Bankruptcy, Biglaw, Dissolution, Howrey LLP, Law Firm Mergers, Musical Chairs

Howrey Going to Survive the Storm? Board the Winston Lifeboats, Leaders Urge

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Accept your offers. It’s wise advice for 2Ls going through fall recruiting, and it’s wise advice for partners of the rapidly unraveling Howrey law firm, most of whom have offers to join Winston & Strawn. Last weekend, Winston made offers to a little over 75 percent of Howrey partners, with responses requested in 21 days.

Yesterday we mentioned that a Howrey partnership conference call took place on Tuesday. During that meeting, firm chairman Robert Ruyak and Winston & Strawn managing partner Thomas Fitzgerald apparently urged Howrey partners with Winston offers to accept them as soon as possible, according to The Recorder.

Many Howrey partners have already left for other firms, as chronicled in these pages. A group of eleven attorneys recently departed for Morgan Lewis, for example.

Of the 200 to 230 Howrey partners who remain, how many are likely to go with Winston?

A fair number, it seems, and sooner rather than later. An ex-Howrey partner told The Recorder: “A lot of people will be making up their mind in the next week or so. A lot of people will go along with the [Winston] program.”

There may be some variation by office. It seems that there will be high acceptance rates in Howrey’s D.C. and Houston offices, but more variation in the California outposts.

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In view of the big names who have already left Howrey, here’s one tricky issue:

One question some legal observers are asking now is how Winston will ensure it gets enough rainmakers along with service partners. “What will they do if only the service partners accept the offers and none of the rainmakers do?” said a California legal recruiter involved in some discussions. “That is my big question — that would impact their profits, it would just be insane.”

As smart lawyers, the Winston folks seem to have protected themselves somewhat: the offers to Howrey partners are reportedly contingent on a certain number of them accepting. This is shrewd: not only does it protect Winston from getting too much chaff and not enough wheat, but it also makes it more likely that the overall deal will go through, by creating peer pressure among Howrey partners to cast their lot with Winston.

Other issues may be less easily finessed. Yesterday we linked to a post by Professor Larry Ribstein, an expert on partnership law, in which he raised two issues:

First, despite Winston’s best efforts to avoid this result, might there be some sort of de facto merger between Winston and Howrey resulting in Howrey’s assets and liabilities carrying over to Winston? I suspect that Winston has covered this base pretty thoroughly, but the whole area of partnership merger is fraught with confusion. See Bromberg & Ribstein on Partnership, Section 7.21.

Second, will the LLP shield protect all the Howrey partners from personal liability for debts in excess of Howrey’s assets? This is a rather complex subject covered in detail in Chapter 3 of Bromberg & Ribstein on LLPs.

The broader story here is about the swift collapse of big law firms that have no real assets except the lawyers who, not bound by non-competes and no longer personally liable for the firm’s debts, can walk out the door any time.

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Liability issues are further explored in this very interesting and thorough American Lawyer article (via the WSJ Law Blog). The piece contains a detailed discussion of Howrey finances, including its credit arrangements with Citibank. Due to all the partner departures, Howrey might be in breach of various covenants with Citi.

Finally, in other Howrey news, another anonymous Howrey-focused blog has sprouted up: It’s Howrey Doody Time (via the ABA Journal). Alas, it doesn’t seem quite as robust as the dearly departed Howrey’ Doin (which was rather short-lived).

As we’ve said before, if you’re a Howrey associate, you might want to start exploring all of your options. If you’re in antitrust / competition law, an area of Howrey strength, we hear that they’re hiring in Fiji.

P.S. That’s only partially in jest. If your law firm goes under, maybe it’s a sign that you need to change things up and try something radically new? Doesn’t a break from the Biglaw rat race, in the island paradise of Fiji, sound great? Cf. Tropical Depression (Arin Greenwood’s new novel, in which a neurotic young New York lawyer loses her job and moves to the tropical island of Miramar).

Ruyak Presses Howrey Partners to Act on Winston Offers [The Recorder]
For Howrey, Mass Departures to Winston Could Breach Debt Obligations [American Lawyer]
Howrey Doing? Here’s Your Daily Update [WSJ Law Blog]
Accept Winston & Strawn Offers ASAP, Howrey Chairman Urges [ABA Journal]
It’s Howrey Doody Time [Blogspot]

Earlier: Prior ATL coverage of Howrey

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