How Wolf Block imploded

For all the talk of how midsize firms are struggling in this tumultuous and recessionary legal market, the fall of Wolf, Block, Schorr & Solis-Cohen L.L.P. on Monday is a cautionary parable that might have sprung directly from the Bible.

The fact is there are plenty of midsize firms in Philadelphia and around the nation that are doing just fine. Fox Rothschild L.L.P. and Schnader, Harrison, Segal & Lewis L.L.P., for example, are two firms that seem to be holding their own in a climate that is absolutely hammering law firms from large to small.

What makes them different from Wolf Block is not so much their mix of business, their strategic plans, or the schmoozing skill of rainmaking partners.

Unlike its peers, Wolf Block had a past it couldn't escape.

And on Monday, when firm leaders said Wolf Block operations would cease to exist after 106 years as one of the city's leading firms, its past delivered a devastating blow.

The story begins in the mid-1980s, when the firm, then at the peak of its power and influence, underwent a tumultuous change in leadership.

It was then that Wolf Block's respected and influential leader, Howard Gittis, decided to leave and join billionaire investor Ronald Perelman in New York.

With the firm under new leadership, bureaucratic brush fires broke out almost immediately, according to lawyers who worked at the firm at the time.

There are many lawyers in Philadelphia who still talk about the slights of that era with raw emotion.

So raw in fact that during his eulogy nearly two years ago for former city solicitor Alan Davis, a Wolf Block refugee revered for his intellect, sophistication, and legal skill, Ballard, Spahr, Andrews & Ingersoll L.L.P. chairman Arthur Makadon caused jaws to drop when he denounced the firm's former management.

Facing a crowd of mourners that included Sen. Arlen Specter (R., Pa.) and Gov. Rendell (D., Pa.), Makadon blamed the former leaders for forcing out not only Davis but also other lawyers who would have remained had they been treated with greater dignity and respect.

Two of those former Wolf Block leaders, Charles Kopp and Robert Segal, were in attendance and thus had to endure the exquisite torture of being denounced by a former colleague at the funeral of a former colleague. It was a riveting scene that transfixed the crowd, which included this reporter.

Neither Kopp nor Segal returned calls yesterday for comment, and Makadon's office said he would not discuss Wolf Block.

As things went downhill, younger associates and partners accused the new firm leaders of hoarding clients and money, playing one lawyer against another, and of taking care of friends and punishing enemies.

Among the sins allegedly committed by the firm's leadership at the time: Younger lawyers complained that senior lawyers, even though they had done no work for some clients for years, insisted on claiming a large share of the clients' revenue as part of their own compensation.

Twenty or more years later, it's hard to know what really happened and where responsibility lies. Memory is unreliable and facts melt away.

But there is no doubt that the infighting and resentments triggered a big exodus of lawyers to firms such as Ballard Spahr and Cozen O'Connor, both of which have since eclipsed Wolf Block. Wolf Block has remained a regional firm while they have broad national, even international, reach.

The atmosphere at the firm was that corrosive.

The firm's current chairman, Mark Alderman, was named to lead Wolf Block in 2000 to restore some semblance of stability.

But he was only partly successful.

For the fact is that Wolf Block's internal dissension was so great, and the damage to its reputation so pervasive, it never had a chance to recover.

Getting the right mix of people by recruitment and cultivating a reputation as a place where people can be proud to work and where partners refer clients to other lawyers rather than jealously hoard them, is a process that can take decades. It can fall apart with breathtaking speed.

It is probably true, as the chairman of one large Center City law firm (not Makadon) coldly put it in a recent interview, that "you can always get people."

But getting the right people can take a lot of time, and without them an organization can fail.

The bottom-line consensus among lawyers in Philadelphia is that because the firm failed to halt the conflicts that broke out in the early 1990s, it lost an entire generation of lawyers, who because they were the best at what they did, could not be replaced.

There are only so many top litigators, intellectual property, and labor and employment lawyers to go around; and when they leave, they take clients with them.

Word got out. The firm got fewer and fewer of the biggest fee generators and less and less of the top talent from law schools.

The firm hobbled along in a weakened state and even grew, buoyed by the exceptionally robust legal market of the last few years.

But when the economy soured, and the firm's banker sought to tighten the terms of its line of credit, an essential economic backstop for many law firms, there wasn't enough bench strength to see it through.

That's when the firm's past merged ruthlessly with its present - and when the bottom dropped out.

Law Review runs on the second and fourth Tuesdays each month; it was delayed this week because of the events involving Wolf Block.