In case you missed it, the Washington Post ran a fascinating story on the D.C.-based Howrey law firm, whose annual revenue once swelled to more than half-a-billion dollars but is now on the verge of collapse.
Writes Amanda Becker,
The stable of talented lawyers who turned the firm into a powerhouse are defecting en masse to rivals. The firm's once-robust European outposts are nearly empty, its California offices shells of their former selves. The bulk of the partners—a law firm's top revenue producers—who remain have been extended offers to join Winston & Strawn, based in Chicago. And the firm has had to address reports that its collapse is imminent.
"At its height," Becker reports, "it boasted 700 lawyers in 18 offices, bringing in more than $570 million a year in revenue." So what happened?
Emboldened, Howrey continued on its growth spree even as other firms scaled back, hiring more than 40 lawyers in late 2008 from Thelen, the now-defunct San Francisco law firm that focused on construction-related work and itself had overreached with a run at rapid expansion.
2008 and 2009 were not very good years for construction. Revenue declined. Management did not have sufficient answers for their employees who reacted by leaving in droves:
By late fall, many of Howrey's top performers were already negotiating with other firms. As Howrey explored a merger with Winston & Strawn, the departures hastened, significantly diminishing Howrey's offices in Irvine, Calif., and San Francisco.... By the end of January, merger talks between the two firms had failed. Instead of reaching a deal, Winston extended personal offers to more than three quarters of Howrey's remaining partners.
Yesterday the Wall Street Journal reported even more grim news:
Howrey partners are set to vote next week to wind down the firm, the Legal Week is reporting.
With Winston & Strawn due to take on many Howrey partners, the beleaguered D.C. firm evidently appears set to become one of the few AmLaw 100 firms in history to bite the dust.
"A trickle of partner departures can quickly turn into a stream and then a gusher of defections," writes Nathan Koppel in the Journal. "It takes a lot of institutional glue to patch the dike."
My sister, an attorney in New Jersey, has seen a firm's dissolution firsthand. It happens fast, she says.
I remember congratulating a lawyer friend in Dallas who was recently made partner at his firm. His reaction, however, was partly dread—now that he is vested in the firm (unlike junior associates), his fortunes are tied to the company, for better or for worse. It sometimes keeps him up at night—can they afford an addition to the house this year or will they need to take out a second mortgage? My friend added, "They ought to teach a class on how to run firms in law school."