The American law firm Dewey & LeBoeuf became one of the largest legal firms to fail in US history on Monday, after it was finally forced to file for Chapter 11 bankruptcy.
Dewey has been in trouble for some time, and was in the midst of attempting to find a partner to save the business.
However, the firm had been hit by the mass-defection of the majority of its 300 partners, which left it with dwindling incomes and a heavy debt burden which have ultimately forced it to fold.
Employees at the firm which had offices in London among 26 around the world were well aware of the troubles, and knew that the firm was considering bankruptcy.
Nevertheless, the move has sent shockwaves through the industry. Kent Zimmermann is a legal consultant at Zeughauser Group.
He told Reuters: "Dewey's failure is rocking the industry in the sense that most firms are saying to themselves, if Dewey could go down, could we?"
The firm confirmed that the departure of many of its partners had precipitated its collapse.
"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," they said in a statement.
The firm's liquidators will now set about recovering money from former partners who departed the business, taking many of their clients with them.
In the first bankruptcy hearing in New York on Tuesday, an attorney representing Dewey claimed that they were close to an agreement on recovering money from ex-partners which the attorney claimed would cost them "significant" sums of money.
However, one lawyer representing around 50 former partners claimed to have no knowledge of such a deal and added that he could not rule out that partners might not have counter-claims against the sunken firm which could offset financial claims made of them.
The London offices of the firm are operated via a separate UK-based company, which was also placed into administration on Monday.
Sources:
Dewey files for Chapter 11 - biggest US law firm collapse (The Telegraph)
Leave a comment