Did alternative fee arrangements contribute to Dewey’s demise?

In a lengthy interview published in today’s edition of The Wall Street Journal (sub. req’d), two top Dewey partners – members of its office of the chairman – shared their views on why the firm is on the brink of collapse. One of the factors cited by Messrs. Bienenstock and Landgraf was “a huge litigation situation in which the clients started paying 60 percent of the bill, with the other 40 percent saved until the end of the matter.” To my ear that sounds like a back-end loaded AFA – with the payout of the withheld 40 percent likely tied to success and/or performance criteria.

Every BigLaw firm seeks out “huge” litigation matters on which they can deploy very large teams of associates and partners at all levels of seniority. However, with law department leaders implementing ever more sophisticated engagement terms in order to pay for value received rather than simply for effort expended, Dewey is an excellent example of how a law firm’s senior management must factor these arrangements into their business model. That said, the type of arrangement cited in the WSJ article doesn’t seem like it would be especially difficult to deal with – hopefully the Dewey litigators’ new firm is better prepared to manage such a fee structure – or to have a collaborative conversation with the GC who retained them about other options that will meet the objectives of both the client and the law firm.

This entry was posted in In-house, Law firms, Legal expense management. Bookmark the permalink.

One Response to Did alternative fee arrangements contribute to Dewey’s demise?

  1. Bienenstock is an outstanding bankruptcy lawyer and he has had to manage his practice to assure payment to match work; bankruptcy counsel has to make a fee application and there is no assurance that it will be approved by the judge or resist challenge by creditors. Jim’s point about the asset (fee)-liability (time on meter x rates) is well taken.
    Nevertheless, has there been an analysis of whether the partners’ compensation guarantees matched the revenue and profitability assumptions – and segregate that from the balance of Jim’s issues relating to the business model. Understanding factors for failure is important, but identifying the factor that has the highest weight and impact is the best basis for lessons learned. At this stage too much of the discussion about Dewey LeBoeuf has been anecdotal and lacks rigor.
    Insights may be gleaned from deeper quantitative analyses – as has been done with other professions facing structural changes – to meaningfully rethink the legal profession’s business model.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>