For decades, Weil, Gotshal & Manges' bankruptcy department was as dominant as the Roman legion. Its legendary partner, Harvey Miller, helped make the practice respectable and profitable. Even as other firms jumped in, Weil Gotshal's market position seemed unassailable; for example, it handled the Chapter 11 proceedings of Enron Corp. and WorldCom, Inc., simultaneously.
But Weil Gotshal's once-proud department has suffered important partner losses lately. The most recent came in November, when its co-head, Martin Bienenstock, a lifer with 30 years at the firm, left for Dewey & LeBoeuf. His departure, beyond hurting Weil Gotshal's status as a dominant player in the field, has revealed a rift within Weil about the future of the bankruptcy practice and how the firm should meet it.
It's hard to overstate Bienenstock's importance. When Miller left in 2002 to join investment bank of Greenhill & Co., Inc., Bienenstock became the group's biggest rainmaker, according to one former Weil Gotshal partner. In the last seven years, he helped land assignments in the bankruptcies of Federal-Mogul Corp., Calpine Corp., W.R. Grace & Co., Owens Corning, and Adelphia Communications Corp.
For Bienenstock, the move makes financial sense. At Weil Gotshal, partners qualify for full retirement benefits when their age and years of service at the firm total 85. At 55 years old, with 30 years at the firm, Bienenstock just qualified. He also increased his compensation. According to a close friend, Bienenstock had multiple offers, at least one of which would have doubled his salary at Weil Gotshal.
But Bienenstock says financial considerations didn't persuade him to join Dewey & LeBoeuf. It was a chance to create a department fit for what he sees as a changing market, one where bankruptcy services are marketed and integrated with other practice areas of the firm. At Dewey, Bienenstock says he will lead a team -- called the business solutions and governance group -- that will include a wide array of disciplines. Bienenstock describes it as a sort of "think tank" that will assemble corporate partners, litigators and academics to assess a company's options.
That idea couldn't be implemented at Weil Gotshal because of internal opposition. There was concern that bankruptcy lawyers would scare corporate clients away, according to Bienenstock. But at Dewey & LeBoeuf, "The concept of marrying [the practice of] corporate governance with [bankruptcy] was warmly received," says Bienenstock.
It's a sentiment echoed by another former Weil Gotshal partner, who says the firm is "locked in a time warp." While firms like Skadden, Arps, Slate, Meagher & Flom and Kirkland & Ellis have positioned their bankruptcy departments to fit with their litigation and corporate departments, Weil Gotshal's group has remained more isolated, he says. According to this lawyer, Weil Gotshal's corporate department has resisted integration with the firm's bankruptcy department, which has long been supreme at the firm. Some corporate partners saw integration as a threat to their own practice.
Thomas Roberts, co-chair of Weil Gotshal's corporate department, says the firm's model allows for partners from the various practice groups to work together when the need arises. The firm simply doesn't need to market itself any differently. "If I'm going to see a healthy company, I don't need to take a bankruptcy lawyer with me," says Roberts.
Bienenstock is taking with him veteran partner Judy Liu and associate Timothy Karcher, who joined Dewey as a partner. Their departure comes on the heels of the departure of four other prominent Weil Gotshal partners -- George Davis, Deryck Palmer, John Rapisardi, and Andrew Troop -- who were lured by Cadwalader, Wickersham & Taft last spring. The previous year, Paul Basta, another young talented partner, left for Kirkland & Ellis.
Marcia Goldstein, who was previously co-chair with Bienenstock and who will now run the practice solo, still has a large group to lead at Weil Gotshal. The firm's Web site lists 26 partners in the group, including Harvey Miller, who returned last year.
Weil Gotshal Chairman Stephen Dannhauser calls it the best bankruptcy group around, and he's not about to mess with a winning formula. "Folks would like to run their own show, but that's not always going to happen here," says Dannhauser.
True enough. The Bienenstock show will open elsewhere.