Live action collapse of a big law firm

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thesealocust
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Live action collapse of a big law firm

Postby thesealocust » Fri Jan 21, 2011 2:02 pm

This is kind of scary. It's happened before, but it's major news and worthy of some discussion.

Law firms can have complicated cash flows, and their only assets are partners and their links to clients (repeat or otherwise). Howrey is having dozens of partner defections and has seen several offices close, with news of these departures/closures seeming to pick up an accelerate over recent days. At some point the law firm just won't have any business. Many firms have certain requirements with lenders (since money from clients can come in irregularly) meaning that a critical mass of defections can cause the entire thing to collapse (which, I believe, was roughly what happened to Heller (http://en.wikipedia.org/wiki/Heller_Ehrman) in 2008).

Sources / links:

Most recent news: http://blogs.wsj.com/law/2011/01/21/how ... ger-await/

Blog about the situation, looks like it may be run by an insider: --LinkRemoved--

ATL coverage (with many more links): http://abovethelaw.com/2011/01/howrey-g ... situation/
Last edited by thesealocust on Mon Jan 24, 2011 2:17 pm, edited 1 time in total.

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thesealocust
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Re: Live action collapse of a big law firm

Postby thesealocust » Mon Jan 24, 2011 2:08 pm

Is there really no interest in this?

Howrey has lost 71 partners recently, and closed several offices. The most recent departure, a co-chair of a major practice group, was today.

http://www.thelawyer.com/partner-exodus ... 26.article

--LinkRemoved--

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James Bond
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Re: Live action collapse of a big law firm

Postby James Bond » Mon Jan 24, 2011 2:14 pm

I don't think most people here fully understand the situation, which leads to no comments, but law is NOT the industry to be going into right now, and I'm sure there are others out there with full understanding but don't post out of fear/denial too.

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A'nold
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Re: Live action collapse of a big law firm

Postby A'nold » Mon Jan 24, 2011 2:15 pm

Not all of us have a hat in the ring, be it voluntarily or involuntarily. :wink:

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KibblesAndVick
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Re: Live action collapse of a big law firm

Postby KibblesAndVick » Mon Jan 24, 2011 2:16 pm

I feel like I've become completely numb to negative economic news about the legal sector. Not that I don't process it or appreciate you sharing it, but I don't have any real reaction other than "Yup. This is going to end poorly."

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seespotrun
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Re: Live action collapse of a big law firm

Postby seespotrun » Mon Jan 24, 2011 2:17 pm

Man, I feel bad for 2L's that accepted SA positions with Howrey. I wonder whether OCI due diligence could have even revealed something like this?

bdubs
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Re: Live action collapse of a big law firm

Postby bdubs » Mon Jan 24, 2011 2:27 pm

Interesting... I am going to tag this one and save my comments for later

Anonymous User
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Re: Live action collapse of a big law firm

Postby Anonymous User » Mon Jan 24, 2011 2:43 pm

seespotrun wrote:Man, I feel bad for 2L's that accepted SA positions with Howrey. I wonder whether OCI due diligence could have even revealed something like this?

Due diligence and a completely detached, cynical analysis might have predicted this, but why would anyone look a gift horse in the mouth THAT closely. When analyzing my offers, I would check several mainstream sites and talk to a few mouthpieces at that firm. There is no way that I would have found any underlying stability issues with the firm, and I really didn't want to.

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seespotrun
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Re: Live action collapse of a big law firm

Postby seespotrun » Mon Jan 24, 2011 3:34 pm

Anonymous User wrote:
seespotrun wrote:Man, I feel bad for 2L's that accepted SA positions with Howrey. I wonder whether OCI due diligence could have even revealed something like this?

Due diligence and a completely detached, cynical analysis might have predicted this, but why would anyone look a gift horse in the mouth THAT closely. When analyzing my offers, I would check several mainstream sites and talk to a few mouthpieces at that firm. There is no way that I would have found any underlying stability issues with the firm, and I really didn't want to.

Yea, I have to agree with this. Plus, asking about a firm's health is pretty taboo. Couple that with the firm's strong incentive to keep something like this under wraps, and you get a pretty sad result for some poor 2L.

