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Eat What You Kill The Fall of a Wall Street Lawyer By Milton C. Regan Jr. University of Michigan Press/$29.95 In “Eat What You Kill: The Fall of a Wall Street Lawyer,” Georgetown University Law Center professor Milton C. Regan Jr. tells us how the big Wall Street law practice evolved from an elitist men’s club, members working shoulder to shoulder to maintain a permanent hold on wealthy clients, to a limited liability partnership whose members are in competition with each other to see who can originate the most business and get the biggest share of the firm’s net income. In addition, Regan tells the true and sad story of the fall of a young, ambitious Wall Street lawyer at Milbank, Tweed, Hadley & McCloy who ended up with a jail sentence. Here is how it all began. Paul Cravath, around 1910, had a vision of what the law practice should be. Cravath headed Cravath, Swaine & Moore until his death in 1940. Cravath decided to take the best men from Harvard, Columbia and Yale law schools and hire them as associates and pay them well. They need not worry about getting business. The firm had all the business it needed. Cravath originated the “up or out” policy for associates. He made partner within 10 years or he moved on. If he did not make partner, he was placed with corporate clients or with smaller firms with which Cravath had a working relationship. Nobody starves. Associates who made partner were in a lock-step class whose increase in earnings was preordained, step by step. They would remain with the firm for their entire careers. The emphasis was on doing good work and preserving the firm’s reputation for competence. The work was always there because the firm had close personal and business connections with the clients. The bills usually were not itemized. They were submitted with the notation “For Services Rendered.” The firms operated in this civilized way because of unique economic and social factors that kept the clients bonded to the firm. The clients saw no need to change the relationship. Therefore, firms did not compete for business and the partners within the firm did not compete with each other for rainmaker client origination credits. In the 1960s, changes took place that converted this elegant culture into the business it is today, where firms compete against other firms and lawyers are drawn from firm to firm to get the most money that can be negotiated by an aggressive headhunter. In the 1960s, the law practice went corporate. Until then, law firms practiced as general partnerships. Each partner was the agent of the other and each had a close personal and fiduciary relationship with the other. They shared profits and losses as partners. The law firms went corporate because of a change in the tax laws that gave retirement benefits to a corporation but not to a general partnership. Instead of being partners, the lawyers were stockholders and employees of their professional corporation. As such, they were given the retirement tax benefit and more importantly a corporate type shield against personal liability, just like any other business. The PC evolved into the LLP, the limited liability partnership. It gave the firm partnership tax benefits and continued the corporate type limited liability of the partners. It also did away with cumbersome PC requirements and it gave the control group of the LLP what amounts to absolute power to hire and fire. Associates who work in high-demand fields but have little rainmaking potential become permanent associates, rather than promoted to partner. In addition, firms now use contract and temporary lawyers more frequently to cover large projects. Some firms distinguish between classes of partners, creating mysterious categories such as non-equity partners and partners without voting rights. This reduces the number of partners who share the profits. Professor Regan describes what goes on inside today’s Wall Street firm as tournament play where many are not up to its demands. It is a contest for compensation, status and continued employment. The goal is survival and eat what you kill. “The result of heightened competition among large law firms is perpetual instability. A prestigious pedigree and impeccable reputation are no guarantees of survival in the new legal services market. Firms must project an image of continued ‘momentum,’ moving into new markets, pursuing new alliances, weeding out unproductive lawyers and expanding their operations to keep pace with corporate clients.” Regan tells us that the one-size-fits-all Rules of Professional Conduct no longer is suitable to the big-firm practice — a practice that consists of stand-alone specialties such as bankruptcy, tax, commercial transactions, antitrust, patent and intellectual property all under one LLP. Each specialty has its own vocabulary, its own statutes, its own rules of practice, and its own ethical rules of the road, which may not conform to the abstract Professional Rules. Over time, the shared experiences of practitioners in a particular specialty lead them to develop what is acceptable within that specialty. In some cases, it authorizes the lawyer to engage in behavior that otherwise would be subject to question. The rules evolve like the law merchant did and they do not fit well within the abstract Professional Rules. John Gellene, the young Milbank lawyer described in the book, was unprepared for tournament play. He was drawn into filing a false report in a bitter bankruptcy case in order to keep Milbank in a profitable case. He was prosecuted, convicted and given a prison sentence. It is likely that from the victim’s point of view he was the fall guy caught in a game moving too fast for him. He should have received more guidance than he was given. As I read Regan’s description of this tragedy, it seems to me he is saying that it is reasonably predictable that the future will bring other falls of Wall Street lawyers. Regan’s epilogue to “Eat What You Kill” says his primary purpose in writing the book was to use the story to explore the factors that shape modern large-firm lawyers’ encounters with ethical issues. He asks how we might better promote ethical behavior by practicing lawyers and offers this comment: “One especially important lesson is that ethical law practice does not depend simply on the moral probity of individual lawyers. Personal character is of course relevant. Lawyers, however, work within law firms and practice groups that themselves operate within the broader context of the market for legal services. How these practice organizations respond to the demands of this market shapes the ethical environment in which their lawyers work.” Regan’s well-written and well-researched book confronts the reality of law as a business — and suggests how to make it a reasonably honorable business. Jacob A. Stein is a founding partner of Stein, Mitchell & Mezines in Washington, D.C. His books include “Legal Spectator & More.” This article was originally published in Legal Times, a Recorder affiliate based in D.C.

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