Legal News

Firms Ask Partners to Pony Up

By Dan Slater

Laying off lawyers and freezing salaries are probably the two most visible indicators of tough times for law firms. Today, our very own Ashby Jones reports on another angle: Firms turning to their own lawyers in order to reduce and avoid debt.

When it comes to raising money, law firms generally have fewer options than publicly traded companies, which can sell bonds or issue equity shares, Jones writes. Ethical rules prohibit nonlawyers from owning equity in law firms, so firms typically structure themselves as partnerships, with the most senior lawyers owning the equity. That generally limits the firms to two fund-raising options: taking out a bank loan or passing the hat to their equity-holding partners.

Here’s how three firms are handling it:

Dewey & LeBoeuf: Last fall it announced it would withhold certain monthly distributions from its partners to build up its capital base.

Clifford Chance: Last fall the firm, which has offices in 21 countries, asked all of its partners to kick in as much as $150,000 each to build the firm’s nest egg.

DLA Piper: Toward the end of last year, DLA, which has some 3,500 lawyers world-wide, announced it would reduce some partner payouts and converted more than 200 nonequity partners into equity partners, which would require them to contribute more than $100,000 each to the firm’s coffers.

Full post as published by Law Blog - WSJ.com on January 29, 2009 (boomark / email).