Would a Dewey LeBoeuf-like bankruptcy happen in Canada?

REUTERS/Eduardo Munoz

By now, everyone who follows the business of law knows that one of the largest law firms in the United States, Dewey & LeBoeuf, has filed for Chapter 11 Protection.

The easy observation for those on the sidelines – including Canadian lawyers – is that this is a simple case of greed. Just a big US law firm, and a particularly greedy one. But as it was put very well in the Am Law Daily by William D. Henderson – this was more complex than greed:

At its core, Dewey’s collapse has less to do with individual moral failings than with aging organizational structures that worked remarkably well for over a century, but now, for a variety of reasons, inhibit law firms’ ability to adapt to a changing legal marketplace.

One of the key problems with Dewey’s approach – and this is not unique to Dewey – was its reliance on attracting more and more laterals by offering them better and better compensation, which then resulted in more demands from current partners. And since this is not something that only Dewey is doing, the problem is not going away:

Ironically, many of the lawyers who are thriving the most under the lateral model—selling their time for $1,000 an hour and feeding work to a large cadre of junior lawyers—are the major roadblock to a more competitive future. Unless these lawyers are willing to share risk toward the goal of developing a new source of firm-specific competitive advantage, Big Law won’t be able to turn the corner.

Of course, Dewey’s particular managerial problems played a huge part – and they have been covered by many in the news, but there is no doubt this bankruptcy holds lessons for the industry as a whole, including Canadian firms.

And one of the fundamental lessons that many claim this holds is the corrosive effect of an individualistic approach to partner compensation.

What about Canada? Our law firms are not leveraged like US firms, and they are friendlier, less competitive, more communal? Kind of like Canada as a country, right?

At Lexpert, we just recently published a feature on law firm compensation – our writer Marzena Czarnecka looked at how Canadian firms compensate their partners and the answer was not so different from what hurt Dewey:

So, what kinds of things do Canadian law firms compensate for? What’s the real score? Christopher Sweeney reiterates: “Law firms are more rewarding than ever to rainmakers and those who can produce their own billings, and they are less rewarding to those who cannot. … The focus is, really, how much work can you bring in? I wouldn’t say it’s almost incidental that you’re a good lawyer, but it is your ability to bring in clients and keep key clients happy that is becoming paramount.”

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