The fight over what remains of Weil Gotshal raises awkward questions about partnership capital, management accountability and what BigLaw equity is really worth.
The lawyers are now hiring lawyers over at Weil Gotshal & Manges with about10 former Weil, partners working with Foley & Lardner litigator Peter Wang as the 95-year-old firm heads for closure, according to reports in the Financial Times.
The group includes lawyers who left within the past five years, but none from the recent stampede.
Landlords, vendors and other creditors come first, leaving current and former partners to hope something remains. It is still unclear what Weil owes certain partners under its partnership agreement, Reuters reported.
Weil generated more than $2 billion in revenue last year. That is limited comfort once the people generating it have left the building.
The firm wants an out-of-court dissolution, with AlixPartners and Davis Polk advising, and reportedly believes it can wind down solvently. If it can’t, 9fin notes, former partners’ distributions and capital repayments could land at the centre of a Chapter 11 case. Partners hoping for a cheque could instead receive a demand for one.
Questions for Weil’s leadership
The FT reports that the group is examining whether longtime executive partner Barry Wolf (pictured) and the firm’s management breached their fiduciary duties during its final stretch as an ongoing entity, with no wrongdoing having been established.
The management committee recommended the wind-down on October 28, subject to a partnership vote, although there is no public confirmation of the result.
Weil exposes a weakness about partnerships, which is their ability to walk out the door, unlike the firm liabilities. It’s easy enough for rivals to recruit valuable teams without inheriting the old firm’s leases, unpaid bills or capital obligations. Gibson Dunn alone is set to take up to 120 Weil funds lawyers, including more than 20 partners.
But what about the ‘remainders’? And the bills that need paying?
Placed in sharp relief with the Weil winddown is just how much security does equity partnership really offer when a profitable firm’s value can evaporate in months?
For Weil’s former partners, the question is no longer theoretical and it may be worth a great deal of money.
