The bankruptcy of Brobeck, Phleger & Harrison LLP is a wacky symbol of how law firms are not immune from the vacillations of the market. After riding the wave of the technology boom, and opening new offices in new dot.com territories such as Austin, Texas, Brobeck declared bankruptcy in February 2003. Profits per partner plummeted from over $1M per partner in 2000 to $245k in 2002. After suing 200 partners for over $1M each in January, the bankruptcy trustee has announced that the vast majority of the partners have settled for $22 million total. The settlements range from $4,732 to over $500,000 per partner, but merely adds up to 8% of amounts claimed by creditors.

Where is the "L" in "LLP"? The legal theory that the trustee was using the clawback this money was not that the partners were liable for the partnership's debt as partners. The trustee claims that the law firm was insolvent for much of 2001 and 2002, but that the partners took distributions and bonuses during that time.

Not all partners have settled. The former chairman, Tower Snow, who left the sinking ship in 2002, has not settled. (He left and took a group of attorneys with him to Clifford, Chance, which has also settled with the bankruptcy trustee for $5.5M over a lawsuit concerning that defection.) However, Steve Zager, a former Houston attorney with Weil, Gotshal and huge rainmaker who went to Brobeck in Austin fairly near the end, has settled.

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