Downturn in Testa Hurwitz’s core areas and lawyer departures spelt firm’s end

Testa Hurwitz & Thibeault announced its dissolution in January this year after suffering a series of body blows from which it could not recover.

The final strike came in December 2004 when 10 partners decided to leave the firm, including seven from its lauded private equity team. Less than one month later, managing partner George Davitt was forced to admit that the firm was going to be wound-up.

The problems at Testa Hurwitz began three or four years previously. The firm had failed to diversify quickly enough and saw its profitability fall as the worldwide decline in its core business areas of technology and private equity continued. Then, at the end of 2002, Testa Hurwitz lost its iconic founder and former managing partner Dick Testa, who was credited with generating much of the firm’s business. Rivals, smelling blood, had already begun to circle and the firm started to lose partners at an unsustainable rate.

The speed of the decline is evident from the figures. In 2001, the firm had a profit per equity partner of $825,000 (£458,500), putting it into the top 35 firms in the US, according to The American Lawyer’s figures. By 2004, that had fallen almost 40 per cent to $500,000 (£277,900). Over the same period, lawyer headcount shrunk from 364 to 272.

Even after the December walkout Davitt refused to concede defeat and embarked on a series of aborted merger talks, but it was not enough to stop the break-up. Since the declaration, name partner George Thibeault has been managing the dissolution. In February eight partners seeking to recover capital contributions filed an involuntary bankruptcy petition, which was thrown out by the judge. All grievances will now be heard by an arbitration panel.