Dewey & LeBoeuf’s inglorious galactic implosion changes all of the rules; it was not too big to fail, it was, however, far too big and corroded to fail in the relatively orderly way others before it failed.
The next battlefronts in this immense tragedy are likely to be pretty massive and probably fairly scandalous breach of fiduciary duty claims, fought on a level and at a pitch never seen before. These battles are going to be completely unseemly and they will probably suck in a host of law firms that made homes for Dewey refugees. Thus may result in a form of tribal warfare never before seen in Western society.
Rarely has the gap between assets and liabilities of a failed law firm been as wide as they appear to be in Dewey & LeBoeuf’s case. With liabilities thus far reported at about $315,000,000 (which may ultimately come close to doubling) and assets of a mere $215,000,000 (which may eventually realize less than half that amount of cash), there just doesn’t look like there is much there there, particularly when we consider that of its liabilities listed thus far, some $225,000,000 is secured debt, the lion’s share now owned by vulture funds, which reportedly much much of this debt at fifty cents or so on the dollar. They don’t call these guys vulture investors without reason. They are smart and omnivorous. They probably expect to double their investments and will do so by picking away at every morsel of the carcass and anything edible within range. They are not like traditional banks or landlords; they have no expectation of doing business of doing business with these lawyers or their new law firms and aren’t going to be anything but single-minded in squeezing every ounce of blood from every stone.
In light of this, every remaining constituency, particularly former partners, who are seeking to avoid as much pain as possible and general unsecured creditors are presumably plumbing worn legal texts and laying out battle plans for both offensive battles and planning out defenses for what may be pitched battles.
Here, then, is an early assessment of the order of battle for global breach of fiduciary duty claims which stands every likelihood of deploying scores of lawyers in fratricidal battles that will last for many years and will forever change the landscape of BigLaw and most certainly lateral recruiting will never be quite the same.
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