What Caused Super-Firm Howrey LLP’s Demise?

Few management lessons are as painful as those learned as a result of a winding down of operations where there was once the hum of activity, but the good news is that those lessons are sure to be put to immediate use throughout the industry. This is the case with the recent turn of events at Howrey LLP.  This well-nigh litigation and intellectual property legend, with its principal office in Washington, D.C., ceased all activities effective March 15 after a vote by the firm’s partnership.  The New York Times’ “DealBook” blog pointed to “several missteps” which led to the firm’s folding.

One of these missteps was widely recognized to be complicated client billing. There were also other factors. The end result was revenue that was, in DB’s words, “lumpier and harder to predict.” In 2009, the big firm’s billing had dropped by a perilous 16%.  After two years of disappointing performance, staff defections became the norm and clients followed suit left and right.  

The WSJ Law Blog ran a post a few days before DB that stated that Howrey, then close to demise, used the slogan “In Court Every Day” and housed 750 attorneys.  Howrey was considered by many corporations as the “go-to firm” in the U.S. and Europe when it came to matters of intellectual property and litigation, WSJ claimed.  The post, too, pointed to client billing as an issue, specifically “alternative billing practices” that included contingency arrangements as a reason for the spiral.

Robert Ruyak (pictured), chairman and chief executive officer, said that “…an orderly wind down of the firm’s activities over time was the only practical” action to take after several partners resigned due to poor financial showing.  It was uncertainty over the firm’s future, after partners started bailing, that resulted in the firm’s closing. 

Ruyak explained that, as the litigation field started shifting, clients began to look to pay their costs on what Ruyak called “future recovery”, or at least partial contingency. The firm’s CEO said he made the discovery that big firm law partners don’t take to change very well. “What we found,” said Ruyak “is that partners… have very little tolerance for change….and fluctuations in profits.” He also mentioned what he called “free agency”, where partners can, basically, leave one firm and go to another without much risk. “It’s difficult,” he said. In addition, Ruyak cited third party document-discovery specialists that provided litigation support services at cut rate prices. Howery, he said, with its mega offices in big cities, couldn’t compete.

Since April of last year, more than 140 attorneys abandoned ship, but that meant placements in other firms.  “The beauty of Howrey is that anywhere you go, there’s always former partners,” one former partner told AmLaw recently.  The firm’s press release stated that those partners who don’t join Winston & Strawn will be joining other prestigious AmLaw 100 firms.

Founded in 1956 by a group that included an Eisenhower administration official, Howrey was soon known as a dynamo in antitrust practice and, a little later, as a global leader in intellectual property.

If you Google “Howrey Law Firm”, you’ll see the firm’s distinctive blue and white site is still up, touting its Antitrust, Global Litigation and Intellectual Property departments.  And, in the site’s News column, there’s a mention of Howrey claiming “Double Victory”, as Law360 had named the firm a top Competition and Top IP group as recently as last year.  For the firm’s full press release and more information go to   http://dealbook.nytimes.com/2011/03/10/howrey-law-firm-dissolves-after-slow-bleed-of-partners/   See also, http://blogs.wsj.com/law/2011/03/09/ceo-ruyak-partly-blames-contingency-fees-discovery-vendors-for-howreys-fall/

CEO Ruyak Partly Blames Contingency-Fees, Discovery Vendors, for Howrey’s Fall  - Law Blog - WSJ

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