Law Firm Failures Aren’t Career Enders That Many Lawyers Fear

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at a paper showing surprisingly positive career results for former Dewey & Leboeuf lawyers. Sign up to receive this column in your Inbox on Thursday mornings.

It is a nervous time at Big Law firms. With deal work having dried up for nearly two years, some firms have laid off associates and staff. Others have seen a raft of partner departures, and many appear to be looking for merger opportunities.

These are all waypoints on the path to law firm failures. No firms have gone under as a result of the past months’ struggles, but anxious lawyers might wonder given the tenuous times: What will happen to me if my firm blows up?

“Nothing good,” is one possible answer, followed by worries about savings and looking for work.

But new research from a Yale Law student offers a positive perspective: Lawyers at decimated firms find new jobs. Their paths to a Big Law partnership might not be derailed by their former firms’ failures.

Andrew Granato got his hands on a list of Dewey & Leboeuf’s associates and partners from 2012, before the firm famously went belly-up. Using the Wayback Machine, a web archive, he tracked down where most of those lawyers moved immediately after the blow-up. Then found out what they’re up to as of late 2022.

Granato compared the lawyers’ career trajectories to attorneys at a handful of competitor firms identified by Dewey & Leboeuf managing partner Steven Davis. The list includes Sidley Austin, Fried Frank, Akin Gump, Mayer Brown, White & Case, Dechert, and Orrick.

It turns out that former Dewey associates became partners at Am Law 100 firms at nearly the same rate as associates at the competitor firms that didn’t fail. Of the 93 Dewey associates, 19% became Am Law 100 partners, compared with 26% of the 353 associates at competitor firms.

The difference isn’t statistically meaningful, according to Granato.

“We can’t with any confidence say that having been a Dewey associate versus an associate at one of these control firms like Sidley Austin or Fried Frank led to a lower likelihood of becoming a partner a decade later at an Am Law 100 firm,” he said in an interview.

Granato said his finding about associates was his most interesting. He’d assumed that associates would have lost the relationships they’d spent years building at Dewey and would suffer in their new firms as a result.

But most Dewey associates who turned into Big Law partners a decade later got there because they joined a new firm alongside Dewey partners just as the firm exploded. Dewey associates who didn’t move to another Big Law firm in 2012 had “very little chance” of being an Am Law 100 partner today, Granato said.

The findings highlight what most associates likely already know: Even if they could, they don’t need to make relationships with every partner at the firm. Working closely with one influential partner or a powerful practice group is really all that matters. If the partner or practice group members leave, they’ll take the associate along for the ride.

The story is more complex for Dewey’s partners.

They had slightly more difficulty maintaining an Am Law 100 partnership a decade after the implosion compared with associates, Granato found. Most landed on their feet in terms of employment, but many were subject to lawsuits clawing back pay from Dewey’s final days. Some resorted to personal bankruptcy filings.

Yale Law professor John Morley supervised Granato’s paper after his research into law firm failures spurred the idea. He lauded Granato’s grueling work tracking down the lawyers’ careers. He said the paper helps answer a nagging academic question: Is the world worse off when law firms fail? (There’s an easy lawyer joke in there.)

“What Andrew wants us to say is: If everybody lands on their feet, is it really a problem?” Morley said. “One thing he proves pretty convincingly is that whatever problems there are, they are not catastrophic. People get hired.”

But it doesn’t mean going through a law firm failure is easy.

Even if Dewey partners ended up as Am Law 100 partners, they may not be paid as well as they once were. And they likely lost a lot of money through the firm’s bankruptcy. One Dewey partner was sued for more than $12 million by Dewey’s estate, driving him into personal bankruptcy.

Morley said partners have compared leaving a failed firm to a painful divorce.

“A lot of divorced people get remarried—does that mean divorce is good? Probably not,” Morley said. “But divorce can be OK and sometimes good.”

One bright spot for partners: Morley does not expect a raft of law firm failures resulting from today’s challenging business environment. Most of the pain has been limited to capital markets and transactional practices, and, crucially, the pain has been spread rather evenly among firms.

Firms don’t fail when everyone’s business is down. They fail when their profits decrease over multiple years compared to their competitor firms. That convinces partners to leave for higher pay elsewhere.

“What you want to pay attention to is not whether a firm’s profits are stagnating, it’s whether they’re declining relative to their competitors,” Morley said. “If every firm is declining in equal measure, none will collapse.”

Worth Your Time

On Google’s Lawyers: Justin Wise profiles Williams & Connolly as the “bare-knuckle” firm takes center stage this week defending Alphabet Inc.’s Google in a high-profile government antitrust case.

On Proskauer: Proskauer Rose is close to reaching a settlement with a former executive it accused of stealing a huge swath of records before leaving the firm, Justin reports.

On Bankruptcies: A wave of corporate bankruptcies might be in store for companies targeted in litigation over the proliferation of “forever chemicals,” Alex Wolf reports. The lawsuits have already led to multibillion-dollar settlements and at least one major Chapter 11 filing.

That’s it for the next few months! Thanks for reading and please send me your thoughts, critiques, and tips.