While there was no single point of failure, undisciplined acquisitions, ad hoc and expensive compensation schemes, and financial mismanagement coalesced to bring the firm’s ruin, several former shareholders say. LeClairRyan’s demise — one of several firm failures in the last decade — is as much a story about a single firm as it is a warning to others in a softening economy, according to an ABA Journal report. Founded in 1988 by two former Hunton & Williams corporate lawyers, Gary LeClair and Dennis Ryan, LeClairRyan started as a regional business firm in Virginia. The firm initially focused on venture capital clients and got by on credit card advances. Throughout the 1990s, the firm grew slowly and was seen as a solid regional player. Then the dot-com bust came at the turn of the century, and things began to change. As former litigation shareholder at LeClairRyan John Fitzpatrick recalls, Gary LeClair began to shift strategy and wanted to run the firm like a corporation. The new corporate-like structure was top-heavy, expensive and populated with people not billing enough to justify their salaries. As economic tumult continued to increase behind the scenes, a public employment and gender discrimination lawsuit against the firm turned into a portentous preview of LeClairRyan’s pending collapse. In January 2016, firm shareholder Michele Burke Craddock filed a discrimination lawsuit in the U.S. District Court for the Eastern District of Virginia alleging LeClairRyan paid male shareholders more than her even though she generated far more billable hours. Hidden in the case’s documents was a revelation about the firm’s financial health. According to the arbitration decision, the firm admitted that it had to cut Craddock’s compensation because it couldn’t afford not to. Revealing that it had missed budget for the first time in its history in 2011 — and again in 2012, 2013 and 2014 — the firm cut many shareholders’ compensation, leading to departures. The decision noted that LeClairRyan “pointed to the untenable results of its automatic ‘raise culture’ years and the need to reconsider its practices.”
