“I have the sense that we have lost focus on our culture and what it means to be a Dewey & LeBoeuf partner,” Davis concluded. “We all now need to reconnect with what is best about Dewey & LeBoeuf and our culture—collegiality, collaboration, and commitment.”

As Davis was sitting down, Kessler grabbed the microphone. “I want to add a few words,” he said, and launched into an impassioned speech about the future of the firm—a future in which guarantees were unnecessary, partners coöperated, and profits rebounded. According to some partners, he proclaimed, his voice rising, “We’ll tear up the contracts!”

However unrealistic the notion of suddenly abrogating the contracts, the monologue left the impression that Kessler, and not Davis, was leading the firm. Afterward, Pierce began negotiating his contract and payments with Kessler and other partners. Davis recalls Kessler telling him that the only thing that would satisfy Pierce was his ouster as chairman.

On February 9th, Davis met with Dye and his allies and told them that he was convening a meeting of “senior leaders” to address the compensation issues.

“Steve, I’m not a senior leader,” Dye said. “I was kicked out, in case you don’t remember. So don’t tar me with your brush.”

Nonetheless, a group of eighteen or so highly compensated partners, including Pierce, Dye, and Ferrara, gathered on February 13th to work out a way to save the firm. The meeting wasn’t fruitful. Pierce and Davis got into a heated argument. Ferrara asked Dye to join a small group that would devise a plan. Dye declined. He and Schwolsky held the view that partners’ income should be capped at two million dollars for the next several years as the firm moved toward a lockstep compensation plan. Davis, DiCarmine, and Sanders would have to be fired. Later, when Davis asked Dye if he wanted to be chairman, Dye replied, “Absolutely not.”

A few weeks later, DiCarmine saw Kessler and Schwolsky come out of a meeting at which management changes were discussed. They hugged, which seemed to suggest that the Dye group would remain loyal to the firm.

“They’ll leave by Friday,” DiCarmine predicted to Davis. “That was a knife in the back.” He’d seen similar scenes in his cousin’s family.

On Friday, March 16th, at 4 P.M., Dye, Schwolsky, Groll, and one other partner met with Davis and resigned. Davis looked haggard. He said nothing. “This isn’t personal,” Schwolsky said. “You’re not the only person to blame. A lot of people should have known better.”

“You’re a good man, but you surrounded yourself with bad people,” Dye added. He meant DiCarmine and Sanders. Dye walked over to the offices of Willkie Farr & Gallagher, a firm that had been courting him, and into a cocktail party to welcome new partners. Twelve partners eventually joined him, representing the core of the firm’s insurance practice. The next morning, Dye left for the British Virgin Islands and a week of sailing. Nearly all his existing clients followed him to his new firm.

On March 22nd, Kessler came to see Davis. “People feel we need a change in leadership,” Kessler told him. Davis argued that the timing was bad. “Let’s close the line of credit,” he said. Then the executive committee could look at the issue of firm governance. “All options will be considered,” he pledged, including his replacement.

Four days later, Kessler, Pierce, and about forty other partners met to decide Davis’s fate. All but one partner voted that the firm needed new management.

That night, Dewey & LeBoeuf issued a press release announcing a new “office of the chairman” arrangement, consisting of Davis, Kessler, and three other partners. Davis would be relocating to London, far from headquarters in New York, and would likely have been ousted altogether had he not been leading the negotiations with the banks for a new credit line. The release also said that DiCarmine’s responsibilities were being transferred to another lawyer. He was fired about a month later.

It took just six weeks for Dewey & LeBoeuf to disintegrate. With the loss of the core insurance practice, headhunters descended on the firm, seeking to hire its most productive partners. Every week brought new defections, accompanied by increasingly unconvincing claims from the firm’s new leaders that they wouldn’t file for bankruptcy.

“I’m warning you, I have a cold!” Facebook

Twitter

Email

Shopping

The only option seemed yet another merger, though this time Dewey & LeBoeuf was negotiating from weakness. Davis, still a member of the office of the chairman, participated in talks with the fast-growing Greenberg Traurig, but his heart wasn’t in it, especially since Greenberg was interested in only about half the firm’s lawyers, and he wasn’t among them. In any event, once news of the district attorney’s investigation broke, the talks collapsed, and Davis got an e-mail that the office of the chairman had voted to remove him.

On May 3rd, Pierce announced that he was going to White & Case. In his resignation letter, according to the Times, he again told the firm that it owed him some sixty million dollars.

Kessler left a week later, taking nearly seventy lawyers with him, for Winston & Strawn. Ralph Ferrara, whose lavish guarantee had arguably set the precedent for the contracts that led to the firm’s demise, joined Proskauer Rose on May 17th.

Dewey & LeBoeuf filed for bankruptcy protection on May 28th, saying that it planned to liquidate. The bankruptcy judge rejected arguments that partners who, like Pierce, had contract guarantees had enforceable claims against the firm. On the contrary, the judge ruled, they, too, would be at risk for the firm’s debts. A total of $71.5 million was pledged to the firm’s creditors by the former partners, including Pierce ($1 million), Dye ($1.7 million), Schwolsky ($1.7 million), Groll ($1.7 million), Kessler ($1.8 million), and Ferrara ($3.4 million). Davis and DiCarmine weren’t allowed to participate in the settlement, but the judge later settled the firm’s remaining claims against them, with Davis owing just over five hundred thousand dollars out of his future earnings, if he sees them.

In the legal profession generally, as Davis predicted, small and midsized firms have been squeezed, and large firms have had to grow, through mergers and by poaching partners. Some of these mega firms are no longer partnerships at all, in the strict sense, or even law firms, but are what are known as “vereins,” a constellation of separate legal entities doing business under a single brand name. Of American Lawyer’s top ten global firms by revenue last year, the top two were vereins.

The durability of the verein model remains to be seen. None of the top ten firms based on profits per partner are vereins, and none have grown through a merger. More than half of them, including Cravath, are lockstep or near-lockstep compensation firms, and they continue to attract the top law graduates once coveted by Davis and DiCarmine, to groom most of their partners from within, and to focus on demanding, high-margin assignments from wealthy corporate clients. Despite the upheavals of the financial crisis and changes in the profession, their rankings have remained remarkably stable for decades. What these firms seem to have—and what Dewey & LeBoeuf so manifestly lacked—is a culture that fosters coöperation and mutual respect.

EPILOGUE

Since leaving the office, more than a year ago, Davis has spent much of his time with lawyers, both on the bankruptcy settlement and on the criminal investigation, which was brought before a grand jury that convened on September 17th for a six-month term. Prosecutors told prospective jurors that they would be hearing evidence and testimony about whether partners and managers in the firm falsified audits and records in order to be able to pay millions of dollars in bonuses and income. No names were mentioned. (Davis and DiCarmine have heard nothing from the district attorney’s office; a spokeswoman for the D.A. declined to comment on the investigation.)