Over the weekend, when it looked like lenders to Dewey & LeBoeuf might be willing to give the troubled law firm more time to sort out its finances, I observed that “LeBoeuf is not yet cooked.” But it now looks like my fairly charitable assessment was unduly, or maybe even wildly, optimistic.
Can you say “warm red center”? As we reported yesterday, another slew of Dewey partners — about eleven in all, including former chairs of the tax practice and the corporate finance practice — started heading for the exits.
And perhaps they’re doing so with the blessing of firm management. Check out what D&L is now telling its partners….
UPDATE (10:10 AM): Now with text of memo appended.
UPDATE (10:30 AM): Now with discussion of London office added.
UPDATE (11:10 AM): Now with comments from Martin Bienenstock, a member of the firm’s four-person “Office of the Chairman.”
Last night, Casey Sullivan of the Daily Journal (sub. req.) broke news of a major internal memo at Dewey:
A Dewey & LeBoeuf LLP partner confirmed late Monday that the embattled New York firm had issued a memo internally that encouraged its lawyers to seek work elsewhere.
The partner would not provide the Daily Journal with a copy of the memo, saying he felt uncomfortable breaching a confidentiality agreement with the firm, but noted the document gave no explanation as to why Dewey had offered this possibility to its lawyers.
In the New York Times, Peter Lattman has additional details:
[Dewey] encouraged its partners on Monday evening to look for another job, according to an internal memo. The firm’s leadership has been scrambling in recent days to stave off failure by merging with another law firm and persuading its lenders not to push it into liquidation.
“All partners,” said the memo, which was reviewed by The New York Times, “are encouraged to seek out alternative opportunities.”
(We’d like to post the full memo here; as you may have noticed, here at ATL we believe in giving our readers complete documents when we can. If you have a copy you can share, please email us, and we will update this post with it.)
UPDATE (10:10 AM): We’ve posted what we believe to be the full text of the “alternative opportunities” memo, on the next page of this post.
So what does this mean for Dewey? More from the NYT:
If Dewey were to file for bankruptcy, it would most likely lead to the firm’s dissolution, industry experts say. Unlike an operating company with physical assets that can reorganize in a bankruptcy, Dewey — a private partnership whose only real assets are lawyers — will be left with nothing to restructure once its lawyers walk out the door.
“There are no plans to file bankruptcy,” Martin Bienenstock, the head of Dewey’s restructuring practice and a member of the office of the chairman, said late Monday. “And anyone who says differently doesn’t know what they’re talking about.”
With all due respect to Mr. Bienenstock, who’s one of the nation’s foremost bankruptcy lawyers, that somewhat swaggering assessment seems at odds with reality. As a partner at a rival firm quipped, when sending us the NYT article, “This is the equivalent of pulling the plug on the respirator.” As a tipster even more succinctly texted us this morning, “Firm is done.”
If you want to be optimistic, here’s another take on the memo, from Sara Randazzo of Am Law Daily:
According to a source with knowledge of the memo’s contents, the message was intended to let partners know that fiduciary duties do not restrict them from considering or pursuing career alternatives outside those the firm is discussing with possible transaction partners.
As previously reported, Dewey had been in talks with Greenberg Traurig to execute some form of combination or mass lateral hire, but both firms confirmed Sunday that those discussions are over. Other firms, including Patton Boggs and SNR Denton, have also reportedly had discussions with Dewey. On Monday, representatives of both Patton Boggs and SNR Denton declined to comment on those reports.
It would be great if Dewey could somehow survive. Nobody wants to see thousands of lawyers and staffers lose their jobs. But it’s hard to imagine why any healthy firm would want to rescue Dewey when it can simply wait for the place to fall apart on its own and then go through the partners and practice groups and pick up bargains.
According to Am Law, counting the 11 or so departures announced yesterday, Dewey has lost at least 83 partners since the start of 2012 (to 32 rival law firms and two clients). And now that firm leadership has essentially given the green light to defectors, the pace of departures might be expected to increase (although it’s possible that the most-mobile people and the biggest rainmakers have already left, with a few exceptions — e.g., Bienenstock).
In other Dewey news:
1. UPDATE (10:30 AM): Dewey’s limited liability partnership in London is considering an orderly wind-down.
2. Former chairman Steven H. Davis has hired a high-powered criminal defense lawyer: Barry Bohrer, a name partner at the white-collar boutique of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer. (We noted this in Morning Docket.) Bohrer issued a statement: “Every action of Mr. Davis as chair of the firm was taken in good faith and in the best interests of the firm. He is confident that fair-minded professionals will conclude that he engaged in no misconduct.”
3. Former Dewey partner John Altorelli — a current partner at DLA Piper, and an alleged ex-lover of sexy Russian spy Anna Chapman — wants to help out displaced Dewey-ans. He has some ideas for how to help. You can see the email he sent out yesterday to his former Dewey partners on the next page.
UPDATE (10:10 AM): We’ve pasted the “alternative opportunities” memo on the next page as well.
UPDATE (11:10 AM): Bienenstock sent a statement to Bloomberg Businessweek explaining his comments denying any current bankruptcy filing plans. He wrote: “Bankruptcy is always a last resort and is not in current plans. If real property and equipment leases are assumed by other firms or renegotiated, and the lenders realize on their accounts receivable and inventory, there may be no need for judicial intervention.”
As for the “alternative opportunities” memo, Bienenstock stated, “Our memo did not encourage people to leave. Rather, it explained that the partners who do not want to be part of a merger could look elsewhere. This way they would not be otherwise inhibited by duties to the partnership.”
You can read the full memo for yourself, on the next page.