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In a shocking turn of events, the venerable law firm Stroock & Stroock & Lavan is set to close its doors, marking the end of a nearly 150-year-old institution that has long been one of the country’s most profitable legal practices. The firm’s executive committee has announced plans to wind down its operations in the coming weeks following a vote by its partners to dissolve the business.
The First Major Casualty of a Legal Slowdown
Stroock & Stroock & Lavan’s demise is the first major casualty in a recent slowdown in demand that has taken some large law firms by surprise, resulting in layoffs across the industry. The firm has been grappling with a downward trend since the 2008 recession, exacerbated by the failure of some of its major clients.
The pivotal moment came last year when the mass departure of lawyers severely impacted Stroock’s bankruptcy group, one of its strategic pillars. This left the firm unable to rely on restructuring work, as the global economic downturn also dried up its focus area in commercial real estate. Observers in the legal field have noted the remarkable resilience of the firm, given the challenges it faced.
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Merger Talks and Pension Obligations
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Despite efforts to explore merger options, Stroock failed to secure a buyer, even after addressing a longstanding $6 million annual pension obligation. A group of over 30 partners, primarily from the real estate practice, has now opted to join rival Hogan Lovells.
The Downward March
The final decision to dissolve Stroock & Stroock & Lavan was made on October 24, 2023, when partners authorized the executive committee to proceed with the firm’s dissolution. The co-managing partners, Jeff Keitelman and Alan Klinger, have declined to comment.
Keitelman, a prominent real estate lawyer, is among the Stroock partners transitioning to Hogan Lovells. The decision to move to Hogan Lovells was initiated by the firm’s CEO, Miguel Zaldivar, who sought to strengthen the firm’s real estate investment trust capabilities and establish a presence in New York.
Stroock also explored merger discussions with other firms, including Pillsbury, Nixon Peabody, Steptoe & Johnson, Squire Patton Boggs, and McGuireWoods. However, the firm’s pension obligations remained a significant hurdle, as it had not adequately funded pensions for retired partners for several years.
A Historic Legacy
Stroock & Stroock & Lavan’s history dates back to 1876 when M. Warley Platzek founded the firm in Manhattan. The addition of the Stroock brothers and later Peter Lavan led to its current name. The firm was known for its political connections in New York City and its work with influential public sector unions.
Throughout the late 1980s, the firm consistently ranked among the 50 largest law firms by revenue, according to The American Lawyer. However, the firm faced setbacks during the 2008 recession, losing major clients such as The Bear Stearns Companies Inc. and Lehman Brothers Inc., which affected its capital markets practice. This led to layoffs in 2009 and a steady decline in gross revenue over the following decade.
Practice Strengths and Recent Developments
Stroock & Stroock & Lavan had historically relied on two key practice areas: bankruptcy and real estate. These areas are often countercyclical, benefiting from economic downturns that force companies into restructuring. The firm experienced a boost in revenue and profits per equity partner in 2021, driven by a pandemic-era surge in corporate transactions.
However, in 2022, the firm’s bankruptcy team was significantly depleted, with dozens of lawyers, including nearly 20 partners, departing for Paul Hastings. This included partner Kris Hansen, the head of the restructuring practice group, and other high-profile attorneys. The firm also lost lawyers to Steptoe in July 2023, further eroding its capabilities.
The Domino Effect of Partner Departures
Law firms are delicate structures, and when partners begin departing, it can trigger a cascade of departures. This phenomenon is often compared to a bank run, as departing partners can lead to a loss of profits, incentivizing others to seek higher compensation at rival firms. This risk is particularly acute for smaller firms with fewer partners, making it challenging for them to retain and attract top talent.
Navigating the End
Stroock & Stroock & Lavan’s executive committee is working to avoid bankruptcy, a complex process that can involve disputes over remaining assets and liabilities. The winding down of the firm has been presented as the best option for most stakeholders. Notably, Jeff Keitelman and around 30 partners who are joining Hogan Lovells are taking associates and staff with them, while other partners, including Alan Klinger, have not publicly disclosed their future plans.
The dissolution of Stroock & Stroock & Lavan marks the end of a legal legacy that has spanned over a century, highlighting the challenges faced by law firms in an evolving legal landscape.
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