Why a $2 Billion Law Firm Suddenly Collapsed

With Joe Weisenthal, Tracy Alloway, John Morley · Friday, November 13, 2026

Yale Law School professor John Morley joins hosts Joe Weisenthal and Tracy Alloway to explain why premier law firm Weil Gotshal suddenly collapsed, drawing on his seminal 2015 research on law firm bank runs. Morley details the structural fragility of the partnership model, the role of fraudulent transfer liabilities in accelerating partner departures, and the challenges law firms face when investing in AI due to intergenerational conflict.

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Key takeaways

Law firms operate on impermanent equity. When partners leave firms like Cravath or Covington & Burling, their shares are extinguished with zero buyout value. Read more →
Publicly traded law firms lock in permanent capital. When Australia's Slater & Gordon became balance-sheet insolvent after a disastrous acquisition, public shareholders were wiped out while client legal operations continued without disruption. Read more →
Rule 5.6 of the Model Rules of Professional Conduct prohibits lawyers from signing non-compete agreements across nearly every US state. Read more →
Law firm collapses function like classic bank runs because partner exits erase revenue overnight while massive fixed costs like office leases remain locked in. Read more →