Like many firms, Howrey also discovered that the larger it grew, the more likely it was to run into problems with conflicts of interest — potential clients or cases that it couldn’t take on because the firm represented a direct competitor.
Again, this is a particular problem for firms specializing in litigation. And it reached the breaking point for Howrey’s office in Europe, where newly acquired partners found themselves losing business because of much tighter U.S. conflict rules that did not apply to their purely European rivals.
The conflicts, the excessive overhead, the volatility of contingency fees — all of these contributed to a precipitous drop in profit per partner that by the end of 2010 was at half of what it was at the peak in 2008. Profit per partner is not only the key determinant of how much partners take home, but it is the metric by which the very competitive and ambitious people in the legal business now keep score. And in today’s cut-throat environment, such a precipitous decline is something only the strongest partnerships can survive.
Howrey, however, was not a strong partnership. Over the past 20 years, it had more than tripled in size by luring away lawyers from other firms and setting them up in offices that had little traffic with each other, or with the lawyers back in Washington. For the most part, these were lawyers willing to switch firms because of the prospect of earning more money and attracting more clients, and for many years, it worked out just that way. But then, suddenly, it didn’t, for one year and then a second, without any clear indication of when or whether things would finally turn around. And it was then, by last autumn, that it began to be clear that the personal roots were not deep enough, the bonds of loyalty not strong enough, to hold Howrey together.
Howrey is hardly the only firm that has faced similar challenges in past years. Brobeck, Pheleger & Harrison, Heller Ehrman and Thelen all succumbed to a similar death spiral, even as firms like Mayer Brown and Cadwalader, Wickersham & Taft managed to avoid it by bringing in new leaders who had the trust of key partners. At Howrey, Ruyak managed to fend off challenges to his control until finally confronted last November with an open revolt from a group of younger partners demanding more transparency and more control.