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Partnership Blues

American Bar Association, The Journal of the Section of Litigation
Robert E. Shapiro

Reprinted with permission from the American Bar Association, The Journal of the Section of Litigation.

"Not honesty alone, but the punctilio of an honor the most sensitive."

We have Justice (then Judge) Benjamin Cardozo to thank for this pithy and memorable summary of the fiduciary obligations owed by one partner to another. It conveys its meaning in an instant, doesn't it? Even those who have never bothered to look up the word "punctilio" have a pretty fair understanding of what Cardozo's archaism must mean. Partnership obligations are serious and exacting—something more demanding and exquisite than those of a mere contracting party. The latter may honor her promise, or not, as her interests may dictate, so long as she recognizes the need to reimburse the other contracting party for any loss incurred as a result of a promise unfulfilled. Partnership obligations are different. A partner owes her counterpart something more than what's calculated to be in her own best interest. Indeed, she probably needs first to consider what's in his.In the world of law firms these days, Cardozo's adage and partnership obligations have about the same status as the phrase "the American people" has in political commentary. Ever notice that when pundits, not to mention politicians, refer to "the American people," they are always referring to someone other than themselves? A politician may have set out to fool "the American people," but the commentator professes to have been too savvy to have been taken in. The American people are some distinct, abstract, and seemingly unthinking mass of somebodies who conform to the biases, and theories, of the commentator in question. They are decidedly different from the commentator himself and of no real value insofar as his own personal life is concerned.

Obligations Are for Someone Else

So, too, are partnership obligations, at least in the minds of lawyers. These are the province of someone else—a client—whose circumstances must be managed but never shared, whose obligations are his, but never the lawyer's own. A partnership matter is something remote— someone else's case to be litigated or position to be managed. Yet strangely, many, if not a majority of American lawyers, practice in partnerships. They should themselves live and breathe the very honor Cardozo articulated for partners, treating their senior colleagues and those colleagues' interests with special deference and respect. A law partnership should be as much about loyalty, teamwork, and collective success as anything you encounter in a business partnership. Indeed, in some respects, it should command even more of these things. But just to say this at all will strike most lawyers as a bit odd. Who, us?

So foreign now is Cardozo's punctilious honor to the thinking of most lawyers about the organizations in which they practice that they seldom call them partnerships at all. Instead, we tend to refer to them as "firms." This term has been around for decades, of course, no doubt adopted from those old businesses that prided themselves on patriarchal leadership and close working relationships. Except in the law context, the term has become largely outmoded in a busi-ness world dedicated to superefficient, just-in-time responses by anonymous cubicle-ensconced employees. But it con-tinues to serve lawyers well. It reassures them that there is still collegiality and common concern within their organiza-tions, even as they have grown and grown (and grown) to become vast business enterprises themselves with hundreds, if not thousands, of employees serving the interests of contemporary clients spread across the world. To their clients, they can hold themselves out as huge reservoirs of effective and efficient legal resources while still comfortably referring to their colleagues as "partners," even if the term seems now to have been drained of any real substance. They can even, without thinking about the paradox, designate certain colleagues as non-equity or "junior" partners, designations that cut against the grain of an understanding of a partnership in which obligations are viewed as in any way "sensitive," as many junior partners can attest.

In short, not too many law partners these days think they owe their colleagues "a punctilio of an honor" or really any "honor" at all, advancing the good of their colleagues above their own. And so there was something extraordinary about the vote of a majority of the now-defunct Dewey & LeBoeuf partners to accept a plan to pay off much of that firm's debt on a "rough justice" basis. There seemed to be a sense here of obligation beyond the separate interests of the individual partners, a kind of collective responsibility to each other and the outside world all at once. This is not to say, of course, that some or perhaps even most of the participants did not calculate in their own interest in choosing to join in the plan, regardless of its shortcomings on the side of fairness. Justice Cardozo hardly requires that partners reject a common plan solely because it also serves individual interests. And, even if there were deep sighs of reluctance, or even regret, by the partners in adopting the plan, there was still at least the hint of a collective sense that this is what was needed to be done.

