So yeah, Dewey is history. Everyone and his mother has written about what the bankruptcy of the “storied” law firm means. According to Kent Zimmermann, a legal consultant at the Zeughauser Group, Dewey could represent one of the first dominos. “Dewey’s failure is rocking the industry in the sense that most firms are saying to themselves, if Dewey could go down, could we?”
And for most firms, the answer is yes. After all, Dewey cited the economic downturn and massive partner compensation arrangements as the root causes for the firm’s collapse. Those causes are common to many large firms. Surely we have all seen the images of those sweet pads in Lawyerly Lairs. Reading those tea leaves, it is clear that Armageddon is a comin’ (or a stayin’, if you consider the other Biglaw firms that have folded).
Dewey’s fate is sad. Well, at least for Dewey and for other large firms. It might be good news for others, however. And, no I do not mean the other Biglaw firms who got to score them some Dewey rainmakers….
Looking at the root causes of Dewey’s demise, there is one important cause that is uncommon to small law firms: massive partner compensation arrangements that can lead to more money going out than flowing in. What small firm could stay in business for any length of time if that were the case?
And what small-firm partner would allow other partners at his or her small shop to take such a large cut of the pie? In my conversations with small-firm partners, many tout the actual control they are able to exercise in the governance and operations of their small firm as a reason for leaving Biglaw to go to a small firm.
Indeed, I have spoken to former income partners at Biglaw firms who gladly traded a smaller paycheck for a greater degree of power and control. These partners would not have allowed partner compensation to swallow up the firm’s income stream. Why? It is certainly not because small-firm lawyers are more magnanimous (I worked for some small-firm bozos). Rather, these partners want to stay in business and they have the power to prevent other partners from destroying the future longevity of their firm.
So, let me throw out a suggestion (that is in completely bad taste, but you know me — ruler girl). If you are looking for a blog topic or something to put in your newsletter (or in an email to me), explain why Dewey’s demise could not happen at your firm. Or, if you think I am wrong, please tell me why. Small-firm partners, I want to hear from you!
When not writing about small law firms for Above the Law, Valerie Katz (not her real name) works at a small firm in Chicago. You can reach her by email at [email protected] and follow her on Twitter at @ValerieLKatz.