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Monday, January 27, 2014

NY Times: A Lawyer and Partner, and Also Bankrupt

Owens 3New York Times:  A Lawyer and Partner, and Also Bankrupt, by James B. Stewart:

Anyone who wonders why law school applications are plunging and there’s widespread malaise in many big law firms might consider the case of Gregory M. Owens.

The silver-haired, distinguished-looking Mr. Owens would seem the embodiment of a successful Wall Street lawyer. A graduate of Denison University and Vanderbilt Law School, Mr. Owens moved to New York City and was named a partner at the then old-line law firm of Dewey, Ballantine, Bushby, Palmer & Wood, and after a merger, at Dewey & LeBoeuf.

Today, Mr. Owens, 55, is a partner at an even more eminent global law firm, White & Case. A partnership there or any of the major firms collectively known as “Big Law” was long regarded as the brass ring of the profession, a virtual guarantee of lifelong prosperity and job security.

But on New Year’s Eve, Mr. Owens filed for personal bankruptcy. ...

Mr. Owens is an extreme but vivid illustration of the economic factors roiling the legal profession, although his straits are in some ways unique to his personal situation. ...

Nonequity partners like Mr. Owens are not really partners, but employees, since they do not share the risks and rewards of the firm’s practice. Service partners typically have no clients they can claim as their own and depend on rainmakers to feed them. In Mr. Owens’s case, his mentor and protector has long been Morton A. Pierce, a noted mergers and acquisitions specialist and prodigious rainmaker whom Mr. Owens followed from the former Reid & Priest to Dewey, Ballantine to Dewey & LeBoeuf and then to White & Case.

“It’s sad to hear about this fellow, but he’s not alone in being in jeopardy,” said Thomas S. Clay, an expert on law firm management and a principal at the consulting firm Altman Weil, which advises many large law firms. “For the past 40 years, you could just be a partner in a firm, do good work, coast, keep your nose clean, and you’d have a very nice career. That’s gone.” ...

At Dewey & LeBoeuf, Mr. Owens’s name was perennially among a group of partners who were not making enough revenue to cover their salaries and overhead, according to two former partners at the firm. But each time, the powerful Mr. Pierce, then the firm’s vice chairman, protected Mr. Owens, they said. “He was very good at what he knew,” a former Dewey & LeBoeuf partner said. “But he wasn’t built to adapt. To make it as a law firm partner today, you have to periodically reinvent yourself.” ...

Mr. Owens has been well paid by most standards, but not compared with top partners at major firms, who make in the millions. (Mr. Pierce was guaranteed $8 million a year at Dewey & LeBoeuf.) When Mr. Owens first became a partner at Dewey, Ballantine, he made about $250,000, in line with other new partners. At Dewey & LeBoeuf, his income peaked at over $500,000 during the flush years before the financial crisis. In 2012, he made $351,000, and last year, while at White & Case, he made $356,500. ...

“In almost any other context, $375,000 would be a lot of money,” said William Henderson, a professor at the Indiana University School of Law and a director of the Center on the Global Legal Profession. “But anyone who doesn’t have clients is in a precarious position. For the last 40 years, all firms had to do was answer the phone from clients and lease more office space. That run is over. The forest has been depleted, as we say, and firms are competing for market share. Law firms are in a period of consolidation and, initially, it’s going to take place at the service partner level. There’s too much capacity.” He added that law firm associates and summer associates had also suffered significant cuts, which has culled the ranks of future partners. All this “has had a huge effect on law school enrollment,” Professor Henderson said.

(Hat Tip: Mike Talbert.)

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Comments

The headline should be "Down on his luck law firm partner still makes $375,000 per year."

That's a downside most normal human beings would envy.

Posted by: Anon | Jan 27, 2014 6:49:57 AM

My only real sympathy for this guy is for the amount of alimony/child support he has to pay. Over $10k/month is absurd.

As for his compensation; like all service partners, he is overpaid. I can see $225,000 for an experienced attorney that has no clients. That actually makes more sense for the firm than cycling through new associates every 5 years.

Posted by: JM | Jan 27, 2014 2:21:26 PM

According to the story, the guy is still puttnig roughly $75,000/year into his pension plan. Hard to have great sympathy for his financial "plight."

Posted by: RN | Jan 28, 2014 6:03:26 AM

That $75k will allow him to retire. The issue he has is how is he going to pay for today.We need to excuse his debts so he can make it to retirement. Unlike my student loans that will prevent me from retiring.

Posted by: Daniel Waters | Jan 28, 2014 11:05:26 AM