Let’s be honest: despite being the Biglaw version of the Titanic, the collapse of Dewey & LeBoeuf could have been worse. Even though the Dewey dissolution constituted the largest law firm collapse in history, many D&L lawyers and staff were able to find new employment. Even Steve Davis, the disgraced ex-chairman of Dewey, landed a new gig.
But not everyone emerged unscathed. Some attorneys and staffers never got back on their feet professionally. Many Dewey partners scored new positions, but not all of them took all of their people with them to their new firms.
And even some partners are still suffering. In fact, one former Dewey partner, now a partner at another major law firm, recently filed for personal bankruptcy….
(Please note the UPDATE at the end of this post.)
When laypeople hear the words “law firm partner,” they envision a “models and bottles” lifestyle. But people within the legal industry know that there’s a big difference between mega-rainmakers and rank-and-file partners.
The news of a Biglaw partner filing for bankruptcy surfaced in an interesting Am Law Daily piece by Sara Randazzo about the ongoing clawback litigation between the Dewey liquidation trust and certain former D&L partners. On behalf of the Dewey trust, Diamond McCarthy plans to sue about 45 partners who declined to join the Partner Contribution Plan (“PCP”), in which participating partners paid a certain amount of money into the firm’s bankruptcy estate in exchange for a release of Dewey-related liabilities.
One of the non-participating partners might still get out of his Dewey debt, but not through the PCP. Am Law Daily reports:
On Dec. 31, banking finance specialist Gregory Owens filed a Chapter 7 bankruptcy petition in New York. In the filing, Owens lists $1.1 million in assets — the bulk of that sum held in his retirement plan — against $2.9 million in liabilities. The filing notes that “Debtor was a service-partner at Dewey LeBoeuf. Virtually all of his debts result from creditor claims against the firm.”
Banking law expert, heal thyself? But in fairness to Greg Owens, it’s hard out here for a service partner. Many of Dewey’s biggest rainmakers happily signed on to the Partner Contribution Plan because they had ample cash on hand or huge paychecks from their new firms. Ordinary partners like Owens found themselves in the worst position: saddled with Dewey debts, yet lacking the means to pay them.
Compare Gregory Owens to the rainmaker whom he followed to White & Case, M&A giant Morton Pierce. Pierce paid just $1 million into the PCP, a fraction of what he’s earning at White & Case. Meanwhile, Owens — who claims in his bankruptcy filing to earn $31,250 a month, or $375,000 a year, as a non-equity partner at White & Case — is being pursued for $1.05 million by the Dewey trust.
And that’s not his only Dewey-related debt:
[Owens's listed] debts include the $1.05 million at issue in the clawback suit filed against him in the Dewey bankruptcy Dec. 5, another $204,926 owed to Barclays Bank in connection with a loan he took out to cover his capital contribution to the firm, and $1.63 million that Dewey’s former New York landlord seeks from him in litigation it has initiated against hundreds of former firm partners.
And what about his assets? They fall far short of covering his liabilities:
Owens’ personal possessions are minimal, according to the filing. They include: household furnishings and electronics worth $5,800, a penny and postcard collection valued at $1,500, and a broken Concord watch worth $300.
That penny collection is going to come in handy soon. As for the broken watch, it sounds perfect for Biglaw timekeeping.
We’ve posted the full Chapter 7 petition on the next page. It contains some depressing tidbits — e.g., that Gregory Owens has just $20 in cash, a checking account containing $400, a savings account containing $400, and personal clothing worth $900. (But before you chastise Owens for shopping at Jos. A. Bank, remember that the clothing in question is used; secondhand suits are worth much less than new threads.)
But the petition reveals good news too. Owens could receive as much as $30,000 from a settlement of class action litigation between Stuyvesant Town and its residents. (Owens lived in Stuy Town — which, you may recall, was the childhood home of former Dewey chair Steve Davis — from 2006 to 2009.)
Most importantly, Gregory Owens owns three retirement plans that hold a total of $1.053 million in assets. These plans are protected in bankruptcy — thanks, ERISA! — so Owens doesn’t need to worry about an impoverished old age. In fact, the bankruptcy could be seen as a smart move for him: he can get rid of all his dischargeable debt, practice law for another decade or so (he’s in his mid-fifties), and then ease into a comfortable retirement.
So maybe the Greg Owens story isn’t as depressing as the “Biglaw Partner Files For Bankruptcy” headline might initially suggest. Even though he has almost $3 million in debt — as well as significant personal expenses, including “domestic support” obligations of $10,000 a month, which he claims cut his take-home pay down to $5,000 a month — he is still in a relatively privileged position. After his bankruptcy filing reduces or eliminates his dischargeable debts, he’ll be a White & Case partner making almost $400,000 a year, with more than $1 million saved toward retirement.
Like the story of his former firm’s fall, Gregory Owens’s tale isn’t exactly happy, but it could have been much, much worse. Even though Owens modestly refers to himself as a “contract attorney” in his bankruptcy filing — i.e., a nonequity partner, or a partner on a contract — he’s far better off than the true contract attorneys out there. Good luck to Gregory Owens as he puts his financial house in order.
UPDATE (5:00 p.m.): First, a former colleague had this to say about Gregory Owens:
Greg was a very reliable finance partner. We knew things were tough on him prior to the collapse — he’s divorced and cares for a little boy that he adores. I learned a lot from Greg and wish him only the best. He’s tied to the hip with Mort and I hope he’ll come out of this soon.
Second, there are some interesting observations in the comments discussing why Owens has so little cash on hand — it could be to his benefit in the bankruptcy.
UPDATE (1/25/2014, 11:30 a.m.): In a piece for the New York Times, Jim Stewart looks at the Gregory Owens bankruptcy and what it says about being a Biglaw partner today.
(Flip to the next page to read Gregory Owens’s complete Chapter 7 petition. Feel free to share your observations on it in the comments, especially if you have expertise in bankruptcy law.)