Dewey Need to Take a Pledge?

The National Assembly taking the Tennis Court ...

The National Assembly taking the Tennis Court Oath (sketch by Jacques-Louis David). (Photo credit: Wikipedia)

Jerome Kowalski

Kowalski & Associates

April, 2012


Again, I am constrained to comment on a rather absurd story appearing in a Reuters dispatch concerning a venerable law firm listing along a perilous course. Leigh Jones, a capable journalist now reporting for Reuters and, I suspect in this instance taken in by the firm’s Hollywood Ninja flack, posits that this firm can hold steady and survive the storm if a “few key players” stay on board (all men) and steer the firm to safety.

The proposition is dubious as a general matter. Given where this law firm finds itself right now, the notion requires a complete suspension of disbelief. Sure, there are a few notable large law firms that achieved remarkable success because of the drive, skill and leadership of a few key players.  Boies, Schiller & Flexner, Kassowitz, Benson, Torres & Friedman and Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor come to mind. However, Dewey & LeBoeuf is not, in its current incarnation, the product of a few driven leaders of the bar.  Dewey is a century old global law firm with 1,000 professionals (maybe fewer by the time you read this) and 24 offices. The notion that a law firm in crisis can survive the loss of 50 partners and a complete crisis in confidence by and among all of its stakeholders by keeping a small cadre signed on to stay the course is simply not credible. Collaboration, the key to law firm survival, is painfully missing here.

Ms. Jones goes on to note that Dewey “… firm leaders say that the vast majority of the departures are due to the firm’s decision to downsize in order to increase profitability.”  Let’s look at the numbers: Six of thirty-five executive committee members have left, four of nine office managing partners are gone and some seven practice group leaders have checked out. And the folks at Dewey want you to believe that this loss of leadership – previously key parts of this firm’s management who have credible client following will enhance profitability.  What we do also know is that one fellow who certainly was tossed out the window (I guess to “increase profitability”); he was the firm’s duly elected chairman who took his defenestration with style and grace.

The firm provocateur then identified the seven amigos on whose shoulders the firm’s survival can be bound: “The seven key Dewey lawyers … are Martin Bienenstock, a bankruptcy attorney; Jeffrey Kessler, a litigator; Morton Pierce, a mergers and acquisitions attorney; Ralph Ferrara, a regulatory and corporate governance lawyer; Michael Fitzgerald, a corporate securities attorney; Bruce Bennett, a partner in the business solutions and governance group; and Berge Setrakian, an international commerce and corporate lawyer.” Well, gosh, that’s neat. Each of the Magnificent Seven were in place as part and parcel of the cadre that charted the disastrous course, and, presumably prime beneficiaries of the healthy succor doled out to the big producers. The message here is that the Magnificent Seven chose poorly when they allowed the now departed executive committee members, office heads and practice group leaders to assume positions of law firm leadership.

But, these seven keys to success do not quite seem to be reading from the same playbook.

Marty Bienenstock advised Reuters that “[t]wo weeks ago, more than 50 business-generators each individually pledged to stay with the firm.”  Mort Pierce, the firm’s vice chairman saw it differently: “There was no formal pledge, no secret handshake,” he said. Asked whether he was part of the “consensus,” Pierce said, “There was a meeting and I was there.” Ralph Ferrara acknowledged that he is busily fielding calls from the firm’s competitors seeking to lure him away. Jeffrey Kessler offered some faint praise: “I am committed to Dewey and believe the firm will prosper.” Bennett, Setrakian and Fitzgerald did not respond to requests for comment.

None of these fabulous lawyers offered up the solid pledge that Bienenstock averred was in place. And these are the believers.  One who didn’t drink the Kool Ade is John Altorelli, an outstanding corporate lawyer and former Dewey executive committee member who is now at DLA Piper. Altorelli, who ironically actually began his career at LeBoeuf, thought well of his former associates and publicly opined that while most of the folks at Dewey were quite good, management (of which he was a member) was “obtuse.” Altorelli also plainly stated that the king has no clothes: “I’m not sure how [Dewey] can weather the departures.”

It’s not just the previously announced departures.  Bienestock probably had it right when he spoke of the “pledges.”  He is an outstanding bankruptcy lawyer, after all, and knows how valuable pledges can be. The key here is for a public announcement, with no wiggle room, in which at least the  Magnificent Seven and hopefully the Key 50 make an unwavering vow to stay with the firm until either they retire or events force a shutdown. This pledge is certainly unenforceable in any judicial proceeding, but it is crucial in the court of public opinion, where the firm is now being badly battered. These outstanding lawyers have much to lose in the event the firm implodes and for that reason should be motivated to provide an oath of loyalty.

© Jerome Kowalski, April, 2012. All Rights Reserved.

Jerry Kowalski is the founder of Kowalski & Associates, a consulting firm serving the legal profession exclusively. Jerry is a regular contributor to a variety of publications and is a frequent (always engaging and often humorous) speaker to a variety of forums. Jerry can be reached at or at 212 832 9070, Extension 310


16 Responses

  1. “These outstanding lawyers have much to lose in the event the firm implodes and for that reason should be motivated to provide an oath of loyalty.”

    True enough, Jerry, on its face. However, perhaps these outstanding lawyers recognize that they have much more to lose in terms of personal credibility and reputation by swearing such a public oath, then leaving for greener pastures shortly thereafter.

    Anyone who believes that every Dewey partner with more than $2 million in business isn’t negotiating with other firms is capable of being, well, a naive reporter for Reuters.

  2. Dewey LeBoeuf deserves some credit as they set up their game space to “encourage loyalty”. Delaying compensation for all partners has the effect of letting those who remain share in the “profits” that are forfeited by defecting partners, including their new strict enforcement the 60 day notice requirement is another such tactic. However, you can only arb so much blood from a stone.

    The simple truth is that the earliest defectors have faired best, and in this sort of circumstance better. In the event of implosion, the liabilities could be huge, and all partners are by definition insiders and their personal receipts – even if voluntarily or otherwise reduced – are subject to clawback. Compounding this, their “claims” are subject to equitable subordination. De facto indentured servitude is a tough. The only way a partner can be sure of hanging onto his next paycheck is to receive it through a different firm.

    The longer a partner stays is the longer he works to pay off higher priority creditors: banks, bond holders, GAMHC “resolution”, WARN act, trade creditors, not to mention administrative expenses. Additional costs of litigation, time, opportunity cost can be substantial in the wake of any firms collapse.

    I can’t disagree with others who say the point of no return has already passed for Dewey. I find it hard to believe that the banks will renew a credit facility given the economy, politics, and simple P&L fundamentals. I’m not privy to the terms of the credit line in the event the banks decline a renewal, but when a firm in distress loses its bank line it is usually a very speedy end. Quite ironic that Bruce Bennett was singled out as one of the “magnificent seven” when it seems that the public doubts of Dewey’s P&L and viability coincided with his awkward arrival in the wake of his SONICblue misconduct.

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