Published March 25, 2009
What took more than 100 years to build will take only 60 days to break down.
For the next two months, Wolf Block will wind down its practice and look to relocate the 300 attorneys and hundreds more staff to new workplaces. The firm voted Monday to dissolve its practice in the face of constricting credit lines and slumping practices in the tough economy.
And while there was much speculation regarding which firms might be interested inWolfBlock’s lawyers and where lawyers might be headed, it’s too early to tell where all the attorneys will wind up.
Wolf Block’s Philadelphia office was a somber place on the morning after the vote, though operating at a hectic pace. Some attorneys and staff were filing into a conference room a few minutes before 9 a.m. and the receptionist was fielding call after call. Brad Hildebrandt, a consultant brought in to run the wind down of the firm’s affairs, was in high demand, Blackberry buzzing, as he sat down in Chairman Mark L. Alderman’s office so the two could recap what happened and what is to come.
The next two months are serving as the 60 days’ notice required under the federal Worker Adjustment and Retraining Notification Act, or WARN, Hildebrandt said. He said that essentially serves as two months of paid notice for all staff and non-equity attorneys and will function as severance.
Once the next two months are up, the firm will no longer practice law and will maintain a skeletal staff to help tie up loose ends, he said.
While Alderman continues to serve as chairman of the firm’s executive committee, as of 2 p.m. Monday the committee ceded control of the firm to a three-member committee that will work with Hildebrandt in closing out WolfBlock’s affairs.
The committee members are the firm’s general counsel, Patrick Matusky, executive committee member and insurance group chairman, Brian P. Flaherty, and Roseland, N.J., partner Stuart Pachman.
Wolf Block does not have as much debt as other firms who have started down the dissolution path recently. One source said the debt was $9 million to Wachovia, and that was all the firm owed. The Philadelphia legal community has spent the last few days speculating about the "why" behind WolfBlock’s collapse. Some point as far back as 1985 when Howard Gittis left as leader of the firm to join MacAndrews & Forbes Holdings Inc. and new leadership came on board as the start of the downfall. Others say it was groups of partner defections in the early to mid-1990s that saw a number of lawyers leave for firms like Ballard Spahr Andrews & Ingersoll and Cozen O’Connor. The firm never quite replaced those attorneys even as it grew, they said.
Wolf Block’s political capital, which got it many local bond financing deals and other municipal and real estate matters, started to dry up as well, they said.
Consultant Robert Denney of Robert Denney Associates in Wayne, Pa., said Wolf Block put all of its eggs in one basket by relying so heavily on its real estate practice. It was like owning one stock in the stock market, he said. According to Denney, Wolf Block didn’t do enough planning to bring in "big hitters" in other practices.
Others in the legal community take a shorter view, pointing to two very public failed merger attempts since 2007 and a lack of leadership in the last year. They said firm leadership was focused for a good part of 2008 on completing what turned out to be a failed merger attempt with Florida-based Akerman Senterfitt and Alderman spent a lot of time in Washington, D.C., on President Obama’s transition team.
Alderman said the characterization that he and other firm leaders weren’t providing leadership in 2008 was "not fair." He said the firm’s leaders never worked harder on behalf of the firm than they have in the last year.
There were "a thousand factors" that could probably even go back to the firm’s founders that ultimately resulted in Monday’s decision, he said.
"There’s no question the firm got staggered in the mid-90s with those departures," Alderman said. "The result speaks for itself. We spent 15 years trying to put Humpty Dumpty back together again."
While a number of things could have led to the dissolution, Alderman said there is no question that in any other economy or any other credit environment, the dissolution would not have happened.
When asked whether he regrets the firm being so reliant on the real estate practice, Alderman said it was difficult to point to one thing as the initial cause of the downfall. Maybe the bank would have been more interested in lending had the practice not been so large, he said, but the economy played a big factor in the overall credit market, too.
Real estate attorneys make up about 20 percent of WolfBlock’s headcount, Alderman said, but the practice made up about 40 percent of its revenues because it crossed over into other areas like litigation.
Alderman said he inno way blames Wells Fargo, owner of the firm’s bank, Wachovia, for what happened. He said the bank made a business decision, albeit a "damn unfortunate one," but at all times acted professionally and respectfully toward the firm. He said the bank made its decision, and Wolf Block had to make its own business decision as a result.
The voluntary decision to dissolve was done as an effort to avoid any sort of bankruptcy proceedings. After WolfBlock’s fiscal year ended Jan. 31, the firm made the common move of looking to tap into a line of credit to help pay out expenses in the beginning of the year when collections are typically low. It became clear in mid-February, in light of the economy and the firm’s heavy reliance on the slowing real estate practice, that Wachovia was not going to extend the line of credit without personal guarantees from partners.
That didn’t go over well with partners and caused many to say they would leave before signing such a deal. Wolf Block and Wachovia were able to work out a deal to finance the firm only through March 31, but in the meantime, several partners had found potential new homes. One source said a large number of attorneys, including Alderman and the firm’s entire New York office, were in talks to move to Cozen O’Connor a former merger prospect for Wolf Block.
Another person familiar with the dissolution said the senior partners inWolfBlock’s litigation group were in talks with Duane Morris on behalf of a group of litigators.
Cozen O’Connor President Thomas A. "Tad" Decker said Monday that he couldn’t confirm or deny talks with any potential laterals, and a Duane Morris spokesman said Tuesday he couldn’t comment when asked whether Wolf Block attorneys may be in talks with his firm.
Cozen O’Connor spokespeople did confirm late Tuesday that so far Wolf Block real estate partner and executive committee member Robert A. Silverman will be joining Cozen O’Connor effective today.
Some in the legal community said there was concern among some Wolf Block attorneys that they would not receive their capital contributions because they were in line behind several other creditors. There was also some concern, sources said, that partners who participated in the vote to dissolve had already created deals for themselves to move to other firms.
When asked about whether former partners would be able to receive their capital, Hildebrandt said he didn’t want to comment on the financial issues that may present themselves as the firm winds down. He said all of that remains to be seen as the firm works with the bank.
Hildebrandt wouldn’t speculate about where any of WolfBlock’s attorneys would be going but said the goal is to get as many of them placed in the next two months as possible. And the larger the groups, he said, the more likely support staff will be able to follow.
Recruiters and consultants have said there isn’t a firm in town that isn’t interested in taking a look at Wolf Block attorneys. Alderman said several have called in the last few days. He said the legal community in the 24 hours since word broke the firm might dissolve has been very respectful and sympathetic and "very appropriate" in how they are reaching out.
Hildebrandt said he hopes firms start picking up Wolf Block attorneys as soon as possible. With Hildebrandt handling much of the firm’s business in the coming months, Alderman said his main goal is to work on getting people placed in new firms.