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Leading law firm calls it a day

Editorial Staff

Dewey Ballentine was one of the bluest of blue chip law firms. LeBoeuf, Lamb, Greene & MacRae was an upstart that grew rapidly and gathered large clients like a farmer gathers hay. In 2007, the firms decided to merge creating Dewey & LeBoeuf, one of the largest law firms in the world. Yesterday, it put itself into the hands of receivers under the USA's Chapter 11 provisions.

The firm bought talent. It overpaid its equity partners and promised rewards that were not dependent on the overall performance of the firm.

As the recession bit and fee income fell, the promises were unravelled. Salaried partners found themselves not with the promised riches but with falling salaries and much reduced, if any, bonuses.

In the past few months, there has been an exodus of the salaried partners who were the mainstay of the firm's income and its revenues have plummeted still further.

Yesterday, in what some are calling the biggest law firm collapse in the history of the US, the equity partners filed for protection under the USA's insolvency laws.

They have made it plain that they are not looking for a rescue - financial or otherwise - and that the firm is dead. Rather, receivers will supervise the orderly winding up of the firm, transfer of clients and the getting in of assets and discharge of liabilities.

The firm was organised as a limited liability partnership which means that, in the absence of fraud or culpable mismanagement, there will be no call on the partners other than under any personal guarantees they may have given.

With over a thousand lawyers in more than 25 offices around the USA and several major overseas cities, including London, DB has grown an international practice that many firms will now be rushing to pick over.

So far, regulators have not had an opportunity to state their intention. In England and Wales, where a law firm "goes under," the Law Society "intervenes." However, it is not at this point clear to what extent the London firm (which is regulated in London as well as New York) is to be disbanded. Intervention is the appointment, by the Law Society, to of an "intervenor" who takes over the management of the firm and its clients.