Dewey Owe Too Much to Certain Partners?
Do some of Dewey's recent financial issues stem from excessive amounts owed to certain partners? And how is the firm handling the situation?
On Friday, we broke the news of lawyer and staff layoffs at Dewey & LeBoeuf. There have been reports of the firm experiencing financial issues, and these cost-cutting measures appear to be part of a larger plan of attack. According to the memo sent out by chairman Steven H. Davis, Dewey plans to “reduc[e] the number of lawyers and administrative staff globally by approximately 5% and 6% respectively.”
But associates and support staff aren’t the only ones who will be feeling the pain. It appears that Dewey is seeking sacrifices from certain partners as well….
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Here’s what Casey Sullivan reported yesterday in the Daily Journal (sub. req.):
Some high-ranking partners at Dewey & LeBoeuf LLP have had a portion of their 2011 compensation deferred, with a promise Dewey would pay them last year’s full compensation in the coming months after the firm takes a closer look at its financials, according to four sources close to the firm.
The compensation being withheld from those partners is often seven-figure amounts, according to two sources. Three sources said the firm has deferred compensation over the past several years and now owes partners what they currently cite to be more than $100 million.
This is roughly consistent with what we’ve been hearing as well. We’ve heard numbers ranging anywhere from $70 million to over $120 million. What’s the order of priority?
Two sources said Dewey is prioritizing making payments to partners who just recently joined the firm, especially top performers who have lived up to their rainmaking promises, rather than legacy partners. The rationale, sources said, is that partners who have been with the firm longer are more likely to stick around out of loyalty.
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Rewarding the most-productive recent arrivals makes sense — especially since Dewey probably wouldn’t mind if some of the less-productive legacy partners head for the door. As we previously noted, the firm strategically encouraged some partner attrition back in 2009, by slashing certain partners’ pay.
“The deferred payments that you’re talking about are being handled by the firm in a long-range fashion that is going to result in almost no impact to profitability,” said Dewey intellectual property litigator Henry Bunsow, who last week acknowledged the firm is currently dealing with what he called some short-term financial issues. “I have confidence that [partners] will be treated fairly within the parameters of what the firm is dealing with.”
Bunsow downplayed the situation by saying it’s common for firms to defer on payments to partners and pointed to Howrey LLP, and Brobeck, Phleger & Harrison LLP, firms where he previously worked. Both are now defunct.
Ouch — did Bunsow really say that? Also, mentioning his prior stints at Howrey and Brobeck makes him sound like the Grim Reaper of Biglaw.
On the financial front, according to the Daily Journal, Dewey is in the process of renegotiating its loan agreements with its three main lenders: Citibank, Wells Fargo, and JP Morgan. Richard Shutran, co-chair of Dewey’s corporate department, described the negotiations as standard. To paraphrase one popular Above the Law meme, “Guys in my high school used to restructure lending facilities all the time, it was no big deal.
In the meantime, expect more partner attrition….
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