Storied Law Firm Pitches Plan for Rescue
Leaders of New York law firm Dewey & LeBoeuf LLP are considering a novel rescue plan that would put the firm into bankruptcy protection but might be its best hope at preserving value at a prestigious firm that this year has been hemorrhaging talent.
Amid a wave of partner exits, Dewey’s leaders in recent days have reached out to law-firm peers with a fresh proposition, said people familiar with the situation. The partners have discussed filing a “prepackaged” bankruptcy plan that would allow a merger partner to take on the firm free of its mounting debts and substantial unfunded pension obligations, these people said.
Asked about such a scenario, a spokesman for Dewey said: “The firm does not comment on speculation.”
A merger, if it happened, would mark a striking turn for a firm that became one of the largest in New York five years ago with the linkup of two storied firms. Dewey Ballantine, founded in 1909, was for years run by former New York governor and presidential candidate Thomas E. Dewey. LeBoeuf, Lamb, Greene & MacRae began in 1929 and developed extensive experience in insurance and energy work. With 1,300 attorneys in 12 countries, and projected annual revenue of around $1 billion, the resulting Dewey & LeBoeuf sought to wrestle corporate work away from the elite Wall Street firms that dominate that market.
The firm aggressively recruited star lawyers and their big books of business but was hampered by sagging demand for legal services in the wake of the financial crisis. This year saw a stream of partner departures, rooted in compensation promises made to some lawyers recruited by the firm that cut into money available to pay others.
While a number of large law firms have foundered over the past decade, Dewey & LeBoeuf is the largest to so publicly enter what legal experts have said is a danger zone—when speculation about the firm’s future can trigger a partner exodus.
Among potential partners for the merger-and-bankruptcy plan being floated, Dewey has made overtures to New York-based Shearman & Sterling LLP; Greenberg Traurig LLP, which has roots in Miami; and Pittsburgh-based Reed Smith LP, these people said.
A Greenberg Traurig spokeswoman said: “We have a great deal of respect for Dewey LeBoeuf and their quality lawyers. It would be inappropriate for us to comment on market rumors.” At Shearman & Sterling, a spokesman said the firm “isn’t in discussions with Dewey & LeBoeuf concerning a merger.” Reed Smith wasn’t immediately available for comment.
The merger idea being discussed is just one among possible outcomes for Dewey. The firm could restructure itself with a leaner footprint, shedding less-profitable practices and lawyers. Partners could also vote to dissolve the firm, something the leadership has said isn’t on the table.
For Dewey, one value of the merger-and-bankruptcy plan would be to avoid a liquidation, which is an outcome that would make recovering accounts receivable and yet-unbilled legal time much more difficult, those familiar with the situation said.
Under the plan, the firm would file for bankruptcy, which would freeze most debts owed to trade creditors and employees, as well as payouts to pension holders.
The remainder of the firm—currently estimated at 250 partners and a total of 1,000 lawyers—would then fold into the merger partner. The hope is that enough of the “old Dewey” could be preserved to enable a robust collection of debts from clients, these people said. The acquiring firm would pay little or nothing up front, but would likely be expected to cover ongoing operating costs as the bankruptcy case proceeded.