Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Venture capital law firm Testa, Hurwitz & Thibeault’s 60 partners voted Friday to disband the 280-lawyer, 31-year-old firm after failing to find a merger partner following 10 major partner defections in December. Boston-based Testa said in a statement that it will wind down its operations over the next 60 days. The vote was almost unanimous except for one partner who “didn’t have the heart” to vote for the dissolution, a source said. The move comes more than two years after the sudden death of the firm’s founder, Dick Testa, in 2002. “First-generation firms are like small personality cults,” said Randy Lewis, a law firm consultant with Denver-based Resolution Management Partners. “And when the charismatic leader steps back, there’s not enough cohesion to hold the place together.” In December, Boston rival Bingham McCutchen said it had grabbed three Testa partners, and New York-based Proskauer Rose announced it had poached seven for its Boston office. All 10 attorneys were part of Testa’s fund formation group, one of the most profitable lines of business for the firm. “In early December, 10 partners decided to leave the firm, having found opportunities elsewhere that they considered more attractive than continuing at Testa,” Testa said in a statement Friday. “Although the firm conducted merger discussions with a number of suitors during the past several weeks, many partners ultimately decided that they preferred other opportunities. This week the partnership recognized that the fabric that had held the firm together for more than 30 years would no longer hold.” Choate, Hall & Stewart, one of the firms said to be talking to Testa about a merger, said on Friday it would hire nine Testa partners. Later that day, Goodwin Procter said it would take on 18 partners. When F. George Davitt was elected the firm’s managing partner in October, the partners assured him the firm was stable. But Testa reacted to the December defections by immediately enforcing a 90-day notice clause in its partner agreement. It told the partners that they had to show up for work during the next 90 days as they served out their notice. They could not do business on behalf of their new firms or indicate that they were partners of any firm but Testa. Though common in partnership agreements, 90-day clauses are rarely enforced by law firms, legal experts said. But according to sources, Testa was intent on firming up its financial position to prepare for eventualities such as a merger or, some say, the eventual dissolution. By requiring the departing partners to serve out their 90-day notices, Testa could still collect on the defectors’ bills. The clause also helps to distribute liabilities equally if a firm dissolves following partner defections. “If the place collapses, we want you to go down with us,” is how one legal expert put it. Davitt denied Friday that Testa forced the partners to serve out their time because the firm saw its dissolution coming. The 10 departing partners, along with 10 more who have since announced their decisions to leave Testa, are now free to go before their March 31 deadline, Testa officials said. Testa has no bank debt, but the firm does have expensive real estate leases on its Boston office space. It must also decide how to pay its bills. Karen Schwartzman, a spokeswoman for the firm, said that Testa will not pay severance. “We’re encouraging our staff to use their work time to advance their careers at other firms,” Schwartzman said. Testa’s enforcement of the 90-day notice mirrors the technique used by Pettit & Martin, a San Francisco law firm that shut down in 1995 after a disgruntled client burst into the firm’s offices and killed eight people. Pettit also required any departing partners to stay for 90 days, during which the firm decided whether it wanted to disband, according to a source involved in that case. Copyright �2005 TDD, LLC. All rights reserved.

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]


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.