Legal Market Feeling Pain In All Corners
The Legal Times
October 22, 2001
By Jennifer Myers
More layoffs, In-House Woes, And Little Work for New Grads
Goodbye, salary raises and fat bonuses. Hello, layoffs, performance reviews, and corporate downsizing.
Law firm layoffs, once just a problem for tech counsel are starting to spread. Ripples are also being felt at in–house legal departments and among recent law school graduates.
Hurt by a downward spiraling economy, Swidler Berlin Shereff Friedman has begun laying off associates – approximately five to date – after shedding a dozen contract attorneys earlier in the year. Piper Marbury Rudnick & Wolfe has instituted ongoing and rigorous performance review to thin associate ranks. Two weeks ago, Morgan, Lewis & Bockius released 50 associates firmwide, becoming the first East Coast-based firm to announce mass layoffs this year. That move followed in the footsteps of Cooley Godward’s decision to release 86 associates and special counsel, as well as layoffs at a handful of other Silicon Valley firms.
Ominous news continues to come from the West Coast, Menlo Park, Calif.’s Venture Law Group laid off 10 associates and 22 staff members last week, accounting for approximately 15 percent of the associate body and 19 percent of the staff. The reduction hit all four of the firm’s offices – including the new four-lawyer Reston office opened over the summer – and comes after VLG indefinitely postponed the start date of its first-class year.
Borbeck Phelger & Harrison leader Tower Snow, Jr., infamous for his pledge earlier this year not to institute economy-driven lay-offs, announced on Oct. 17 that he will not seek re-election as chair in December after nearly four years at the helm. Neither will firmwide managing partner James Burns Jr. When Snow steps down this winter, the protection he afforded many associates may evaporate.
“The legal business is not immune from the general economy,” says Swidler’s managing partner, Barry Direnfeld, who expects other firms to start contemplating layoffs.” If they haven’t done it already, then I think they have to confront it.”
Thinning The Ranks
Cooley’s reduction, though it wiped out nearly 20 percent of its nonpartner work force, did not shock as much as the 50-associate layoff at Philadelphia-based Morgan, Lewis two weeks ago.
But the surprise may wane. Morgan Lewis’ announcement “to me, suggests that it’s going to be very widespread,” says Edward “Ned” Ruffin Jr., managing partner of VLG’s Reston outpost. “It’s not just a technology problem.”
According to Direnfeld, when telecom expert Swidler began feeling the pinch, it started taking “measured” steps to fix the problem. Over the past few months, the firm instituted a lateral hiring freeze, planned for a reduced summer associate class next year, and began letting nearly all of its contract attorneys go, some before the expiration of their contracts.
But the strategies proved insufficient, in part because attrition declined, a phenomenon being experienced at other firms such as Morgan, Lewis. Following the reduction of its contract attorney ranks over the spring and summer, Swidler decided to let go approximately five junior and senior associates, bringing the current number of associates in DC down to 156. That may not be the end.
“Does that mean we will have no more? I can’t say that,” says Direnfeld, who adds that any further reductions will continue in a metered manner. Swidler does not “contemplate a wholesale layoff,” he says.
Direnfeld sees the moves as an attempt to keep the firm on an even keel financially. While profits per partner will go down and bonuses will be smaller this year, he says the firm will be able to avoid dipping into debt toward the end of the fiscal year.
“We haven’t been in our line of credit for 20 months,” he says. “We have not sought an increase of it. We’re not going to go into it this year.”
Just as Swidler is taking a different approach than is Morgan, Lewis or Cooley, other firms’ approaches differ from Swidler’s. Firm leaders have had to determine how far partner profits can drop before layoffs begin, if and how deeply the firm can reach into its line of credit, and how to deal with the dwindling workload for associates.
At VLG, partner Donald Keller Jr. hopes the postponed start date for first years and last week’s lay-offs will help the tech firm weather the drop in the economy. “We absolutely are planning for growth” in the Reston office, he says. “The timing of the growth will depend on the market.” The firm declined to disclose how many attorneys were laid off per office, but Keller says all reductions were “relatively proportional” to the size of the office.
As Ruffin notes, VLG’s layoffs and first-year postponements have permitted the attorneys still at the firm to remain busy. “Everyone expects that we must be having a very, very hard time. That might be true if we came out (to Reston) cold. We came out with a full plate.”
At other firms, not all attorneys have been able to keep up their billable hours. Under Piper Marbury’s increasingly rigorous performance reviews, attorneys with lowered billables are not given as much time to fix the problem as they might have had in the past, but are instead shown the door, say current and former attorneys who declined to be identified. They say the process is a quiet one. Firm leaders confer with associates who are not meeting their goals and encourage them to move on. Chief Operating Officer Jeffrey Liss declined comment.
Piper has made no formal layoff announcements, and thus far the process has apparently affected only a small percentage of the hundreds of associates there. The reductions follow a period of growth, and even counting those who have left, the 184-lawyer DC office is roughly the same size as it was last year.
Associates at DC and Northern Virginia law firms are not the only ones biting their nails and worrying about the next round of pink slips. Corporate legal departments are looking to do more with less, say Washington Metropolitan Area Corporate Counsel Association members.
“I’ve had an upsurge in members of WMACCA contacting us who are in transition,” says organization’s president, Robert Lavet. “It’s more anecdotal, but I definitely think there’s an upsurge.”
At WMACCA’s annual social last year, corporate counsel trickled in slowly, with many attendees arriving at least an hour after the start time. This year, say members, the room was packed with people looking to network soon after the doors opened on Oct. 4.
“One area that has been hit very hard is people in their late 40s and 50s, who are senior in their careers,” says headhunter May Adelman Legg of Firm Advice, Inc. “Law firms are still looking to bring on partners with portables,” and often in-house attorneys have decades of experience but no book of business.
The desire to pare down in-house affects more than just the attorneys who are out of a job and looking for their next one, though. Others, who agreed to a reduced salary for a 9-to-5 environment, are spending more time in the office. As companies tighten their belt, legal departments are being asked to reduce the number of referrals outside to counsel.
“That’s a phenomenon that’s been going on for years, and its just accelerating,” says Legg. “There are very few people in-house who are comfortable with their level of work.”
Normally die-hard in-house attorneys are now starting to send their resumes to law firms. Some firms – such as Howrey Simon Arnold & White, which focuses on antitrust, intellectual property, and litigation – are hiring. Howrey has beefed up its associate ranks its associate ranks by 30 since January, and added 11 partners. But in this market, firms with large corporate practices are going in the opposite direction.
“We’re getting resumes all the time from in-house people,” says VLG’s Ruffin. “Before, those might be quite talented people you would pick up.” As experienced attorneys encounter problems moving on to their next job, it’s similarly taking law students and recent graduates longer to land their first permanent spot.
“It’s a lot tougher,” says Legal Assets Corp.’s Jeffrey Miller, who says that his DC temp agency is currently getting resumes from candidates who, in the past, would have had a job by graduation. “Two years ago, you had people coming out with a lot of options.”
Today, legal temp agencies such as Miller’s are swamped with recent grads looking for a paycheck. “I think because of what is going on in the economy now,” says Goldstein of DC’s Legal Source, “people aren’t hiring as many associates, as many permanent positions.”
At some area law schools, career service departments are also seeing indications that third-year students and recent graduates are having a harder time getting a job offer.
“Every year, we have 3L’s who want to participate [in on-campus recruiting] because they might be shopping around,” says American University College of Law Office of Career Services Director K. Jill Barr. “I think 3Ls who are doing it this year are doing it for a different reason.”