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Re: Live action collapse of a big law firm

Postby Anonymous User » Mon Jan 24, 2011 3:40 pm

I was very close to summering here... wow.

The state of the firm being in poor condition was obvious to me and everyone else who interviewed, provided they did a little research and most partners/associates admitted it. However, this economic ailing was the case with about half the firms I interviewed with ITE... most 2Ls would just assume they would survive the storm along with every other struggling Amlaw 100 firm. .
Last edited by Anonymous User on Mon Jan 24, 2011 3:48 pm, edited 1 time in total.

ClayDavis
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Re: Live action collapse of a big law firm

Postby ClayDavis » Mon Jan 24, 2011 3:45 pm

thesealocust wrote:Is there really no interest in this?

Howrey has lost 71 partners recently, and closed several offices. The most recent departure, a co-chair of a major practice group, was today.

http://www.thelawyer.com/partner-exodus ... 26.article

--LinkRemoved--

TBF, it isn't all that surprising that there aren't a lot of posts about this. Most posters here are worried about getting their LSAT into the 160s or whether to take $ at Cardozo or pay sticker at Brooklyn; news like this doesn't register until 2L.

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Re: Live action collapse of a big law firm

Postby Anonymous User » Mon Jan 24, 2011 3:46 pm

I don't know what y'all are talking about.

Other than their attractive male interviewer, all the talk about Howrey at OGI was how big of a shitpiece the firm is.

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Kohinoor
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Re: Live action collapse of a big law firm

Postby Kohinoor » Mon Jan 24, 2011 4:33 pm

Anonymous User wrote:I don't know what y'all are talking about.

Other than their attractive male interviewer, all the talk about Howrey at OGI was how big of a shitpiece the firm is.

I'm guessing that Howrey wasn't their best or only offer. Heck, for all the badmouthing of Latham that was going on, an offer letter from them would have quickly made a lot of people turn around and realize how solid their fundamentals were and that they would certainly not conduct more layoffs now that they are leanly staffed.

tl;dr: An offer in hand makes it hard to objectively assess a firm, especially when it is your 'best' offer.

Anonymous User
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Re: Live action collapse of a big law firm

Postby Anonymous User » Mon Jan 24, 2011 4:52 pm

On a related note, what happens if a firm hasn't added any lateral partners in? What does that indicate in terms of a firm's prospects?

What if a firm loses just a couple partners?

run26.2
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Re: Live action collapse of a big law firm

Postby run26.2 » Mon Jan 24, 2011 4:59 pm

Kohinoor wrote:
Anonymous User wrote:I don't know what y'all are talking about.

Other than their attractive male interviewer, all the talk about Howrey at OGI was how big of a shitpiece the firm is.

I'm guessing that Howrey wasn't their best or only offer. Heck, for all the badmouthing of Latham that was going on, an offer letter from them would have quickly made a lot of people turn around and realize how solid their fundamentals were and that they would certainly not conduct more layoffs now that they are leanly staffed.

tl;dr: An offer in hand makes it hard to objectively assess a firm, especially when it is your 'best' offer.

Some people thought that an offer from Howrey was better than a market offer, based on the degree of training they purport to provide to incoming associates. People whose opinions I respect. This is unfortunate for Howrey.

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vamedic03
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Re: Live action collapse of a big law firm

Postby vamedic03 » Mon Jan 24, 2011 5:45 pm

James Bond wrote:I don't think most people here fully understand the situation, which leads to no comments, but law is NOT the industry to be going into right now, and I'm sure there are others out there with full understanding but don't post out of fear/denial too.


TBF, this doesn't really reflect on the legal industry. The potential collapse of this firm is due to the exodus of partners rather than the overall economic downturn. The rainmaker's books of business are still out there, they're just no longer at that firm.

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Kohinoor
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Re: Live action collapse of a big law firm

Postby Kohinoor » Mon Jan 24, 2011 6:28 pm

run26.2 wrote:
Kohinoor wrote:
Anonymous User wrote:I don't know what y'all are talking about.

Other than their attractive male interviewer, all the talk about Howrey at OGI was how big of a shitpiece the firm is.

