A Reuters report suggests that the excesses of US law firms like Dewey & LeBoeuf who run on the ‘eat what you kill’ model, could be controlled through outside investors of non-lawyers who want to avoid train wrecks like Deweys.
Outside backers could help tame the excesses of U.S. law firms. Big shops like Dewey & LeBoeuf typically run on an eat-what-you-kill basis, rewarding self-interest over loyalty. Investors, on the other hand, prefer more stable enterprises. Enticing non-lawyers to own stakes in legal firms would require changing some ethics rules, but might help avert another Dewey-style train wreck.
U.S. legal eagles have long spurned capital from non-attorneys, arguing it would undermine their duty to clients by shifting attention to the bottom line. They didn’t budge even after an Australian firm went public five years ago or UK firms were allowed outside investments this year. Last month, the American Bar Association refused for the third time to revise rules barring non-lawyers from sharing fees or becoming partners with lawyers.
But profit already drives many big firms, and Dewey is Exhibit A. Fierce competition and ambition led the embattled firm to incur more than $200 million of debt, fudge revenue and guarantee multi-million dollar deals to stars poached from rivals while home-grown lawyers made far less. When times got tough, partners simply fled with their clients and capital.