DLA Piper Asks 275 Non-Equity Partners to Ante Up, Goes to 1-Tier Structure

Law Firms

DLA Piper Asks 275 Non-Equity Partners to Ante Up, Goes to 1-Tier Structure

Posted Nov 19, 2008, 05:15 pm CST
By Martha Neil

One of the biggest law firms in the world is making a "seismic shift" to a one-tier partnership structure, reports Crain's Chicago Business.

To strengthen the firm's financial position in a struggling economy, DLA Piper has invited 275 non-equity "income" partners to make capital contributions that haven't yet been determined. In exchange, they will join the firm as full partners, according to a Crain's article published today. This could nearly double the number of equity partners: DLA Piper presently has 300.

"By raising funds from a new crop of equity partners and compensating them with a share of the profits, DLA would eliminate income partner salaries and trim payroll costs and borrowing needs," the business publication explains. It would also likely put more pressure on the new equity partners to bring in business, and put associates into an "up or out" model that requires them to generate clients or find another job as they become seasoned attorneys, legal recruiters say.

J. Terence O’Malley, a San Diego-based partner who manages U.S. operations for the approximately 3,800-attorney firm, says it hopes to operate independently of banks at some point in the future.

He says most income partners are "thrilled" by the opportunity to join the firm as full partners, and notes that DLA Piper is likely to offer them a payment plan for the capital contribution, Crain's reports.

In theory, income partners who are doing well at DLA Piper should be better off as equity partners because they will have an opportunity to earn in proportion to the business they bring in rather than making only a specific salary.

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Posted by B. McLeod - 1 month, 2 weeks, 3 days, 17 hours, 48 minutes ago

Up the stairs, down the stairs, blaw your chanter rarely. . .

If one would dance, one must pay the piper.
Posted by RJC - 1 month, 2 weeks, 3 days, 4 hours, 34 minutes ago

The DLA plan is a good deal more complicated than this story reports. For more details, follow this link: http://www.mddailyrecord.com/article.cfm?id=9119&type=UTTM
Posted by B. McLeod - 1 month, 2 weeks, 3 days, 2 hours, 45 minutes ago

More complicated? Perhaps. A good deal? We’ll see who goes fo it.
Posted by spin spotter - 1 month, 2 weeks, 3 days, 2 hours, 33 minutes ago

Shameless that this firm is claiming “record profits” in the NLJ this week while announcing this desperation move. How stupid do they think we are? Hmmm, let’s see…record profits for equities and an invitation to share the stunning largesse with hundreds of non-business owners? Yeah, right. Here’s an alternative theory: record shortfall to budget for a real estate-heavy firm with huge overhead (an office in every city), desperate need to cut expenses (by, say, axing non-equity partner income) and raise capital so equities can stave off paying the piper for another few months.
Posted by V.A. Carney - 1 month, 2 weeks, 3 days, 1 hour, 58 minutes ago

Rather like buying a deck chair on the Titanic. Wonder how many income partners are dumb enough to go for this.
Posted by NO DLA Bailout - 1 month, 2 weeks, 3 days, 1 hour, 32 minutes ago

This sounds very close to what Lehman Bros. did before it collapsed…. I wonder if they are extending the offer to associates to raise capital.
Posted by P - 1 month, 2 weeks, 3 days, 1 hour, 23 minutes ago

I am waiting to see what Elen and her boyfriend think about this.
Posted by Bird Smack - 1 month, 2 weeks, 3 days, 1 hour, 19 minutes ago

You all sound like a bunch of jealous whiners.
Posted by jealous whiner - 1 month, 2 weeks, 3 days, 1 hour, 4 minutes ago

I recall Dick Fuld started calling his “jealous” critics names shortly befor Lehman imploded.
Posted by Bird Smack - 1 month, 2 weeks, 3 days, 1 hour, 1 minute ago

Who cares what Dick Fuld did? He worked for Lehman; I don’t work for Piper. Do your work, serve your clients. What do you care whether and why Piper extends equity status to non-equities?
Posted by HVB - 1 month, 2 weeks, 3 days, 58 minutes ago

“Invited.” Ha.
Note that they presently have 300 equity to 3,800 lawyers. sounds bottom-heavy to me.
Posted by Interesting - 1 month, 2 weeks, 3 days, 16 minutes ago

Does this mean that DLA Piper is having liquidity problems? Is this a short term bridge loan by the non-equity partners to get them over a hump?

Any bets on if they will go under in the next 6 months like Heller and the others?
Posted by bart adcox - 1 month, 2 weeks, 2 days, 23 hours, 55 minutes ago

Does anyone have an example of the language of how such an arrangement can be structured?
Posted by milford - 1 month, 2 weeks, 2 days, 23 hours, 52 minutes ago

This is exactly what happened at Arter Hadden before its 2003 BANKRUPTCY—the second shoe to drop being a panic by retired partners aka the Petitioners in the involuntary bankruptcy filing.
Posted by WWSPD - 1 month, 2 weeks, 2 days, 23 hours, 44 minutes ago

Some questions. First, DLA Piper is very heavy with income (non-equity) partners. With a 1-tier structure, what happens to the non-equity partners who do not make equity? Do they become associates? Counsel? Second, who pays for all this? DLA Piper announced some time ago that it would not have partners billing less than a certain (very high) figure. The clients won’t bear much more. Will the existing equity partners take a hit? (I doubt it). Third, DLA was losing a huge number of non-equity partners. Is this intended to stem that tide by making an equity track more realistic? If “yes,” why change? Why not just promote more people to equity?
Posted by Ellen Watcher - 1 month, 2 weeks, 2 days, 23 hours, 44 minutes ago

Post No. 7. That was hillarious! I know exactly what you mean.
Posted by nospin - 1 month, 2 weeks, 2 days, 23 hours, 33 minutes ago

10—“Jealous” of DLA? And you don’t work for them? Come on, delusions of grandeur like that are only entertained by DLA equities.
Posted by Bubba - 1 month, 2 weeks, 2 days, 21 hours, 49 minutes ago

Was Arter having cash flow problems as well before they went under. The timing of this for DLA is horrible in todays market. It just screams of future trouble for the firm especially since year end is almost here.

Do these non equity partners have to poney up cash before the year end?

Be interesting to hear from a DLA guy on what morale at the firm is like.
Posted by B. McLeod - 1 month, 2 weeks, 17 hours, 58 minutes ago

Indeed. I suspect there’s a tier in their beer.

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