Debevoise & Plimpton Drops Trusts and Estates Practice

The nation’s leading trusts and estates lawyers convened at a Florida resort last month to discuss the latest in estate planning.

Between lectures and workshops, some of the lawyers exchanged whispers about an unsettling piece of gossip: Debevoise & Plimpton, the prominent white-shoe law firm, was eliminating its trusts and estates practice.

Debevoise’s decision surprised members of the trusts and estates bar. If an institution as prestigious and financially sound as Debevoise was abandoning its practice, were they vulnerable too

The news also raised eyebrows across the legal industry because it seemed to run counter to Debevoise’s reputation for a strong partnership culture. At a time when many large law firms have discarded the traditional partnership model and embraced a more bottom-line approach, Debevoise ha been seen as retaining an old-school ethos â€" a genteel law firm known for its camaraderie and decency.

“It saddens me to see a great law firm terminate its estates department,” said William D. Zabel, a partner at Schulte Roth & Zabel and one of the country’s leading trusts and estates lawyers. “Although I don’t know the reasons for this decision, it would seem to be a byproduct of the economics of our society, making the law into more of a business than a profession. That saddens me even more.”

In a statement, Michael W. Blair, Debevoise’s presiding partner, confirmed that it was jettisoning trusts and estates, and that the group’s eight lawyers â€" including Jonathan J. Rikoon, the partner in charge of the practice â€" were trying to find another home.

“Debevoise supports the group in this process and will work to ensure that in this transition the needs of the firm’s clients continue to be served,” he said.

New York-based Debevoise is the latest big ! corporate law firm to discontinue the practice. In 2011, Weil, Gotshal & Manges, a 1,200-lawyer firm, got out of trusts and estates, deciding it did not fit the firm’s business model. Another firm, Gibson Dunn & Crutcher, with 1,100 lawyers, ended its trusts and estates practice about a decade ago.

Corporate law firms once viewed trusts and estates as a small yet important practice that discreetly advised wealthy families. But drafting wills and trusts, and the legal matters that flow from that, is less lucrative than the primary revenue drivers at big law firms: multibillion-dollar corporate transactions and high-stakes litigation.

And there are problems with trusts and estates within a big law firm model. The practice, to use the law firm management parlance, is not as leverageable as other areas. Corporate and litigation partners generate big fees by assigning armies of junior lawyers to megamergers and complex lawsuits. By comparison, trusts and estates work requires far less manpower â€" eaning, far less profit.

Another issue in sustaining these departments is that individual clients bristle at billable rates that now reach more than $1,000 an hour. While big corporations grudgingly pay those rates, wealthy families often resist them.

As a result of these dynamics, firms’ trusts and estates practices have remained small and, in many cases, decreased. At the same time, firms have aggressively built up their corporate and litigation practices across the globe. They have also embraced hot, moneymaking practice areas like patent law and white-collar criminal defense.

There are some counterexamples to this trend, however. In 2011, seven trusts and estates lawyers from Weil, led by Carlyn S. McCaffrey, moved to McDermott Will & Emery, a firm with about 65 lawyers, one of the larger trusts and estates practices. Another firm committed to trusts and estates is Katten, which has more than 50 lawyers in the group.

Joshua S. Rubenstein, the head of Katten’s trusts an! d estates! practice, said that his business went well beyond comforting bereaved spouses and children. A successful practice, he said, includes assignments like advising families in the sale of closely held companies, overseeing trust-related litigation or even assisting in the purchase of a yacht or private jet.

“If done right, a full-service, high-end trusts and estates practice can generate a lot of work for other areas of the firm,” Mr. Rubenstein said.

As large firms have de-emphasized their trusts and estates practices, boutiques have sprouted up. Sanford J. Schlesinger, a former partner at the New York corporate firm Kaye Scholer, left in 2004 along with several colleagues to set up an 11-lawyer shop, Schlesinger Gannon & Lazetera.

Mr. Schlesinger lamented the demise of the practice at big firms, and said he thought they were missing a business opportunity.

“Families are going to pass more wealth in the next 10 years than in the history of humankind, and someone is going to have t shepherd that wealth transfer,” he said. “These firms are making a shortsighted, profit-driven decision without a view of the long-term big picture.”

Debevoise, started in 1931 by two young patrician lawyers, Eli Whitney Debevoise and William E. Stevenson, does not see it that way. Three decades ago, the firm’s trusts and estates practice had six partners, including Barbara Paul Robinson, now retired and a former president of the New York City Bar Association, and Theodore A. Kurz, the former head of the department. Today, there is only one, Mr. Rikoon, 57, who declined to comment for this article.

The firm formed a committee to study its trusts and estates practice, which has advised families like the Lauders (cosmetics) and the Dolans (cable television), according to people with direct knowledge of the group. After concluding that the practice did not have enough business to expand, the committee recommended closing it down. The firm will continue to employ Mr. Rikoon and the s! even othe! r lawyers while they interview elsewhere, these people said.

One factor contributing to Debevoise’s move to discontinue the group, people say, is its unusual lock-step compensation system, which pays partners in a narrow range strictly according to seniority. That means that Mr. Rikoon is paid on par with a star deal maker from the same law school year, while bringing in less business. This created some discord in the partnership ranks. Debevoise’s profits per partner are $2.1 million, according to The American Lawyer magazine.

Debevoise, with 650 lawyers, recently made headlines away from trusts and estates. The firm advised a special committee of Dell’s board on the $24 billion leveraged buyout of the computer company. And President Obama nominated the Debevoise partner Mary Jo White to run the Securities and Exchange Commission.

Stephen J. Friedman, a onetime Debevoise partner who is now president of Pace University, said that he was unaware of the facts involved in his former firm’s decision to close the trusts and estates practice, but noted that organizations are often faced with business realities that require painful choices.

“It’s sometimes necessary to make a decision that’s in the best interest of the firm but can hurt individual partners and associates,” he said. “That’s not a happy experience, but it’s sometimes the right thing to do.”