Bankruptcy, Biglaw, Dewey & LeBoeuf, Dissolution, In-House Counsel, Money, Partner Issues, White & Case

A Non-Equity Partner’s Rant

Although Am Law and ATL covered the story first, the long spread in The New York Times alerted the whole world to the woes of Gregory Owens, a former Dewey partner who’s now a bankrupt non-equity partner at White & Case.

The legal blogosphere naturally lit up over this story, with Scott Greenfield dispensing his usual simple justice and the Volokh Conspirators (and their many commenters) debating Owens’ personal and professional worth.

But my emailbox filled up, too, with assorted reactions from people at all levels in the law. The most interesting rant — and the one I’m sharing with you today — came from a person who looks a lot like Owens; he or she is a non-equity partner at a Vault 50 firm who’s in his or her 50s. This person disagrees violently with the conventional wisdom about non-equity partners. My correspondent sings their praises and insists that both law firms and many law firm consultants terribly misjudge the value that non-equity partners provide to their firms. . . .

In my correspondent’s words: “The Times article had the usual spin from law firm consultants saying how Owens proves that non-equity partners are problems for their firms. This resembles similar statements that these consultants make every time they deign to speak of the Untermenschen. In my humble opinion, the consultants are idiots.

“Seems to me that, if White & Case was paying Owens $375,000 (which seems low even for a non-equity partner in a big New York firm), Owens was a pretty good economic deal for his firm. Assuming he was billed by the hour and billed, conservatively, $600/hour, he paid for himself (without overhead) at 625 hours in a year, or 12 hours per week. After he covered his share of overhead, everything else he brought into the firm was gravy for equity partners.

“From the law firm’s perspective, what’s so awful about having a subclass of economic non-partners who make money for economic partners in the exact same way that associates do? If the objection is that firms must maintain a culture of making associates feel that becoming a ‘partner’ means something, that’s crazy. Associates can see that the economic partners do extremely well (particularly in firms that share financial results widely), and associates will continue to strive for equity status. In fact, many would strive just as hard to get the income levels earned by non-equity partners, which, Owens aside, are pretty good, too.

“Or is the objection that firms should eliminate non-equity partners because the firms must reserve some ‘good work’ for associates to do? That objection is equally silly. The ‘only so much good work’ explanation is both subjective and questionable. What exactly is ‘good work’ for associates? And is all that ‘good work for associates’ really best performed by associates? Does anyone really think that clients aren’t better off having a 30-year non-equity partner handling significant things he or she has seen dozens of times before as compared to having the work done by a 5th-year associate? Clients clearly win when certain work is given to non-equity partners.

“Some big firms may well be based heavily on a model where non-equity partners generate income for the economic partners — the equity partners. These firms have very substantial portions of their ‘partnership’ generating profits for the elite few. The basic big New York law firm model where the firm has only two types of service providers — a very few extremely rich partners and a vast number of, at least by comparison, poorly compensated associates — is good at delivering multimillion dollar average partner incomes, but the model doesn’t make much sense for clients. This model depends on the notion that work can readily be divided into that which those two groups — associates and partners — are the most effective and efficient at providing. That’s silly. Work is a continuum, with some best done by associates, some by people more senior than associates who are not equity partners, and some by equity partners. This isn’t a binary choice between associates and partners; there’s a vast amount of room in the middle.

“Indeed, you come closer to the truth if you strip away the fiction that, within a partnership, high income/equity status and exceptional legal ability are closely correlated. The reality is that, within many partnerships, the high income earners hold that status because they (1) are better salespersons, (2) are being rewarded for what amount to historic accidents (they inherited a client or practice by being there at the right time, came from a prior job in the government or judiciary that makes them a magnet, etc.), or (3) have random personal relationships with those who matter. Once you acknowledge that truth, you quickly conclude that the firms need actual good lawyers who are identified as such and stay around to be good lawyers for client-related reasons.

“For obvious reasons, I may be a little biased on this subject. In a few short years, I will no longer care.”

So, readers, what do you think? Is my hyperventilating correspondent in fact an Untermensch, unworthy of mention, or might he (or she) have a valid point?

Earlier: Dewey Know A Biglaw Partner Driven Into Personal Bankruptcy By The Firm’s Collapse?


Mark Herrmann is the Chief Counsel – Litigation and Global Chief Compliance Officer at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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