Tuesday, March 24, 2009

The Wolf Shuts the Door

When I first heard the news yesterday morning of the possibility that the firm might dissolve, I have to admit that I was shocked. Sources: Wolf Block partners to discuss dissolving firm.

After all, Wolf Block was a legal institution in Philly, a large firm established over 100 years ago, as a way to counter the anti-semitism that prevailed at the time in the venerated white shoe (WASPY) firms. As noted in Wolf Block Dissolves:

The 300-lawyer Wolf Block was formed in 1903 by Morris Wolf and Horace Stern, two Jewish lawyers who could not get work at Philadelphia’s elite law firms. The firm rose in prominence during the first half of the 20th Century along with the local Jewish business community. It was able to attract some of the nation’s top Jewish law school graduates until other firms changed their hiring practices in the late 1960s.
I suppose, to some extent, it had become an anomaly once the raison d'etre no longer existed. Yet, it survived and thrived for many years. At this point, as noted by the Business Journal Wolf Block decides to dissolve:
[T]he firm has 287 lawyers and 400 support staff, with 156 local lawyers and 255 local staff. The firm has roughly half of its lawyer count in Philadelphia with about 60 lawyers in Roseland, N.J., and more than 40 in New York and smaller sites in Cherry Hill, N.J., Harrisburg, Pa, Boston and Wilmington.
By yesterday afternoon, however, its days were numbered. As the Inky reports, Wolf Block law firm will dissolve:

Hit hard by defections of top lawyers and tight credit markets, partners at Wolf Block voted this afternoon to disband the 106-year-old law firm, a Philadelphia institution that for generations played a central role in the city's civic, legal and governmental affairs.

The decision was made during an emotional partners meeting at the firm's Center City offices. Lawyers from offices in other cities were video-conferenced in.

Like many other firms, Wolf Block had been hit by a sharp fall-off in revenue as credit markets seized last fall and the housing market collapsed. But the firm also had been plagued with defections by top fee generators and faced further defections in the coming months.

It appears that the demise of the firm was due, in large part, to the fact that some of the partners were grumbling that they weren't making enough. Sound Wall Street enough for you? The Holy Grail for Big Law, PPP (Profits Per Partner) "fell 18.5 percent from $502,000 to $409,000 and the average compensation for partners dropped by 19.7 percent from $400,000 to $321,000 in 2008." After all, who could be expected to survive on that? Not the big boys -- they deserve the big bucks to go with all they bring to the firm.

The other major impediment was the fact that the annual line of credit renewal was coming up and personal guarantees would be required by the Bank, as noted by the Legal Intelligencer, Wolf Block to Close Its Doors:

One source familiar with the firm's financial situation said Wolf Block sought in late 2008 an extension of its line of credit with Wachovia. After some back and forth, it was eventually decided that the line of credit would have to be personally guaranteed by each partner. That didn't go over well and a number of partners announced they would leave before signing such a deal, the source said.

Ultimately, Wachovia -- now owned by Wells Fargo -- extended the line until March 31 without mandating the partners personally guarantee it. But by that time, the source said, a large number of attorneys, including all of the New York office, said they would be moving to Cozen O'Connor. Some put the number close to 100 attorneys while others said it was still fluid and was probably lower.
The death knell, however, was apparently the missed paycheck or draw:

A former Wolf Block partner said the year-end distribution of partner profits was “almost non-existent,” creating a loss of confidence in the current management team, which then moved to get the firm back on track with its credit line. Firms need to take a line of credit out with banks to pay operating expenses at the start of each fiscal year until receivables come in from clients.

But more concerns arose on March 1, when former partners said Wolf Block partners did not receive their monthy stipend, called a draw, electronically that day. Instead, it was delivered manually as a check a few days later, indicating the firm might have had some financial problems.

Looks like the firm's Chairman, Mark Alderman, and a number of other lawyers may be bolting over to Cozen, which personality-wise, is probably the best fit for them. One of my client's was involved in a contentious partnership split-up matter with them a few years ago and it was particularly ugly among both the clients and the lawyers on both sides. Based upon the reputation of many of the W/B lawyers, I'm sure that more than a few lawyers in town are intoning that old meme: it couldn't happen to a nicer (more deserving) bunch of guys.

Missed paychecks, grumblings about who deserves what, guarantees on the line -- all bring back bad memories of the dissolution of a former firm many years ago (of course, at that time, I was one of the big income producers and generators supporting some of my lazy ass partners). The last place in the world I'd want to be right about now would be W/B, with the infighting and scrambling, as the firm winds down.

UPDATE (3/25): One point I didn't mention, which is really the worst part of the news (other than the demise of a legal institution in the city) of W/B's closing, is the fact that the legal environment couldn't be worse for out of work lawyers right now. Except for those lawyers with a book of business, as I've mentioned before, times are tough. As noted by the Inky, Wolf Block lawyers face difficult job-hunting climate:
From an employee's perspective, the announcement Monday that Wolf, Block, Schorr & Solis-Cohen L.L.P. would soon be closing its doors couldn't have come at a worse time.

Law firms in Philadelphia and across the nation have been trimming lawyers and staff for months, and jobs are in short supply.

Yet for lawyers with a deep base of clients, and there are many of those at Wolf Block, there likely will be many suitors.

'I would say that for lawyers with solid business generation, they are going to be highly sought after,' said Sheldon Bonovitz, the former chairman of Center City's 650-plus lawyer Duane Morris firm. 'For those that don't, they likely will have a hard time, unless they are part of a group.'
Those are the people who have really been hurt by the firm's decision to shutter its doors.

Finally, a good retrospective on the firm can be found here, Wolf Block's end marks an era's passing.

(Photo via JD Journal)

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