February 2009 won’t be remembered fondly by many in the legal industry.
The month seemed like one continuous onslaught of law firm layoffs — with its final week bringing some particularly harsh cuts.
Last week alone, Latham & Watkins shed 190 associates and 250 staffers; Lowenstein Sandler cut 21 attorney and 32 staff positions; Dechert cut 10 staffers; Sheppard, Mullin, Richter & Hampton confirmed it has let go 25 attorneys since the start of the year; and Pillsbury Winthrop Shaw Pittman offered associates the chance to leave the firm voluntarily with three months’ severance.
Additionally, Sonnenschein Nath & Rosenthal announced on Friday that it was closing its Charlotte, N.C., office — a move that affects 11 lawyers and eight staff attorneys, some of whom will be offered the opportunity to relocate, according to a firmwide e-mail written by Chairman Elliott Portnoy.
The job cuts during the past week compounded those made earlier in the month. At least six firms dismissed more than 700 staffers and attorneys on a single day, Feb. 12. The reductions included 243 positions cut at Holland & Knight and 180 in the U.S. offices of DLA Piper.
Legal experts have speculated that February was a popular time to make cuts because law firms had compiled their financial results from 2008, and the news was not good. Furthermore, firms didn’t see the hoped-for boost in business early in 2009.
“I don’t think many people will be surprised by this,” said Joel Henning, a legal consultant with Hildebrandt International. “If you look at how dramatically business is down — particularly in transactional work — there’s a real need to manage the large overhead.”
Not only is business slow, but firms are reporting that normal attorney attrition has nearly ground to a halt, making it even harder to keep everyone busy without worker reductions.
The Latham & Watkins cuts garnered the most attention last week, in part because they are believed to be the single largest law firm head count reduction since the industry began to shed jobs en mass in September. Altogether, 440 workers are leaving Latham, according to Chairman Robert Dell, who spoke with National Law Journal affiliate The American Lawyer the day the cuts were announced. The firm laid off about 12% of its associates, with the bulk of the cuts coming from the New York and Los Angeles offices. Between 12 and 15 attorney jobs also are under review in Latham’s London office. Dell said departing workers are being offered six months of severance, capped at $100,000, and six months of medical coverage.
There were signs that Latham was struggling prior to the layoffs. Profits per equity partner dropped by 21% from $2.27 million to $1.8 million while revenues fell 4% from just over $2 billion to $1.9 billion, according to The American Lawyer.
Henning said not many people will be shocked that a prestigious firm like Latham & Watkins laid off a large number of attorneys, particularly because the larger, highly regarded firms tend to be most steeped in the type of transactional work that is practically “moribund” right now.
Because the financial services industry has suffered a “near fatal blow,” the legal industry in major capital markets like New York may never return to the way they were structured prior to the recession, said New York-based legal consultant Jerry Kowalski. “Everyone who made their livelihood servicing that industry is feeling the effects right now, and that includes law firms,” he said. “This is not a hiccup. It’s a significant change, and we may never get back to where we were before.”
Kowalski and Henning don’t think law firms are through unloading workers, though Henning said he thinks more firms are trying to be creative in how they cut down on overhead. He noted that the voluntary layoff deal offered by Pillsbury Winthrop could catch on at other firms, or that more firms may explore options such as across-the-board pay cuts during the recession.
In another recent move, Latham & Watkins announced that it is deferring the start date for its 2009 associate class to December, and has offered those incoming associates the opportunity to defer their start dates until October 2010.
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