Posted May 21, 2012 12:19 pm CDT
Lawyers who work at multiple failed law firms face a big financial hit.
These lawyers may lose their capital contributions at the failed firm at the same time they have to pony up capital at their new firm, the Wall Street Journal (sub. req. ) reports. Andrew Ness is all too familiar with the problem.
Ness, who currently works at Jones Day, has lost his equity stakes at three failed law firms: a boutique, Thelen and Howrey. “I did not see a dime of capital returned and don’t expect to see a dime,” Ness told the newspaper.
According to the story, capital requirements can range from 20 percent to 60 percent of a new partner’s expected earnings for the year. The amount might be $100,000 to $200,000 for a young partner, or $1 million for a seasoned lateral earning $2 million. Firms often require the amount upfront, though loan programs allow the lawyers to borrow the money, providing an immediate cash infusion to the law firm.
Dewey & LeBoeuf has been slow in repaying capital to some partners who left years ago, the story says. Dozens who left Dewey Ballantine before the merger haven’t seen capital returned; at the same time Dewey missed loan payments on the money in 2008 and 2010, according to the article. Some have raised questions about whether loan statements wrongly indicated the money was being repaid to the bank.