What Are The Lessons From the Closure of A Law Firm?

burleson law firm closure

The oil price collapse has left energy law firm Burleson LLP, based in Houston, with the decision to shutter its entire operation.  And therein lie some lessons for many law firms.

The firm will close all five offices by the end of this year its managing partner, Richard Burleson said.

Burleson’s was a highly successful law firm growing from two lawyers when founded a decade ago to over 140. The unhappy events for the firm have left it with the decision to wind down operations, which over 60 attorneys are now in the process of implementing.

The closure carries lessons for fast-expanding law firms – or indeed any law firms – who may be dependent upon a principal source of business, have expanded rapidly and may have their compensation model suffer as a result.

As Richard Burleson told Texas Lawyer, they wound up “upside down”.

“And we started adding associates—especially in the title area and that compensation got upside down. And when the market fell out of oil and gas we were left with really large leases we could no longer accommodate.”

Multiple Offices

The firm had offices in San Antonio, Midland, Denver, Pittsburgh and New Orleans and a singular energy focus, both its strength but also its weakness.

The law firm grew when energy companies were hitting natural gas deposits in the Shales, but it was hit when its clients’ suffered from declining revenues and ceased requiring exploration and land acquisition assistance.

Burleson’s was also very profitable in its best years.  In 2013, the firm had $1.6 million in profits per partner. That plummeted 48.9 percent to $595,000 in 2014. [See “Energy Work Improved Texas Firms’ Bottom Lines” Texas Lawyer, April 27, 2015.]

Texas Lawyer reports that Houston firm consultant William Cobb said Burleson followed the shale boom and increased its market share by opening offices, but it should have looked more at profitability along with that growth.

“When the oil went from $70 something to $40, down to $38, a lot of those guys they probably worked with started going bankrupt, couldn’t get money, couldn’t get loans. Their business went down. People started leaving. Their revenues wouldn’t support the payments to partners,” Cobb said.

The magazine also reported that the firm ran better when Burleson owned it 100 per cent.

The problem with growth and the requirement for additional capital is that the ownership options become more limiting and the opportunity to retain full ownership less appealing or possible.

However no doubt in this energy law firm’s case, full ownership would see a smaller firm continue.  Maybe.

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