Poor Management Means Bankruptcy!

Altheimer & Gray’s, an 88 year-old law firm in Chicago with 300 lawyers and offices around the world, filed for bankruptcy in 2003 with liabilities of more than $30 million ($25 million owed to its bank). The proposed plan will require the firm’s 59 former equity partners to pay a total of $15 million to the bankruptcy estate; of that amount an average of $753,500 will be paid by each of the nine executive committee members.

The remaining portion will be paid by the 50 other equity partners. And Altheimer’s 65 non-equity partners will contribute slightly less than $10,000 each. No one expects that very much of the more than $30 million in accounts receivable will be collected. See more.

Over-extension of the firm’s real estate obligations, failure to aggressively collect its billings and lack of a team effort to address management challenges are factors that took this firm down. No wonder that today’s young lawyers are questioning whether they want to become partners in firms in which the management of the firm is questionable at best and secretive at worst.

That sounds very much like Steve Kumble’s story as he relates it in his book about Finley Kumble in the 1990s.

While it is not practical for lawyers in large firms to have a direct voice in every decision, is it reasonable for all lawyers in the firm to be personally liable for liabilities over which they have no control? That is a key question being asked by today’s aspiring partners-to-be.


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