Major US law firm files for bankruptcy protection

Farcear

http://www.bbc.co.uk/news/business-18246882

Interesting story from the US you may / may not have seen.

Proving that not even larger firms are safe bets; although it strikes me as almost negligent that the firm didn't have _some_ sort of escape clause mechanism...

mikemac1

The partners have equity so do they have liability for the debts?

Are these firms run like partnerships or like a Ltd company?


So I suppose what I'm asking is if I made partner in McCann Fitzgerald and they went bust, could all the partners including me be pursued for the debts?

I've never seen a law firm with Ltd after their name

FreudianSlippers

mikemac1 wrote: »

The partners have equity so do they have liability for the debts?

Are these firms run like partnerships or like a Ltd company?


So I suppose what I'm asking is if I made partner in McCann Fitzgerald and they went bust, could all the partners including me be pursued for the debts?

I've never seen a law firm with Ltd after their name

In the US the medium sized ones are usually either LLP or LLC. The larger ones are varied, but you can be sure they are protected. The one doctors seem to use frequently there is S-corp

Farcear

May not be complete protection though, especially if reports of longer term financial issues are to be believed.

I remember reading about a previous law firm going bankrupt in the US and the partners were found personally liable on the ground of something akin to trading while insolvent.

FreudianSlippers

Good point.

Predalien

Dewey & LeBoeuf are an LLP, does sound like it could get very messy though http://www.businessweek.com/articles/2012-05-31/after-dewey-and-leboeuf-its-lawyers-v-dot-lawyers

BW1

I assume liability is limited to the amount of equity paid up by each partner. Although I doubt the partners absconding and taking teams of associates with them to other firms were able to cash out their paid up equity.

shaneybaby

New legal services bill here will bring in the ability of solicitors firms to become Ltd companies. (Dunno where i read this mind...) Can only be partnerships at the mo.

ucd.1985

Same as accountancy firms so.

No limited liability there either.

Marcusm

Dewey was a firm with some very good lawyers in New York and London in my experience. Post LeBoeuf merger, the head partners seem to have gone on a hiring spree issuing large guarantees to supposed rainmakers to attract them. This discommoded a number of the senior existing partners who made arrangements to make similar moves to other firms. A roundabout started which seriously impacted DLeB's ability to stay profitable commencing a scramble for the door.

Need to be careful when the intellectual property is of the two legged kind and highly self invested.

johnfás

ucd.1985 wrote: »

Same as accountancy firms so.

No limited liability there either.

Although in reality accountancy firms make mor from consulting than auditing and they generally incorporate their consulting business with the partners in the firm being the shareholders and directors of the company.

Right 2B a liar

shaneybaby wrote: »

New legal services bill here will bring in the ability of solicitors firms to become Ltd companies. (Dunno where i read this mind...) Can only be partnerships at the mo.

There was a piece on this in May LSI gazette

FreudianSlippers

LSB has been very quiet recently; I anticipate it will be back on the radar following the close of the current referendum.

krd

Farcear wrote: »

May not be complete protection though, especially if reports of longer term financial issues are to be believed.

Chapter 11 is bankruptcy protection. If the business is viable, debts may be written down or written off. If it isn't, then it'll go to full bankruptcy. What assets does a law firm ever have? A few desks and chairs. Maybe a framed motivational poster or two.

It's seems their problem is the 'sign on' deal they did with new partners. If that's the only thing standing in the way of the business's viability, they're not going to see a sovereign of that fools gold they were promised. And if the business is bankrupt, they won't see it either. Though they might get their hands on that framed motivational poster.

Since it's lawyers, they might keep each other in litigation for years. Like a bunch of bald men fighting over a comb.

Delancey

Anyone know if the Dewey is Thomas Dewey who ran for President on the Republican ticket but was defeated by Truman ?

Farcear

Famously, not according to the early edition of the Chicago Daily Tribune!

(Wikipedia says it is the same person; nice spot.)