Outside Counsel

Old-line, white shoe firms are interesting to me-- Sullivan & Cromwell brokered the Panama Canal deal, for example. Mudge, Rose is where Nixon met Mitchell. Dewey, Balentine used to be Root, Clark & Bird. The Root was Elihu Root, Jr., son of New York Senator Elihu Root, former United States Secretary of War. Henry Friendly and John Marshall Harlan II worked there at one time, and when Thomas E. Dewey was done being governor (but before he became a Thruway) that's where he went. LeBoeuf, Lamb, Greene & MacRae was pretty fancy too, and five years ago Dewey and LeBoeuf merged. Now it looks like they are going broke, which is sad, in a way. I don't mean particularly sad for the lawyers-- in the grand tradition of these matters it looks like they got into trouble for pretty much the same reason all law firms do. The saying in this biz is that pigs get fat and hogs get slaughtered. When your assets basically go home in people's hats every day it doesn't pay to get too greedy, and now a lot of interesting history is about to be lost, along with a lot of jobs that people who weren't greedhead lawyers can ill afford to lose.

I ran into one of the former partners of the firm where I once worked at the deli the other day. He was a big deal back then, because he had a big institutional client, and then that client collapsed and suddenly he wasn't such a big deal. He landed on his feet, more or less, and then the firm blew up. Seeing him got me to thinking about what fragile entities law firms are, even though they seem substantial. When it blew up (a couple of years after we'd left) that firm was over 150 years old, but when they blow up all law firms are revealed as being less substantial than Papier-mâché. Yesterday news hit that Bill Savino and three other partners at Damon Morey are walking away to join a Rochester-based firm, and this seems like a fairly significant seismic event in the local legal community. Damon says it is the third largest firm in the area, and I suppose it is. Whether it will endure after losing a big chunk of the work that it is largely known for is an interesting question, and the answer is likely to come down to whether the partners that remain are committed to practicing together. Law firms depend on synergies-- if everyone merely tends his or her garden and expects compensation in excess of actual contribution then they are in an unsustainable posture, but because lawyers are so clever we are pretty good at constructing operations that operate in exactly that way-- for a while. I suppose the paradigm is Dewey LeBoeuf, but there are plenty of other examples.

Peter S. Marlette, Damon Morey’s managing partners, confirmed their departures and said he was sorry to see them leave, but he noted Damon Morey continues to have 85 attorneys among its 160 employees. “We’ve got a firm that’s filled with excellent attorneys and terrific clients, and we will continue to serve our clients as well as we always have,” he said.

Well, there's part of the problem right there: the 75 employees who are not lawyers (lawyers, mind you, not partners) are pretty much pure overhead. So too are some of the 85 lawyers. Ideally associates and paralegals are profit centers, but associates expect to become partners at a rate that typically outpaces their ability to expand the practice. Some leave-- the time spent training them is a lost cost. Overhead will kill you: Class A office space doesn't come cheap, and neither does Westlaw, or photocopiers, or computers, or software (I wonder what the license for 160 copies of MSWord runs?). The service that comes and waters the plants, the money laid out to sponsor the Zoo, or Shakespeare in the Park, or tables at the Heart Ball-- it adds up pretty quick, and meanwhile you have partners who reckon that the client that that retained them 25 years ago is their client, not the firm's client, and that therefore they should get the slice with four pieces of peperoni, not the slice with two, or the slice with just olives, or the plain slice.

I hope Damon circles the wagons, I really do, chiefly for the sake of the 75 people who are not lawyers, and for the sake of the people who are not partners. And I wish Bill Savino well.

You look around at the way the world works and you wonder sometimes, how did it get like this? One of the ways is that, for good or for ill, lawyers made it like this. One of the cats that invented the modern corporate marketplace has just died: Joe Flom, the last name in Skadden, Arps, Slate, Meagher & Flom. Flom understood M&A practice before anybody else did. He transformed the way business does business, and along the way he transformed the way law gets practiced. I'm no fan of the Skadden model, but there is no disputing that they get their results by working hard to achieve them-- and it is clear that Flom was the model for that ethic.

It's interesting to consider a little law firm genealogy: the founders of Skadden, Arps, who hired Flom as their first associate, had been passed over for partnership at Root, Ballantine, Harlan, Bushby & Palmer-- that's the Harlan that became the second Justice Harlan, and the Ballantine that was Thomas Dewey's partner when the firm evolved into Dewey, Ballantine (which is Dewey & LeBoeuf these days). The Root was Elihu Root, the son of the Nobel Peace Prize laureate, United States Secretary of War (under McKinley and TR), and Senator from New York. In between government gigs the old man was also a partner. Ballantine was the first solicitor of what later was named the Internal Revenue Service.

And just like that, Dewey LeBoeuf is over. Pigs get fat, hogs get slaughtered. The shoemaker's children go barefoot. Whenever I see a firm like that go bust I marvel-- it inevitably happens because the decision makers make decisions that they would never, ever recommend to their clients.

Some years back we were a minor beneficiary of a similar meltdown, inheriting a batch of files from a firm whose partners didn't know how to share. I went with the client to retrieve the files in person, and the poor son of a bitch that had stayed on deck to manage the wind-down was a lawyer with whom I'd had some dealings in the past. He had been one of the decent ones in a office that was well-known for its hard-nosed swagger, and he was miserable, surrounded by banker's boxes and broken office furniture. Everyone else had left the plantation, and he was stuck, being paid out of the bankruptcy estate, doomed to be the last one out of the gate in his search for a place to land. I'd never particularly liked him, and I actively hated the firm, but seeing the guy like this gave me no pleasure. Really all it did was remind me that our glamor profession is a very delicate ecosystem. Every day your chief assets put on their hats and go home, and if they go into work the next morning at a different place, well, that's what happens. If enough of them do that then the secretaries and the mailroom guys, and the overnight staff and the paralegals -- and the associates-- are all out of work. The outfit that takes care of the plants, the cleaning contractor, and the coffee service company lose a valuable account.