerances shrink a lot […] There was a lot of sadness about the fact that a place that could combine the quality of the legal work we provided with the humanity of the place just wasn't going to be able to make it anymore. [I]n some sense it was a really sad statement about where the profession, if not the broader society, had gone.

Orrick chairman Ralph Baxter draws a lesson about fragility and scale:

For partners as individuals, in a big firm or not, if you didn't get it before, you get it now, that law firms are fragile, […] It's about the consolidation in the practice of law, the challenges of leading and practicing law at the scale we have come to, with a business model that was not intended for this scale […] At the end of the day, we are still limited by some features we can't change, such as the inability to raise capital other than from the after-tax income for partners and debt.  But most things about the old model we can change.

MoFo's Keith Wetmore spots a theme: "[L]aw firm failures from last year were important lessons in minimizing short-term debt, because in every death story from these law firms, the banks rang the bell."

In other news, that other September 08 casualty, Thelen, has filed Chapter 7.

                                                                               -posted by brian


Filed Under: Law

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