After the “Partner Run”: the Dewey & LeBoeuf Diaspora

Abstract

“Partner runs” are a phenomenon distinctive to the American legal profession, a result of legal professional responsibility rules, partnership governance, and bankruptcy law that occasionally causes individual law firms to spiral into liquidation following unexceptional setbacks. It is unclear whether this idiosyncratic feature of law firm collapse can pose a threat to the industrial organization of the legal profession. Can lawyers easily recover and recreate the benefits of law firm scale by re-merging into other law firms with ease, or does a partner run mark a scarlet letter that poisons lawyers’ careers, and the legal profession as a whole, permanently?

I provide the first rigorous examination of this issue using the case study of the 2012 downfall of Dewey & LeBoeuf, the largest law firm bankruptcy ever. I hand-construct a dataset using public information in directories, news reports, and LinkedIn of the career outcomes of every lawyer who worked at Dewey’s U.S. offices in 2012 and a control group of similarly situated lawyers at law firms identified to me by former Dewey leadership as Dewey’s benchmark competition (1,575 lawyers total). Immediately after the firm crumpled, about 80% of Dewey’s partners remained in Biglaw as partners or forms of counsel, while about half of Dewey’s associates remained Biglaw associates. Ex-Dewey associates who were cluster-hired with their practice area out of Dewey as the firm collapsed are more likely to be (1) men and (2) Biglaw partners in 2022. I find suggestive and inconclusive evidence that ex-Dewey partners, a decade on, are marginally less likely to be partners at top law firms than alumni of control firms, and find that the overall distribution of 2022 employment, especially for ex-Dewey associates, is quite similar between alumni of Dewey and its rivals. I therefore find little evidence for stigma against (non-core management) Dewey lawyers or damage from dissolution of firm-specific relational capital in the labor market in the long run.

My findings suggest that the long-run cost of partner runs to the legal profession at an institutional level, at least in times when the overall legal job market is somewhat liquid, is modest at most. The policy implication of this finding is that policymakers and state bar associations should be cautious in modifying the rules that inadvertently generate partner runs, like the requirement of exclusive lawyer ownership of law firms, if such changes would also generate costs. These law firm glass houses, it seems, can regenerate elsewhere.

Keywords: law firms, lawyers, professional responsibility, bankruptcy, partnerships, partnership governance

JEL Classification: G33, G34, J63, K22, L22, L84