What Happened to Weil?

Nov 11 Written by Virginia Law Weekly On Monday, October 26, partners at Weil, Gotshal & Manges were calling their summer associates to tell them Weil would be alright. By Wednesday the 28th, the board had voted to dissolve the nearly-100-year-old New York firm. What happened?Yale professor John D. Morley has a theory, something he calls the Run on the Bank hypothesis. In a recent podcast discussing Weil’s collapse, he explained that law firms have unique structural features that make them vulnerable to “partner runs.”[1] In contrast to most businesses, which are owned by their investors, law firms are owned by their workers—the partners—who are free to leave at any time due to ethical rules against noncompetes. Those partners are “acutely sensitive” to declines in profits.“[W]hat really matters is not debt or insolvency. What matters is relative profitability [compared to peer firms],” said Morley.

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