Weil, Gotshal & Manges was not losing money. Its profits per partner were still rising when, on October 28, 2026, the firm's leaders told partners that the 95-year-old firm would wind down. Delta and General Motors went through bankruptcy and kept flying planes and building cars; no partner-owned law firm, John Morley observes, has gone through a bankruptcy and come out the other side. Most firms weather bad years, but once a partner run gathers momentum, it is hard to stop. His explanation is not about what pushes a firm off the table. "It's an explanation for why it shatters when it hits the ground."
In this TalksOnLaw interview, recorded the day Weil announced its plans to wind down, Joel Cohen speaks with John Morley, the Augustus E. Lines Professor of Law at Yale Law School and the author of Why Law Firms Collapse, a study of three dozen law firm failures that identified a pattern he says Weil followed "almost uncannily according to script." Morley, who co-hosts the New Law Order podcast with Cohen, explains the structural reasons law firms unravel, why a firm earning millions per partner can still be a candidate for collapse, what the bankruptcy and ethics rules mean for the partners, associates, and staff now heading for the exits, and what every other firm should do before the pattern reaches them.
The Run on the Bank
Morley's thesis is that law firms are fragile because they are owned by their workers, and the workers can leave at will. When one rainmaker departs, revenue falls faster than costs: the firm still carries the leases, the pensions, the associates, and the staff. Profits per partner drop, so the next partner can now get a raise by moving, and then the next, in "a spiraling cycle of decline that becomes a kind of run on the bank." Bankruptcy law accelerates the spiral. Partner compensation is a distribution on equity, not a wage, and distributions made while a firm is insolvent can be clawed back as fraudulent transfers, with a federal reach-back of two years. A partner who thinks the firm has a 50 percent chance of filing must therefore discount every dollar of expected pay by half, which is why a partner can credibly threaten to leave for less than she currently earns, and why holdup demands at a failing firm, as Morley reads the Dewey & LeBoeuf episode, are often rational pricing rather than simple greed. Because firms pay modest draws during the year and settle up in January, Weil's partners stand to lose much of what they earned in 2026.
Why Weil
What matters, Morley argues, is not absolute profit or debt but profitability relative to peers, because the engine of collapse is lateral movement. In Morley's account, Weil entered the financial crisis strong, with its celebrated debtor-side bankruptcy practice, but did not invest in private equity the way its rivals did afterward, and over two decades it slid down the profits-per-partner rankings. Its business generation was concentrated in a few hands, so the September departure of corporate chair Michael Aiello and a group of partners for Cravath did outsized damage. Press accounts described a centralized governance culture, which Morley reads as leaving partners few non-financial reasons to stay. Then came the classic triggers: a leadership transition in which Ramona Nee, elected to succeed executive partner Barry Wolf, declined the job; a merger search (Willkie Farr, and reportedly Freshfields and Linklaters) that struggled to find a large firm without a New York presence to absorb it; and a bankruptcy practice that, for all its prestige, may have conflicted out potential partners. Morley contrasts Wachtell Lipton, which weathered recent departures on the strength of its relative profitability and one-office culture, and Boies Schiller, which shrank and survived.
The Ethics Rules
Two professional rules make law firms more brittle than accounting, engineering, or medical partnerships. Rule 5.4 requires that firms be owned by lawyers, so there is no investor capital to absorb a loss and no equity to hand to creditors in a reorganization. Rule 5.6 bars agreements that restrict a lawyer's right to practice after leaving, and courts have extended it to financial penalties on departure, so a firm cannot slow an exodus with the restrictive covenants other professions use. The written materials collect the text of both rules, the leading cases, and the obligations that Rules 1.4, 1.15, 1.16, 1.17, and 1.10 and ABA Formal Opinion 489 place on departing lawyers and dissolving firms. The United Kingdom has no equivalent of Rule 5.6 and permits outside ownership, and Morley argues that collapses on the American pattern have been far rarer there. His counterexample is Slater & Gordon, a publicly traded firm that, after a disastrous acquisition, went through a lender-led recapitalization that wiped out most of the shareholders' equity and split the firm in two. Both halves kept operating. Try that at a partner-owned firm, Morley says, and "the partners would just leave."
What Happens Now
The partners will leave as fast as they can, because fees collected between now and their departure belong to the firm and potentially its creditors. Associates and staff face the going-out-of-business dynamic of any closing company. Morley walks through the liabilities that followed earlier collapses, including the "unfinished business" claims that once required departing partners to hand over fees earned at their new firms on matters that were open at dissolution, which the New York Court of Appeals rejected for hourly matters in In re Thelen (2014) and the California Supreme Court in Heller Ehrman v. Davis Wright Tremaine (2018), and the personal guarantees that landlords extracted from Brobeck partners before that firm failed anyway. He explains why a firm with little bank debt but decades of lease obligations can still leave creditors unpaid, why Weil may wind down without a bankruptcy filing if landlords and trade creditors can coordinate, and why its debtor-side bankruptcy practice will try to move as a unit.
Lessons for Every Firm
Morley closes with advice for firms further back in the cycle. In the short term: waive unfinished-business claims in the partnership agreement now, while the firm is healthy, because a waiver adopted in distress may be voided as a fraudulent transfer; and keep each partner's pay within the band of her market value, since both overpaid and underpaid partners are risks. In the long term: cultivate client loyalty to the firm rather than to individual partners, plan succession early, and build a culture that gives partners reasons beyond money to stay. He also revisits the 2025 executive orders against firms such as Paul Weiss, arguing that Weil's fall shows how a shock to relative profitability can become existential, and why the risk those orders posed was real.
What to Know Now
At the time of recording, Weil's management had recommended an orderly wind-down and its partners were expected to vote within days. The firm, founded in 1931, reported about $2 billion in revenue for 2025 and employed some 1,200 lawyers. Its advisers reportedly expect to complete the wind-down outside bankruptcy, and associates and staff were reportedly told they would be paid for 90 days. Partner departures to Cravath, Sidley Austin, and other firms were continuing as this program was produced.
