What caused Weil Gotshal to fail?
Frankly, given our historic experience with pre-eminent law firm failures, Weil fits no pattern we’re familiar with. Their collapse came seemingly all of a sudden and—this is without precedent among previous high-profile law firm failures—when the US economy is going strong and, more pointedly, its key clients are all financially healthy, paying their bills on time, and generating high-stakes legal work as always. This is not supposed to happen.
Let’s briefly rehearse the last decade-plus of BigLaw failures (a selective list):
- Thacher Profitt/2009: A 160-year-old firm which doubled in lawyer headcount from 2003 to 2007 but was shockingly undiversified in its client base and monoline practice focus—structured finance, specifically helping clients bundle and sell mortgage-backed securities. (The standard paperwork mortgage traders used were simply called “Thacher docs”(!)) When the subprime bubble collapsed essentially overnight and Bear Stearns, Thacher’s largest client, dissolved, a Citigroup Bank loan covenant was breached. Thacher came close to merging with [being acquired by] King & Spalding, but ultimately no dice. Sonnenschein threw a lifeline to about 100 Thacherites, but lights out.
- Howrey/2011: Over 700 lawyers and half a billion in revenue, but victim of its own mismanagement. Irresponsibly aggressive post-recession expansion, out of control negligence and no discipline around billing, and falling short of 2009 budget projections by 35%. Understandably, partners started heading for the doors. Self-inflicted, if unintended.
- Dewey/2012: Undoubtedly the highest-profile law firm blowup during the career of many of us. Heedlessly over-generous lateral partner compensation guarantees, unheard-of (but voluntarily assumed) debt, and flat out accounting fraud, with four senior leaders (its Chair, Executive Director, CFO, and Client Relations Manager) tried for alleged criminal offenses and Joel Sanders, the CFO, convicted of felony fraud and fined $1-million. Behavior best avoided.
- Bingham/2014: A pattern of fairly aggressive expansion-by-merger seemed to be working until its 2009 combination with McKee Nelson involved multi-year compensation guarantees to the newcomers. This sparked internal resentment and, shortly thereafter, its large insolvency group saw demand soften substantially and the Deepwater Horizon oil spill annuity revenue wound down. In late 2014 ~750 lawyers including 226 partners decamped for Morgan Lewis. Game over.
- Dickstein Shapiro/2016: A prominent Washington DC regulatory and lobbying firm (>400 lawyers) weakened by the 2008 global recession but fatally impaled in 2015 when its partner, former House Speaker Denny Hastert, resigned in the face of indictments for bribery. Merger talks went nowhere and when Blank Rome took over 100 lawyers and staff it was finis.
Why did I start with this look-back list? Because as widely varied as the firms, their client bases, and the economic environments for each were, they all had something in common: A strongly negative exogenous economic event occurred, or the firm committed gross internal mismanagement. In brief: All previous law firm failures came in the wake of a widespread economic downturn or else a sudden evisceration of their core practice area. Neither is the case with Weil. The economy is doing fine and their clients are all doing fine. This is what’s distinctive.
What was affirmatively true at Weil were high-profile partner departures starting this past summer when a group of private equity experts peeled off for Simpson Thacher and Paul Weiss (others followed). But the headline departure came in September when Michael Aiello, head of Weil’s corporate department, said he would be leaving for Cravath. Although according to public reports Aiello was, charitably, not universally admired (“polarizing”) he oversaw a very large book of business so this alone was a worrisome event. (He reportedly was being paid more than $20-million/year.)
Aiello was—until his plans with Cravath came to light—tight friends with Barry Wolf, the firm’s long-time managing partner, who had announced in late 2024 that he would be stepping down at some point. Nearly two years later, he finally brought this impressively protracted succession planning process to an end by appointing Ramona Nee to be his successor starting January 1, 2027.
Well, not so “fast.” Almost immediately after Aiello’s news in September, Nee withdrew her name from consideration as Wolf’s successor, although at first only the management committee knew of her decision. Her withdrawal was not disclosed to the full firm until early to mid-October, which strongly implies that management believed it would only further disturb the rank and file partnership. It did.
In its recent article on Weil’s implosion, The Times of London quoted me on what happened next:
“A run on a bank is a super analogy, because in a typical scenario the bank is solvent. The shocking thing is how fast this unravelled. I can’t recall a firm that imploded so fast in a non-recessionary environment. […]
“Law firms really have no tangible assets; the joke is that the assets go down in the elevator every night. And we don’t have the custom of garden leave, so when a lawyer leaves any firm, they can walk across the street and pick up their practice with a different logo on the door. Clients increasingly tend to be loyal to their lawyers as opposed to their law firms.”
The lawyer personality type, definitively portrayed by Dr. Larry Richard, encapsulates lawyers as “insecure overachievers,” which leaves them naturally predisposed to looking for the exits if they have the slightest doubt about the long-term stability of their current firm. Here’s how I described it to Thomson Reuters:
Over the past several months, Weil Gotshal got caught in a negative spiral after the departure of a few key rainmakers, merger discussions failed to produce a deal, and another top executive — Ramona Nee, the firm’s co-managing partner — told the firm she would not take over as executive partner from longtime leader Barry Wolf. “People within the firm saw all this and that left everyone spooked,” MacEwen says. “And from there, it just took on a life of its own.”
The unanswered question surely on the minds of many is, “who might be next?” I don’t have a snappy answer, because it’s such a highly consequential—existential—topic, and because events can unfold with breathtaking rapidity. What I can offer are thoughts on guarding against your firm being next:
Weil Gotshal’s collapse is a warning that prestige, past revenue, and legal excellence cannot compensate indefinitely for deteriorating leadership, competitive weakness, and a loss of confidence among partners.
Those firms best positioned to survive in today’s legal market will not necessarily be the largest or those paying the highest salaries. They will be the firms that understand why their best people stay, why clients remain loyal, and how to preserve institutional strength when individuals leave.
“What happened to Weil Gotshal is likely to spur more consolidation,” says Adam Smith’s MacEwen. “The demand for legal services hasn’t gone away, and the firm’s talent will find homes elsewhere, so I don’t think the industry as a whole will shrink.”
Individual law firms must show they are more than the sum of their rainmakers, because their long-term survival depends on the strength of their business, the credibility of their leadership, and the confidence of the people who make it work.
Let me leave you with a parting thought on the human consequences of this collapse. We can stipulate that, again in a non-recessionary economy, all the untainted partners and associates will land on their feet at other nicely pedigreed firms in short order. So should productive paralegals and talented IT professionals. But what about rank and file staff, the people who keep the intranet running, the time and billing systems motoring along, the bills being sent out, collected, and properly recorded? Spare a thought for them. They were minding their own business, loyally and capably doing what they have been trained to do, and without even stepping off the curb came close to being knocked over by a heedlessly driven truck.
Image created by Gemini AI
