Among the unknowns: What will be left of Howrey once lawyers have made up their mind about Winston, and what will happen with Howrey’s debt if most partners who receive offers accept them and no formal merger with Winston is completed? (In typical merger agreements, an acquiring firm would take on the assets and liabilities of the target firm, but it remains unclear whether a Winston-Howrey merger is officially off the table.)
Howrey supposedly has more than $100 million in accounts receivables, which W & S is giving the firm time to collect. Good luck convincing the recalcitrant clients who are not looking forward to repeat business with Howrey.
Thus, one consultant told The Recorder: “The work in process and accounts receivable become worth a fraction of what they are on the books.” And a lawyer said:
“If I was a Howrey partner, I wouldn’t be looking to figure out when I’ll get the rest of the money the firm owes me, I’d be looking to see when I have to pay the firm. Look at the Heller, Brobeck and Coudert dissolutions — that’s what happened there.”
This raises two immediate questions. First, despite Winston’s best efforts to avoid this result, might there be some sort of de facto merger between Winston and Howrey resulting in Howrey’s assets and liabilities carrying over to Winston? I suspect that Winston has covered this base pretty thoroughly, but the whole area of partnership merger is fraught with confusion. See Bromberg & Ribstein on Partnership, Section 7.21.
Second, will the LLP shield protect all the Howrey partners from personal liability for debts in excess of Howrey’s assets? This is a rather complex subject covered in detail in Chapter 3 of Bromberg & Ribstein on LLPs.
The broader story here is about the swift collapse of big law firms that have no real assets except the lawyers who, not bound by non-competes and no longer personally liable for the firm’s debts, can walk out the door any time.
For a discussion of the general Big Law death spiral, including the specific stories of the particular firms mentioned in above, see my Death of Big Law.
Update: I added the question mark at the end of the title of the post to clarify that I don’t know and am not trying to predict what ultimately will happen to Howrey.