Global law firm Dewey & LeBoeuf has filed for bankruptcy in New York, saying its formation during the economic downturn and its super-fast expansion ultimately led to its demise.
At the time of the Chapter 11 filing, Dewey & LeBoeuf listed among its primary assets cash totaling $13 million, accounts receivable and money due on work in progress of $255 million and roughly $11 million invested in an insurance group. Major liabilities are $225 million owed to secured lenders, $50 million in lease-related payments and around $40 million in accounts payable.
Dewey & LeBoeuf was created in 2007 when the firms Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae merged. Dewey was founded in 1909 and LeBoeuf started in 1929. Their merger meant the beginning of a firm with 1,300 attorneys working in 12 nations.
"Unfortunately, DL was formed at the onset of one of the worst economic downturns in U.S. history (the "Great Recession"), which had a devastating effect on the financial markets and related industries that constituted the majority of the Firm's historic client base," the bankruptcy filing stated.
Additionally, the firm's growth coupled with generous payment plans to some of its partners "created a situation where the cash flow was insufficient to cover capital expenses and full compensation expectations."
The end of Dewey & LeBoeuf is the latest and perhaps most notable of big U.S. law firm collapses in recent years. The New York Times pointed out that other large firms that have fallen apart in the near past included Thelen and Heller Ehrman of San Francisco and Howrey of Washington.
Dewey & LeBoeuf's Chapter 11 filing stated that "during the first quarter of 2012, the Firm was confronted with liquidity constraints that led to the precipitous resignation of over 160 of the Firm's 300 partners by May 11, 2012." The departures weren't exactly a surprise. Earlier this month, when seeing that it might have to rapidly pay $225 million in financial obligations to creditors, the firm told its workers that "the vast majority" would be fired as soon as May 15.
Dewey & LeBoeuf tried but wasn't able to work out a merger with another firm, and it couldn't secure financing to keep it in business. As a result, it decided the best step was to wind down the firm.
The bankruptcy filing can be read here.