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They say if we don't learn from the mistakes of the past, we are doomed to repeat them.
So let's look at some of the biggest law firm fails to see what we can learn. Why did they fail? The simple answer would be: they weren't making enough money. But that's like saying the car stopped because it ran out of gas. Let's get into the specifics of why these firms failed, and what we can learn.
Dewey & LeBoeuf
It's almost not fair to kick a dog when it's down, but this was a bad dog.
Dewey & LeBoeuf, a New York giant that once employed 1,000 lawyers in 26 offices around the world, filed for bankruptcy in 2012. The problem? Well, of course it was money.
But the root of the problem was hidden deep in the law firm's financial statements. It turns out firm leaders were cooking the books to obtain loans. The firm's former chairman is already serving a five-year deferred prosecution deal. Two other firm executives are on trial now.
Lesson number one: Don't cheat. Lesson number two: Especially don't cheat on your financial statements where there's an obvious paper trail.
Finley Kumble grew from roughly 50 lawyers to become one of the first national law firms in the United States with 700 attorneys. Their formula for success? A strategy of excess.
Industry experts said the firm built itself by aggressively poaching lawyers from other fields. But Finley Kumble could not afford the promised salaries, and soon the diminishing profits caused those partners to return.
Lesson number three: Don't lie or make promises you can't keep.
A Canadian-grown firm, Heenan Blaikie once employed 500 legal professionals. It was a top-flight practice that attracted many former politicians for forty years.
But in early 2013, firm leaders announced that while the firm was "financially sound," profits per partner were down by 10-15 percent across the board. That announcement was followed by a mass exodus of partners.
Lesson number four? When partners start to bolt, it means the doors will soon be bolted.
The American Bar Association looked at the reasons for law firm failures in a panel discussion entitled, What Makes Law Firms Succeed or Fail? Katherine Suchocki, director of Law Practice Management for the New York State Bar Association, quoted William Pollard:
"The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow."
Lesson number five: Learn from the past, and you may survive the future.