Over the past few weeks, we’ve been receiving interesting reports about Dewey & LeBoeuf. They were nothing but vague rumblings for a while, but they’ve now reached the point where we have enough to write about.
So let’s check in and ask: How do things stand at this major, top-tier law firm? In other words, “Where’s LeBoeuf?”
Some sources suggest to us that the firm isn’t as liquid as it should be. One such source claims that Dewey “is defaulting on payments to former partners” and “was late on a required ERISA deposit.” Another tipster, at a competing firm, tells us that Dewey partners who are in talks to join his firm as laterals “have suddenly accelerated their timetables” for moving, without clear explanation.
We’ve also heard scattered reports of layoffs affecting associates and counsel. These reports have been lacking in specificity, though, and it’s not clear that any cuts are being made outside the ordinary course of business. (If you have detailed information, please email us, subject line “Dewey layoffs.”)
We’re not the first to report on alleged financial issues at Dewey. Casey Sullivan covers the topic in a piece for today’s Daily Journal (sub. req.):
Leaders at Dewey & LeBoeuf LLP had to significantly reduce compensation for some mid-level business generators and have continued, despite growing controversy, to pay guarantees to higher-ranking rainmakers at the firm, according to several sources inside and outside of the firm.
Could compensation cuts be driving Dewey departures? In the past few weeks, we’ve seen a number of partners leaving the firm. (Names and links are collected in a list on the next page.)
Back to the Daily Journal:
The decisions came after the New York firm has not yet paid some partners compensation dating back to previous years because of guarantees that had to be paid out to high ranking partners the firm couldn’t afford, according to three recruiters and consultants.
Two sources knowledgeable of the firm’s finances said Dewey currently has come up significantly short — more than $50 million — on compensation the firm owes to partners. Three sources say partners within the firm are expressing concern over whether Dewey can afford to keep paying certain rainmakers lucrative guarantees.
Some of the rainmakers have generated veritable monsoons, it seems, while others may need to improve their rain-dance skills:
In California, Dewey hired two major rainmakers in recent years, a group of M&A specialists led by Rick Climan in Palo Alto and a bankruptcy team led by Bruce Bennett in Los Angeles. By all accounts both of those lawyers had banner years with Climan handling most of the major M&A activity in California in recent months and Bennett leading the bankruptcy of the Dodgers baseball team. But partners at the firm are frustrated with other rainmakers at the firm who aren’t living up to the standards promised, sources said. One who is often mentioned is Henry Bunsow, an intellectual property litigator who moved to Dewey from Howrey LLP.
We covered Bennett’s joining Dewey here, and Bunsow’s arrival here. According to the Daily Journal, Bunsow has “a multi-year guarantee being paid out at roughly $4 million a year,” based on the expectation that he’d bring in $10 million in business.
For its part, Dewey denies the rumors of financial issues:
“From a financial performance perspective, the firm’s overall financial performance is stronger now than it’s probably ever has been in its history,” said [firm chairman Steven H.] Davis in response to the claims about the firm’s financial challenges. “We are coming off a set of financial performance by metrics that really are very good and we’re off to a good start in 2012.”
Davis said the firm’s revenue increased 32 percent so far this year and that the amount of time lawyers billed increased 15 percent, which was expressed to the firm’s partners in its monthly partners meeting last Wednesday.
“What we reported to the partners today was that we are actually having the best two months we’ve had since the financial recession,” Davis said. “Anybody [who] tells you otherwise is simply ignorant of the facts or has some other agenda going on that is trying to say inappropriate things.”
Could some of the grumbling be coming from Dewey partners dissatisfied with their compensation? It’s quite possible — and might explain why we’ve heard a lot of the rumblings in the past few days. Consider the timing:
Last Wednesday’s meeting was held to roll out the firm’s budget and announce official compensation slotting, but some Dewey partners weren’t happy with the news they received, according to Jeffrey Kessler, chairman of the firm’s litigation department.
“We’re not a lock step firm and that requires difficult judgments,” Kessler said. “Some people agree and disagree with those judgments.”
And if you disagree, well, the door is that way. Back in 2009, as you may recall, Dewey docked the pay of 66 partners by as much as 80 percent, to encourage attrition from less-productive partners.
(On the next page, we provide a list of Dewey partner departures that have taken place in 2012, as well as links to related coverage.)