Mayer Brown Decision to Demote Partners Still Drawing Criticism
Not surprisingly, last week's announcement by Chicago-based megafirm Mayer Brown of its plans to "de-equitize" 45 equity partners quickly drew a reaction around the blogosphere immediately thereafter. ALM affiliate blogger Rick Georges of Future Lawyer commented that Mayer Brown's actions showed that as a Biglaw partner, you're never safe, a sentiment echoed by lawyer/coach Eric Mazzone in this post, Don't Get Too Comfortable.
Taking a more academic approach, professors Stephen Bainbridge and Larry Ribstein in respective posts here and here suggest that expelling partners like Mayer did isn't a breach of contract if the firm's partnership agreement had a "guillotine" provision allowing it to cut partners at any time without cause. But even in the absence of a guillotine clause, Bainbridge and Ribstein suggest that cutting partners to make the partnership more profitable isn't a breach of fiduciary duty or a bad-faith action, particularly when the termination makes the rest of the partnership more profitable.
But even this week, the Mayer Brown decision is still reverberating and, in fact, drawing even harsher criticism. Gerry Riskin of Amazing Firms, Amazing Practices asks, why would you demote 10 percent of your partners in a such a public manner rather than doing so discretely and offering them job assistance? (The response to Riskin may be that the firm never intended the media to get the story, as suggested here by David Lat.) Most of all, Larry Bodine takes the firm to task for its greed. From his post:
Unlike Chrysler, Mayer Brown had record earnings in 2006: $1.1 billion, up 11% over 2005. In fact profits per partner exceeded $1 million. So this means the decision was motivated by avarice, insatiable greed for riches, and an inordinate desire to gain and hoard wealth. If I were a client of Mayer Brown, I might be thrilled that my law firm was run by bloodthirsty cut-throats who will jettison longtime colleagues for money. But maybe I'd be a little scared of the firm too. Mayer Brown has signaled that its firm culture is a money-hungry, ruthless sweatshop. That would give me the creeps.
Who's right here? Did the jilted partners get the short end of the stick by being dumped by a firm to which they gave years of service? Or as Ribstein and Bainbridge suggest, to the extent the firm owed a duty of loyalty, did the duty lie to the greater good of the other partners?
As for me, here are some of my thoughts. First, what comes around goes around. By firing partners to retain more profits, Mayer Brown may someday find itself on a client's chopping block, terminated from service because it charges too much. As Bodine points out, the firm's clients form their own views on the firm based on this recent decision.
At the same time, while I admire Bodine for putting potential business on the line to express an opinion that matters to him, I don't agree with his criticism of the firm entirely. Biglaw is big business. Large corporations make decisions based purely on economics. Law firms may call themselves partnerships (though, these days, many refer to partners as "shareholders"), but that doesn't mean that they're congenial places to work.
Nor do I feel sorry for the jilted partners. In contrast to the managers who lost jobs at dot-coms and couldn't find employment for years, lawyers, particularly those who held partnerships at large firms, have far, far more opportunities. These partners may find employment at other firms or in-house at corporations or in government. And with a law degree, they can even start their own firms. Once the initial shock of termination wears off, I'm optimistic that these lawyers will wind up in a better place and come to view their firings as a fresh start rather than a bitter end.
Posted by Carolyn Elefant on March 9, 2007 at 04:55 PM | Permalink
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