Dewey & LeBoeuf, New York Law Firm, Files for Bankruptcy

May 29, 2012 10:06 AM

NEW YORK - Dewey & LeBoeuf, the New York law firm crippled by financial miscues and partner defections, filed for bankruptcy on Monday night, punctuating the largest law firm collapse in United States history.

The Chapter 11 filing, made in Federal Bankruptcy Court in Manhattan, marks the final chapter in a turbulent period for the New York-based Dewey, which unraveled after disappointing profits and prodigious debt forced it to slash partners’ salaries. The partners, already owed millions of dollars from prior years, grew concerned over the firm’s finances and their ability to get paid. A partner exodus destroyed the firm.

Dewey announced Monday that the firm planned to liquidate. It said it would ask about 90 employees to remain on staff to assist in the wind-down of its business. The firm has $315 million in liabilities, of which $225 million is owed to its banks, according to the court filings. Other creditors include the firm’s landlords and former partners owed money.

“This is a very sad day for the legal profession,” said Richard J. Holwell, a former federal judge in Manhattan now in private practice. “Dewey is a fabled firm with a lot of great lawyers and a demise of this magnitude is unprecedented.”

Meanwhile, the firm's London and Paris offices, which are operated through a separately incorporated UK entity, were yesterday officially placed into administration, with BDO business restructuring partners Mark Shaw and Shay Bannon appointed joint administrators.
 
Dewey - which was created in 2007 through the combination of Dewey Ballantine and LeBoeuf Lamb Greene & MacRae - said in documents submitted in conjunction with the Chapter 11 filling that the so-called 'Great Recession' was a major factor in its demise.
 
At the same time, the firm acknowledged that its grand ambitions for growth and lucrative pay guarantees it doled out to high-profile lateral hires in an effort to achieve those ambitions were also to blame.

Dewey employed at its peak more than 2,500 people, including roughly 1,400 lawyers in 26 offices across the globe.

Dewey’s dissolution has generated a debate across the legal profession: Was its failure an isolated event or emblematic of bigger problems in the corporate-law industry?

Dewey & LeBoeuf's bankruptcy petition

Click here for the full Chapter 11 filing