Biglaw, Money, Partner Issues, Trusts and Estates

Debevoise Ditches Its Trusts and Estates Practice

It looks like the trusts and estates department at Debevoise & Plimpton needs a last will and testament. As we mentioned in Morning Docket, the firm is pulling the lifeline on its T&E department.

The move surprised some, given the kind of place that Debevoise is. As Peter Lattman put it, “it seemed to run counter to Debevoise’s reputation for a strong partnership culture. At a time when many large law firms have discarded the traditional partnership model and embraced a more bottom-line approach, Debevoise has been seen as retaining an old-school ethos — a genteel law firm known for its camaraderie and decency.”

We have some additional information about the wind-down process. On the bright side, it’s being conducted in a genteel, decent, Debevoise sort of way….

The department has been given until the end of 2014 to find a new home, according to one source, so it’s not like the group is being rushed out the door. As Debevoise’s presiding partner, Michael W. Blair, told the New York Times, “Debevoise supports the group in this process and will work to ensure that in this transition the needs of the firm’s clients continue to be served.”

A tipster told us that the group is trying to move intact — and sooner rather than later, “to avoid practicing under a cloud of uncertainty.” Any associate who chooses not to move can stay on at Debevoise for six months after the group’s departure. And “it has been suggested that the T&E associates will have a vote on the choice of firm before the move is made.”

“It’s not a great situation,” said a source, “but I suppose it could have been much worse.”

What prompted the firm’s decision to shutter its T&E practice? Some thoughts from DealBook:

[D]rafting wills and trusts, and the legal matters that flow from that, is less lucrative than the primary revenue drivers at big law firms: multibillion-dollar corporate transactions and high-stakes litigation.

And there are problems with trusts and estates within a big law firm model. The practice, to use the law firm management parlance, is not as leverageable as other areas. Corporate and litigation partners generate big fees by assigning armies of junior lawyers to megamergers and complex lawsuits. By comparison, trusts and estates work requires far less manpower, which mean far less profit.

T&E work often involves fewer lawyers billing fewer hours. Although they work hard, T&E lawyers generally aren’t billing 3000 hours a year.

Another issue in sustaining these departments is that individual clients bristle at billable rates that now reach more than $1,000 an hour. While big corporations grudgingly pay those rates, wealthy families often resist them.

Rates are a big part of the puzzle here. They partly explain why some Biglaw partners are leaving their firms to set up their own boutiques. In certain specialties, clients just don’t want to pay the Biglaw rates.

This is what jumped to my mind as the main motivation when I heard about the news:

One factor contributing to Debevoise’s move to discontinue the group, people say, is its unusual lock-step compensation system, which pays partners in a narrow range strictly according to seniority. That means that [T&E practice head Jonathan] Rikoon is paid on par with a star deal maker from the same law school year, while bringing in less business. This created some discord in the partnership ranks. Debevoise’s profits per partner are $2.1 million, according to The American Lawyer magazine.

But according to the firm website, Rikoon is the only partner in the practice area. Removing a single partner isn’t going to improve profit per partner by that much. According to the most recent Am Law 100 rankings, Debevoise had 143 equity partners and PPP in 2011 of $2.075 million. Subtracting one equity partner boosts the PPP figure by a mere $15,000, to $2.09 million. If I were Debevoise, I’d be less worried about T&E’s drag on PPP and more worried about super-rainmaker Mary Jo White possibly leaving to head the SEC.

William D. Zabel — a founding partner of Schulte Roth & Zabel, Debevoise’s neighbor at 919 Third Avenue, and a leading T&E lawyer (who certainly looks the part) — told the Times that it saddened him to hear the news of Debevoise closing its trusts and estates department. And it certainly is a sign of the times, reflecting how law is becoming more of a business than a profession, even at a place like Debevoise.

But, in the end, this could turn out to be a good thing. The Debevoise trusts and estates attorneys will probably wind up at a firm where they can continue to do excellent work, charge their clients much less in fees, and not get dirty looks in the elevator if they leave before 7 p.m.

Best of luck to the Debevoise T&E lawyers as they search for a new professional home.

Debevoise & Plimpton Drops Trusts and Estates Practice [DealBook / New York Times]

Earlier: Obama Throws Down The Gauntlet With New Pick To Head The SEC

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