Today’s edition of First World Problems:
Anyone who wonders why law school applications are plunging and there’s widespread malaise in many big law firms might consider the case of Gregory M. Owens.
The silver-haired, distinguished-looking Mr. Owens would seem the embodiment of a successful Wall Street lawyer. A graduate of Denison University and Vanderbilt Law School, Mr. Owens moved to New York City and was named a partner at the then old-line law firm of Dewey, Ballantine, Bushby, Palmer & Wood, and after a merger, at Dewey & LeBoeuf.
Today, Mr. Owens, 55, is a partner at an even more eminent global law firm, White & Case. A partnership there or any of the major firms collectively known as “Big Law” was long regarded as the brass ring of the profession, a virtual guarantee of lifelong prosperity and job security.
But on New Year’s Eve, Mr. Owens filed for personal bankruptcy.
According to his petition, he had $400 in his checking account and $400 in savings. He lives in a rental apartment at 151st Street and Broadway. He owns clothing he estimated was worth $900 and his only jewelry is a Concord watch, which he described as “broken.” . . .
Mr. Owens has been well paid by most standards, but not compared with top partners at major firms, who make in the millions. . . When Mr. Owens first became a partner at Dewey, Ballantine, he made about $250,000, in line with other new partners. At Dewey & LeBoeuf, his income peaked at over $500,000 during the flush years before the financial crisis. In 2012, he made $351,000, and last year, while at White & Case, he made $356,500. He listed his current monthly income as $31,500, or $375,000 a year. And he has just over $1 million in retirement accounts that are protected from creditors in bankruptcy.
How far does $375,000 a year go in New York City? Strip out estimated income taxes ($7,500 a month), domestic support ($10,517), insurance ($2,311), a mandatory contribution to his retirement plan ($5,900), and routine expenses for rent ($2,460 a month) transportation ($550) and food ($650) and Mr. Owens estimated that he was running a small monthly deficit of $52, according to his bankruptcy petition. He has gone back to court to get some relief from his divorce settlement, so far without any success.
As the story explains, Owens isn’t really a partner at all any more, but rather a “service partner,” which in the Orwellian argot of big law firms means he’s been “de-equitized,” i.e., he’s salaried employee of the firm, just like the associates and paralegals and secretaries and the guy selling coke in the mail room.
Now if I had a dollar for every story I’ve read in recent years about how mid-six figures doesn’t go very far in Manhattan (or, apparently, Harlem) any more, I wouldn’t have to be making the big bucks by blogging for LGM. Still, this tale of woe is nice example of how economic distress, above the level of brute starvation, is always positional: Owens’ annual salary, stupendous as it might seem in the eyes of the madding crowd, is just two weeks worth of pay for Morton Pierce, his protector at both Dewey and White & Case, and the man who at present is probably standing between Owens and flat-out unemployment. (“White shoe” — meaning old-money WASP — firms like White & Case do not like to see themselves featured in this sort of reportage).
A few other points:
*Citing this kind of thing for why law school applications are down is equivalent of dissuading dreams of athletic greatness by citing the case of a marginal NBA player who got cut and is now having to get by on a $300,000 salary playing for Bologna in the Italian league. Despite his recent status degradation, Owens is still very near the top of the law graduate pyramid.
*This story also reflects the extent to which private legal practice is, even at the most stratospheric levels, now more than ever a glorified sales job. Pierce makes rain, so he and a tiny handful of peers gets paid millions. The most skilled technician, by contrast, is exponentially less valuable to a firm, especially since the value a technically skilled lawyer adds can disappear overnight in the wake of a change in the economic or regulatory environment.
*Owens’ current salary is higher than that of 99.8% of non-instutitionalized adult Americans (or 99.65% of such people who are working or currently seeking work).
Update: Anyone interested in the gritty financial details can read Owens’ petition here.