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.