I'm guessing that Howrey wasn't their best or only offer. Heck, for all the badmouthing of Latham that was going on, an offer letter from them would have quickly made a lot of people turn around and realize how solid their fundamentals were and that they would certainly not conduct more layoffs now that they are leanly staffed.

tl;dr: An offer in hand makes it hard to objectively assess a firm, especially when it is your 'best' offer.

Some people thought that an offer from Howrey was better than a market offer, based on the degree of training they purport to provide to incoming associates. People whose opinions I respect. This is unfortunate for Howrey.

Even someone forecasting Howrey's decline might have given it a timeline of years and still taken an offer with them for the solid training and biglaw experience.

Anonymous Loser
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Re: Live action collapse of a big law firm

Postby Anonymous Loser » Mon Jan 24, 2011 6:37 pm

thesealocust wrote:Is there really no interest in this?


This is already old news. The handful of posters on TLS who understand what you are talking about have likely already ready the thousands of posts on xo/ATL about this over the past few months. I was sick of hearing about Howrey by Thanksgiving.

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vanwinkle
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Re: Live action collapse of a big law firm

Postby vanwinkle » Mon Jan 24, 2011 9:35 pm

vamedic03 wrote:TBF, this doesn't really reflect on the legal industry. The potential collapse of this firm is due to the exodus of partners rather than the overall economic downturn. The rainmaker's books of business are still out there, they're just no longer at that firm.

This is what I was thinking. This was something that happens regularly in the legal industry. Law firms implode from time to time because people become dissatisfied and go elsewhere. Sometimes the firm they left survives in a smaller capacity, other times it dissolves or its remnants get swallowed up by a healthier firm. This is somewhat normal.

However, there is a difference between this happening now and a firm implosion happening in boom times: There are a lot fewer places to bail to, for those who don't have a fat book of business they're bringing with them. But these kind of things happen regularly enough regardless of the economy.

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prezidentv8
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Re: Live action collapse of a big law firm

Postby prezidentv8 » Mon Jan 24, 2011 9:37 pm

KibblesAndVick wrote:I feel like I've become completely numb to negative economic news about the legal sector. Not that I don't process it or appreciate you sharing it, but I don't have any real reaction other than "Yup. This is going to end poorly."


Similar for me.

Anonymous User
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Re: Live action collapse of a big law firm

Postby Anonymous User » Mon Jan 24, 2011 9:41 pm

Mmm... I remember when HE imploded. I was in the middle of a closing with HE on the other side. That was interesting :shock:

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James Bond
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Re: Live action collapse of a big law firm

Postby James Bond » Mon Jan 24, 2011 9:42 pm

Anonymous User wrote:Mmm... I remember when HE imploded. I was in the middle of a closing with HE on the other side. That was interesting :shock:


Just for the sake of story telling...what went down on your end when it happened?

Anonymous User
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Re: Live action collapse of a big law firm

Postby Anonymous User » Mon Jan 24, 2011 9:47 pm

James Bond wrote:
Anonymous User wrote:Mmm... I remember when HE imploded. I was in the middle of a closing with HE on the other side. That was interesting :shock:


Just for the sake of story telling...what went down on your end when it happened?


The deal was put on hold for a while, then HE's client (a mezz creditor) backed out. Not sure if it led to a lawsuit... I doubt it.

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nealric
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Re: Live action collapse of a big law firm

Postby nealric » Mon Jan 24, 2011 9:50 pm

Back when Howery first came out with their 100k/yr pseudo associate training program I urged caution. Turns out I may have been more right than I knew.

That said, I really hope they make it through. Would be a shame to lose them just as things are picking up.

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thesealocust
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Re: Live action collapse of a big law firm

Postby thesealocust » Mon Jan 24, 2011 10:39 pm

nealric wrote:That said, I really hope they make it through.


I definitely agree. And also with the others who point out that this isn't cataclysmic for the legal industry in general. Still, it's interesting. I don't have nearly the experience or insight to know what, if anything, can be "learned" from this - least of all from the job hunting perspective. But it's huge legal news.

I have a hard time imagining they survive if the rumors that PPP is down 55% this year turn out to be true. Other firms saw big dips, but things have been improving so it stands out - and when partners with books leave, that kind of has to hurt the potential profits for those who remain even further?




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