For the past two months, the media coverage of law firm Dewey & LeBoeuf’s collapse has been near constant. With everyone from Above the Law to the New York Times getting in on the story—and a Dewey Departure Tracker provided by AmLaw Daily—lawyers, law students and laymen alike have been on the edge of their seats watching the disaster unfold.
The Times began its coverage of the Dewey defections in March, but trouble was brewing much earlier than that. Let’s take a look back at how this all began:
October 2007: Law firms Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae combine in the largest law firm merger to date. Steven Davis, then chairman of LeBoeuf Lamb, is elected chairman of the new firm, Dewey & LeBoeuf.
December 2008: Citing profit losses, Dewey withholds compensation from some junior partners, according to The Lawyer.
2008-2009: Dewey closes four offices and offers its associates and counsel the opportunity to leave the firm for 12-18 months “to pursue other interests,” with a stipend equivalent to one-third of their annual salary. (Several other firms also offer deferral programs in order to cut costs without conducting layoffs.)
March 2010: The firm raises $125 million in a bond offering (an unusual way of obtaining financing for large law firms, which more commonly raise cash through partner contributions). According to Reuters, many Dewey partners are not aware of the offering.
2011: Over the course of one year, Dewey hires 37 lateral partners (and loses seven).
October 2011: Steven Davis discloses to firm leadership that compensation guarantees (a recruiting tool wherein hires are promised a certain salary irrespective of firm or individual performance) had been made to about a third of the firm’s partners. While it was widely known that Dewey’s partnership compensation scheme was far from lockstep—with rainmakers receiving up to $10 million per year and some junior partners earning $300,000 (the most senior associates at the firm received $280,000 before bonuses)—most partners were shocked to learn that approximately 100 partners had been given such guarantees. Compensation guarantees were used as a recruiting tool at Dewey as early as December 2007, when former Weil Gotshal partner Martin Bienenstock joined the firm after receiving a $6 million guarantee.
January 27, 2012: Davis informs partners that half of the firm’s net income for the past year is committed to pension and overdue compensation obligations.
February 2012: Dewey’s twelve-person insurance transactional team leaves for competitor Willkie Farr & Gallagher.
March 2, 2012: In a firm-wide memo, Davis announces that 5% of lawyers and 6% of administrative staff will be laid off.
April 3, 2012: The American Lawyer reports that the financial results it published in 2010 and 2011 for Dewey were highly inflated by the firm and would be revised.
April 2012: The firm retains bankruptcy counsel, hires a crisis communications firm, and removes Davis as chairman. On April 27, firm management informs partners that the Manhattan district attorney is investigating "allegations of wrongdoing" by Davis. On April 30, partners are “encouraged to seek out alternative opportunities” via another memo.
May 4, 2012: Dewey’s domestic employees receive WARN Act notice, a required written notification in advance of mass layoffs by large employers.
May 15, 2012: Last day of employment for employees in New York, Dewey’s largest office.
On Monday, we’ll take a look at how and why Dewey folded, as well as what the firm’s downfall means for law students and young attorneys. As always, we’d love to hear what you think in the comments or by tweeting us @VaultLaw.
--Rachel Marx, Law Editor