Law Firms

Are Dewey's Problems Unique? 'Leverage Is Dangerous,' Ex-Partner Bienenstock Says

Before its collapse, Dewey & LeBoeuf embraced a business strategy of growth through mergers and lateral hires, using pay guarantees to lure and keep star partners.

The result was a widening spread between superstars and partners working in the trenches, the New York Times DealBook blog reports. According to the story, observers say the strategies “destroyed the fabric of a law firm partnership, where a shared sense of purpose once created willingness to weather difficult times.”

These observers say Dewey’s strategies are not unique. Other large law firms also pursued big growth while offering big pay packages. “Many large firms have discarded the traditional notions of partnership—loyalty, collegiality, a sense of equality,” DealBook says. Instead, they have “transformed themselves into bottom-line, profit-maximizing businesses.”

The article contrasts Dewey’s business methods with that of “an elite tier” of law firms that continue to pay lockstep compensation and rarely make lateral hires. Those firms include Davis, Polk & Wardwell and Wachtell, Lipton, Rosen & Katz.

Bankruptcy specialist Martin Bienenstock, who left Dewey for Proskauer Rose earlier this month, has his own take on Dewey’s problems. “I think there’s an overall lesson for law firms that leverage is dangerous,” he told the Wall Street Journal (sub. req.). “I think you just can’t take leverage lightly in a business where your most valuable assets go home every night.”

DLA Piper chairman Frank Burch also emphasized the importance of curbing debt in an interview with DealBook. The firm is among several BigLaw firms that have pursued growth; Greenberg Traurig is another. These firms say they are different that Dewey, however. Burch said his firm does not have long-term debt and does not give multiyear pay guarantees to partners. “We have conservatively managed our finances,” he told DealBook.

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