Since our Friday photo essay on Dewey & LeBoeuf, the once-proud law firm that probably isn’t long for this world, numerous other outlets have produced some excellent Dewey coverage. We mentioned two of the pieces, about partner problems and unpaid janitors’ bills, in today’s Morning Docket.
It’s interesting to see how the pace of the Dewey story is shifting. We’re moving from the breathless breaking of news into a period of longer pieces focused on analysis and narrative. This makes sense, given that most of the major events have already transpired (with the exception of formalities that will be big news if and when they do occur — e.g., an official vote of dissolution, a filing of bankruptcy, etc.).
So let’s do a more comprehensive review of the latest Dewey stories from around the web. We bring you more theories of blame, more partner departures, and more revelations about the personal life of former chairman Steven H. Davis….
Here is a non-exhaustive list of recent, interesting news stories about Dewey & LeBoeuf. We’ll say a little bit about each; you should click on the title to read the full piece.
1. The Dewey chronicles: The rise and fall of a legal titan [Thomson Reuters News & Insight]
A long but fascinating piece about how Dewey reached the point where it is today — definitely worth your time. At a partners’ meeting in January 2012, after explaining Dewey’s financial predicament, former chairman Steven Davis reportedly said this to his fellow partners: “You have to own this problem.”
(Some might have wondered why Davis didn’t have to “own” it, under a “you break it you buy it” theory. But in fairness to Davis, his “owning” the problem probably wouldn’t have gotten Dewey out of the hole it was in — the firm has about $230 million in outstanding bank and bond debt, according to Thomson Reuters.)
2. Dewey’s Bienenstock Discusses Law Firm’s Demise [DealBook / New York Times]
3. Behind the Scenes as Dewey Tries to Save What Remains [Wall Street Journal (sub. req. ) via WSJ Law Blog]
We’ve already heard from one former Dewey partner about what went wrong at the firm. We will surely hear from more in the weeks and months ahead.
On Friday and Saturday, two high-ranking Dewey partners — Martin Bienenstock and Charles Landgraf, who served together for a time in the firm’s Office of the Chairman — spoke with the New York Times and the Wall Street Journal about Dewey’s last days. Both pieces are very interesting, discussing such as matters as the Willkie Farr defections, which dealt a major blow to the efforts to stabilize the firm, and the eleventh-hour discussions with Greenberg Traurig. Bienenstock reveals that Dewey’s current strategy is to try and unwind without a formal filing of bankruptcy:
The intent is to optimize the outcome for all the constituencies. Right now that’s done without the use of the court. Whether it continues that way, we have to say we’re not sure, but so far it’s worked….
Right now, we have no plan to file a Chapter 11 bankruptcy. We’ve had a completely nonadversarial relationship with our lenders, and right now the cash we’re using is the lender’s collateral. They have blessed our use of cash collateral to pay expenses. Their expenses, too, are much less because we are not in the courts.
Bienenstock and Landgraf come across well in the interviews, in my view. It seems they were trying to make the best of a very difficult situation, continuing to serve Dewey’s clients while at the same time striving to preserve as many jobs as possible. It’s worth noting that Bienenstock, in taking his practice to Proskauer, is bringing along a significant group of partners and associates. We’ve heard from a number of Dewey readers who praised Bienenstock for staying as long as he did, trying to salvage what could be salvaged, and then leaving with all or most of his team.
One reader, however, offered this dissenting opinion:
[Bienenstock] makes two ridiculous claims:
(a) He pats himself on the back for staying with Dewey until now in order to save jobs, with a loss of pay for himself that he could get from joining another law firm. That’s disingenuous. Since he’s one of the big rainmakers at Dewey — with the most equity in the firm — he also has most to lose in the event of a bankruptcy. So staying was an effort to protect his investment, and minimize his liabilities.
(b) He says that the 2011 Dewey revenue shortfall resulted from $30M in unexpectedly lower billings, and from the fact that the firm drew only $75M of its $100M line of credit. So together, he says the firm came up $55M short. But that makes no sense. The line of credit is drawn on in the early part of the FY in order to smooth out the firm’s cash flow, and then it’s paid back over the course of the rest of the year. It’s a short-term loan. Bienenstock is claiming that the firm should have used the line of credit to pay the partners at the end of the year. You pay partners from profits, not from loans. Otherwise, all you have created is more debt, which carries over into the next year. It’s no way to run a business.
That may be true. But perhaps one should blame the Steves for Dewey’s business difficulties. (Bienenstock, though, is careful not to blame Davis; in fact, he defends Davis against suggestions that he acted criminally.)
Speaking of the former chairman — whose portrait is available for sale, by the way — let’s learn more about his private life. And read about the latest partner departures, too….