A cynic might observe that, had the partners breathed more such collective sighs at an earlier date, the deep ones at the end might have not have been necessary all. For if a collective mindset at Dewey & Leboeuf allowed the firm to 'avoid some of the various uglinesses and indignities suffered by the partners at such firms as Heller Ehrman and Howrey & Simon as those firms disintegrated, such thinking was in too short supply earlier to avoid that disintegrative fate itself. Does this tell us something about how such once-honored and highly regarded partnerships ended up in such a tangle in the first place?

The Demise of Dewey & Laboeuf

The prevailing explanation for the demise of Dewey, like its predecessors, coheres with the contemporary view of law firms. These, it is said, are businesses, and if Dewey was brought low, surely it was because of business errors. It is easy to support such a thesis. Reports out of Dewey were that huge guaranteed contracts were given to "superstar" lawyers, who, like professional athletes, were paid top dollar to deliver big results for these firms. And like some of these free agent gambles in the sports world, some of the lawyers went bust, unable to produce annually on their exceptional promise. Bad contracts led to bad financial results and a last place or defunct franchise rather than the expected championship team.

Surely, with these facts in mind, there has been much self-satisfied tut-tutting heard in the legal world, along with a less fully admitted schadenfreude, over the way Dewey managed, or mismanaged, itself internally. Dewey, it is said, should never have made these uneconomic arrangements. It trusted too much in the idea that past production necessarily meant future performance. No one can guarantee what legal business tomorrow will bring , no matter a lawyer's reputation. And it is folly to mortgage the future of the firm on the performance of a few individual superstars. And so the observers of Dewey's implosion can, once having felt their souls purged and purified by watching the Greek tragedy of Dewey's demise, continue on in the confidence that they face no similar risk of ruin themselves, at least until the next spectacular law firm collapse disturbs, however briefly, their own sense of complacency.

These criticisms may be true enough, as far as they go, but are they really the correct lessons to be drawn from Dewey's failure? Only a sense of poor financial decisions and misjudgments about the earning capacities of its "su-perstar" lawyers? Perhaps. But taking Cardozo's comment less as a moral or legal doctrine, and more as a precondition of partnership success, might we not see more in the Dewey saga than just business decisions gone awry? Perhaps the problem arises more from how law firms have chosen not to appreciate what a partnership is all about. If so, it is possible that Dewey might be more avatar than aberration.

Why do lawyers practice in partnerships to begin with? Part of the answer lies in the nature of the legal profession and of professions in general. The idea behind a profession is the pursuit of a goal that transcends one's own interest. Doctors, for example, take the Hippocratic oath to acknowledge that their first obligation is to their patients, not themselves. Not for nothing does Plato's Socrates describe a doctor qua doctor as someone necessarily devoted to the advantage of someone else—the patient. In receiving compensation, he is a wage earner, not a doctor in the precise sense.

Lawyers have a double obligation outside themselves. Like doctors, they serve an "other" before themselves, which is called a "client" in this instance. The client's interests come before any interests, of favor or financial gain, the lawyer may have for herself. But lawyers are also officers of the court, which denotes an obligation beyond that even to the client, let alone themselves. The interests of the legal system are paramount, superseding those of client and lawyer alike.

Once properly taught in this way to serve interests above and beyond themselves, lawyers would tend to find a law partnership a most welcome form of organization. A lawyer's mindset should already be outward-looking rather than inward-looking. The partnership model reinforces and is reinforced by an understanding of lawyering as a professional undertaking that does not have as its first goal the individual enrichment of any one participant or even all the partici-pants. Lawyers are professionals first, and moneymakers no more than second.

