X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
In a sign of increased caution in the post-Enron world, two of New York’s most prominent law firms have elected to become limited liability partnerships. Sullivan & Cromwell and Paul, Weiss, Rifkind, Wharton & Garrison both acquired Limited Liability Partnership status effective Jan. 1, thus ending a combined 250 years of operation as general partnerships. Though LLP status, which limits liability to those partners directly involved in a claim, has been available in New York since 1994, many of the city’s more established firms have resisted changing their stripes, largely out of a sense of tradition and a fear of eroding trust and collegiality among partners. Instead, they have chosen to remain general partnerships, in which the partners are jointly and severally liable for malpractice claims against any individual partner. But the recent spate of corporate scandals and the accompanying specter of crushing liability beyond that covered by malpractice insurance has reawakened and recast firms’ consideration of the topic. Paul Weiss Chairman Alfred Youngwood said arguments about tradition had been voiced over the past several years as the firm periodically considered becoming a LLP. In the past year, he said, partners had become more comfortable with the idea. “We talked about it at our May meeting and decided to do it in December,” he said. “It ended up not being very controversial.” Youngwood said partners’ increased comfort with LLP status derived in part from the apparently benign effect the change has had on those firms that adopted the status shortly after it became available. Skadden, Arps, Slate, Meagher & Flom; Dewey Ballantine; and Weil, Gotshal & Manges are among those firms that became LLPs in the 1990s. Firms that remain general partnerships include prominent names such as Cravath, Swaine & Moore; Simpson Thacher & Bartlett; Davis Polk & Wardwell; and Shearman & Sterling. It is the long history of and deep attachment to tradition at such firms that has prevented them from taking a step that younger firms have taken as a matter of course, said Lewis R. Kaster, an of counsel at Bryan Cave and lecturer on partnership law at Columbia Law School. As such, the adoption of LLP status by Paul Weiss, founded in 1875, and Sullivan & Cromwell, founded in 1879, should encourage other white-shoe firms to take similar action. “Those two firms carry a lot of prestige, a lot of knowledge and a lot of conservatism,” he said. “Partners are going to have to ask themselves, ‘If it’s good enough for them, why isn’t it good enough for us?’” Indeed, Shearman & Sterling will likely adopt LLP status, subject to a partner vote, within the first quarter, said Kenneth J. Laverriere, the partner at the firm who has been leading discussions on the issue. “There isn’t a compelling reason not to do it,” he said. “It makes sense for firms to take advantage of an organization structure that wasn’t available to them 25 years ago.” How that protection will be treated across states, though, remains an unsettled issue, said Kaster. Some states, including New York, have so-called “full shield” LLP statutes, offering protection against malpractice, tort and contract claims. Other states, with “partial shield” LLP statutes, offer protection only against malpractice claims. Illinois, notably, permits lawyers to adopt LLP status only if they waive its protection against liability.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.