The recession has seen the demise of hundreds of large law firms who had been previously enjoying an economic bubble of their own.
Worldwide economic strife after years of poaching high flyers at astronomically high long term salaries, and millions of pounds spent on top offices each year, has put pressure on firms to let lawyers go and can lead to dissolution.
Famous law firms, some of the industryâ€™s most elite, have begun haemorrhaging partners across the pond with Dewey & LeBoeuf taking a nose dive last year with other huge names not far behind.
Thatâ€™s not to say that partnerships havenâ€™t disbanded pre-recession, but finance is often a key player in the break-up of a star firm. Partnerships dissolve for many reasons, and the decision to bring one to an end can be difficult for all involved.
Dissolution for the greater good
Not all firms separate for negative reasons, in 2003 Milberg Weiss Bershad Hynes & Lerach split their prolific plaintiff-side firm in half as a consequence of its own success.
The firm negotiated settlements for hundreds of millions of dollars for a number of well-known companies over its 35 years, expanding to having share-holding senior partners on the east and west coasts of America. Their split was not for financial purposes, or because of rifts between partners, but a difference in working style between the firmâ€™s highest profile partners.
Dividing their giant of a law firm into two entities would not damage either half economically or in their efforts to win cases, the sheer size merely meant that two would be more manageable than one 220 lawyer firm.
As briefly mentioned above, financial ruin is often a contributing factor to the downfall of a law firm, while the responsibility to pay what is owed to creditors leaves filing for bankruptcy as the only viable option.
For Dewey & Le Boeuf this was precisely the case, as the firm was forced to call back money from their retired beneficiaries in order to contribute to the masses of debt accrued: totting up to a total of secured and unsecured creditors claims of $550 million.
Deweyâ€™s bankruptcy was built around the Partnership Contribution Plan, in an effort to reimburse creditors. Two major groups were required to contribute to the Dewey bankruptcy estate plan: 450 former partners agreed to pay $71.5 million while the retired former partners chipped in a further $500,000.
This was a considered a major coup for the floundering firm, who had achieved huge settlements from former partners who stated that Dewey & Le Bouef owed them money.
Days of dissolution gone by
This is not the first time a recession has changed the face of law, after the extravagance of the 1980s the early 90s was a shock to the system for many firms who like today found themselves disbanding under severe economic pressure.
In October 1994, New Yorkâ€™s oldest law firm Lord, Day & Lord, Barrett Smith, were amongst many law firms to close their doors as they entered the final decade of the 20th century.
Founded in 1845 by Daniel Lord, business took a turn for the worse when their 19th century business model no longer supported a law firm with aspirations to prosper through to a third century of business. Their ideals remained gentile and their clients had been at the company for countless generations; an aggressive pursuit of clients would be un-gentlemanly amongst colleagues who describe each other as â€œniceâ€.
Making the decision to end a partnership can be difficult no matter the circumstance, and is usually highly disappointing to those involved. However, as we have seen dissolution is sometimes the only option left, and so having a team of solicitors such as Ralli Partnership Law behind you can help the progression. We can guide you through the process allowing you to move on with your career and provide you with peace of mind.