A partnership also coheres with a second element of lawyering, which lawyers do—or at least should—know well. This is that legal problems are knotty in a unique or at least unusual way. It seems that no one lawyer, even the most brilliant, can solve a legal problem as successfully as two. This is the real reason lawyers are like nuns, always traveling in twos, because the work of the law, no less than the word of God, can be difficult to know. Add to that the fact that many legal tasks—briefs, trials, negotiations, closings, etc.—require multiple hands to be successful, and a law partnership of loyalty and trust seems particularly well suited to the provision of legal services.

Lone Heroes

Contrast this, however, with what's happening to the legal profession and you may see why Dewey might be viewed as more warning than wastrel. Certainly, Dewey's view that there are "superstar" lawyers is no real aberration. Everything in the legal world has conspired to accentuate the tendency of lawyers to view themselves as free agents. Our celebrity culture encourages such notions, and lawyers have swallowed the bait of promoting themselves as lone star heroes. Indeed, the road signs outside law firms all point in the same direction. Read any lawyer's bio on the Internet and you will find a list of individual accomplishments, from trials won seemingly by themselves, to deals made without the help of others. Then there are the less subtle forms of advertising, everything from glossy rag sheets promoting "superstar" or "leading" lawyers, to legal publications that ,feature the separate feats of first-chair *lawyers, to public relations blasts on pending matters that never fail to promote this lawyer or that.

Even internally, where lawyers depend on the good will and hard work of their colleagues, bad thinking has set in. Unusual is the firm that does not tout within its own ranks the individual achievements of this rising star or that. If the press reports are to be believed, fights over compensation are becoming fiercer, as lawyers focus on their comparative standing more than the overall success of their firms. This particular distortion was especially prominent during the economic downturn, where partners seemed to take any economic woes out of their associates' and lesser partners' hides. Whatever happened to the idea that the economic fortunes of partners would rise and fall with the profits of the firm, and that it was senseless to make long-term partnership decisions on the basis of six-month financial results? Is it really true that lawyers could not do without the income, relatively as well as absolutely, they had not thought of enjoying five short years of prosperity earlier?

Little wonder then that the legal world has become rife with sensational partnership defection from one firm to another. Believing their own press notices, not to mention lured by and endorsing the celebrity culture that has invaded the legal world, many lawyers have sniffed at notions of loyalty as old-fashioned, and cast about for and attached themselves, however briefly, to the highest bidder for their superstar services. Rare is the firm that does not find itself worrying, for reasons it unaccountably fails to understand, that the lawyers whose reputations it has gone out of its way to promote will pack up their bags and settle somewhere else that promises to make them richer. In this environment, Dewey may have made the right choice, trying to lock up by contract what partnership loyalty no longer could ensure. Its immediate failure was only in the details.

Most lawyers really know better than all of this—or they should. Particularly in litigation, where losses are inevitable, whether because of the facts or the unpredictability of the legal system, lawyers know that cases are won through some uncertain combination of hardwork, teamwork, and dumb luck. You have to wonder about a trial lawyer who promotes himself as having an unbroken winning streak. Did he only take sure winners? Or might he be particularly adept at shifting blame to others? Or is he just deluding himself? Whatever the reason, such talk does the lawyer, the system, and the profession itself a disservice, making it appear that the law, always intractable, might actually be something that can be held within the grasp of a single lawyer.

But it is difficult to know how to relearn some of the old lessons amid the hard-pressing facts of the new order. Somehow the idea that the individual lawyer's worth is something different from the clients and dollars that he or she supposedly controls or supports needs to be reinvigorated. And the encouragement given to the pursuit of individual glory and riches needs to be gainsaid, if it is not to make the profession—if not the lawyers themselves—so much the poorer. Perhaps further reflection on Cardozo's great aphorism is the best place to begin.

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Litigation, published quarterly, is the preeminent journal in the field of trial practice. The publication offers practical yet lively information on common problems and interests for the lawyers who try cases and the judges who decide them.

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