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Kaplan College Paralegal Studies

Successful Career Strategies, Inc.

July 2005

The Firm is Burning

A fact of modern legal life is that law firms are not perpetual institutions. Like lawyers themselves, law firms now come and go. In today's legal market, law firms dissolve, merge with other firms, reorganize, and declare bankruptcy.

The precarious position many law firms find themselves in has added anxiety to the already anxious lives of law firm associates. This situation has also made the ability to anticipate the demise of one's law firm an extremely valuable legal skill.

Much like other disasters, it is often very difficult to predict the collapse of a law firm. While partners are privy to The Firm's books and in position to prepare for the collapse, they tend to leave associates in the dark about the financial health of The Firm. Not only that, but partners will also frequently make assurances that all is well -- even when this is far from the case. Such pronouncements are aimed primarily at keeping clients and associates from going elsewhere. In other words, to keep clients and associates from doing exactly what they should be doing.

Because it is unlikely partners will tip their hand about the uncertain state of The Firm, associates must look for indicators in and around The Firm that the end may be near. Some indicators The Firm isn't doing well, such as skipped partnership draws and the departure of certain power partners, are hard to miss. Other indicators are even more obvious.

The biggest law firm ever to go out of business, Finley, Kumble, provides a good example. One luckless Finley, Kumble lawyer found out about the closure of the firm's branch office when he showed up for work on a Monday morning. To his great surprise, all the office furnishings, including his desk and client files, had been removed from the premises.

Donít let this happen to you! Associates are advised to look for one or more of the following:

1. The partners put out a press release dismissing rumors that The Firm is having financial difficulty. While the press release will proclaim that all is wonderful, it is often an act of desperation to discount information about The Firm's finances that has been leaked to outsiders. Astute associates able to read between the press release lines can discern that the rumors are true and The Firm's collapse is imminent.

2. The Firm has a huge payroll, a peak-of-the-market office lease and no clients. This deadly combination has spelled the end of many law firms.

3. The Firm has a huge payroll, a peak-of-the-market office lease, no clients and merges with another firm that has a huge payroll, a peak-of-the-market office lease and no clients. One struggling firm plus one struggling firm equals one large struggling firm.

4. Strange behavior among partners. I don't mean the usual strange partner behavior. I mean really strange behavior -- even for partners.

5. Another indicator that can be derived from observation of partner behavior occurs when associates are given work assignments. Under normal circumstances, partners use words such as "urgent," "right away" "ASAP," "rush," "emergency," and "immediately" to explain when they want projects completed. Associates should worry if, for the first time ever, they hear a partner tell them to do the work "whenever you get around to it." This is a sure sign that The Firm won't be in business long enough to complete the project.

The Rodent lived through the collapse of the branch office of a major firm. Although many of us among the associate ranks knew there were problems, we didn't realize just how serious the situation was. That all changed when we read the writing on the wall -- literally. The writing on the wall was in the form of posters plastered on the walls of The Firm's file room, copying center, and lunch room. The posters contained motivational messages such as: "success if a journey, not a destination" and "it's amazing how much can be accomplished when no one cares who gets the credit."

These motivational posters signaled the end for us. A law firm simply cannot recover from something like that. All they motivated us to do was to find new jobs elsewhere. A few months after the posters went up, the firm came down.

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