Back to the Future: Stealth Layoffs in 1990
Welcome to BACK TO THE FUTURE. In this occasional ATL feature, we'll step into a time machine and take a look at what the legal profession looked like at some point in the past.
In a post about staff layoffs at Fried Frank, a commenter drew our attention to this fascinating 1990 article from the New York Times. It seems that the commenter was trying to challenge the recent claim by firm chair Valerie Ford Jacob that the firm has never laid off attorneys. The NYT piece -- by David Margolick, former national legal correspondent for the Times, now at Portfolio (and also one of Kash's journalism professors at NYU) -- mentions Fried Frank as a firm that may have engaged in "stealth layoffs."
Margolick's article doesn't use the term "stealth layoffs," but the phenomenon it describes is essentially identical to what we've been reporting in the pages of ATL lately. The article begins:
They were the legal profession's gilded generation, an army of lawyers without limits. As law students, they were wined and dined and wooed by the most prestigious law firms in New York. Once hired, they began settling into a frantic but fantastically lucrative life. It was a life of glamour, prestige and, they assumed, stability.Now, only a few years later, dozens of these lawyers have had a crash course in the realities of modern Wall Street practice. For the first time in their lives - lives of success atop success - they find themselves in an unusual position. They have been fired.
As the sour corporate climate reaches large law firms in New York and to a lesser degree cities like Los Angeles and Chicago, a bubble has burst. With business down, particularly in corporate work, real estate, and mergers and acquisitions, several of the most famous law firms have dismissed substantial numbers of lawyers, particularly those in the early years of their careers.
This article could have been written yesterday. But it was actually written over 18 years ago; the dateline is August 12, 1990. The more things change, the more they stay the same.
More excerpts and discussion -- including a brief comment from Margolick, plus information about what junior associates earned back in 1990 -- after the jump.
More from Margolick:
The ax fell disproportionately on women - a reflection of their continuing marginal status at some firms, despite record raw numbers. In others, it fell on those brought in laterally from other firms rather than home-grown products. In still more, it fell more capriciously - on those who had the wrong mentor, an absentee mentor, or no mentor at all.
Were women disproportionately hit in the latest round of layoffs? It's tough to tell. But it's worth noting that one of the more high-profile legal layoff victims was a woman: holla at your girl, Shinyung Oh.
On the spectrum of hardship cases, the plight of 25-year-olds making $85,000 a year, most with skills more than sufficient to find work elsewhere, is admittedly not the saddest. There is no constitutional right to foreign cars or second mortgages. But many still carry large debts from law school. Moreover, there is the shock of dismissals in a world unfamiliar with them, as well as what the lawyers involved contend is the disingenuous way in which they were handled.
The foregoing paragraph also could have been written yesterday (or today) -- except that in 2008, the numbers are much bigger. Since 1990, starting salaries have almost doubled, to $160,000. But law school loan burdens have also increased.
Update: That approximate doubling is in nominal dollars. If you want to talk about inflation, check out some of the comments.
More on the "disingenuous way" in which layoffs were handled:
The firms involved do not deny that many of their lawyers have been asked to leave. But they have proven more willing to let go of lawyers than of the myth of gentility they have long cherished. Straining to preserve what remains of that image, they insist the dismissals are based on merit rather than on reduced earnings.A representative comment came earlier this year from Roger Meltzer, a partner at Cahill Gordon and the firm's spokesman. ''The quote, layoffs, were not related to any financial problems at the firm; they were related strictly to the merits,'' he told Manhattan Lawyer magazine, a trade publication.
Ah yes, the invocation of performance-based dismissals. Sound familiar?
(Digression: Anyone know what happened to "Manhattan Lawyer" magazine? It doesn't ring a bell for us.)
The layoffs have left many of the young lawyers feeling betrayed by institutions which, they charge, courted them, exploited their loyalty, and worked them incessantly, only to dump them when times got tough and to blame them for poor performances. That, in turn, leaves some feeling chagrined over their own naivete.''A lot of young people think they can go to a good law school and get a degree which will guarantee them stability and interesting work for the rest of their lives,'' said Lesley M. Friedman of Special Counsel Inc., a legal temporary service which has helped place some of the dismissed lawyers.
One of the more than 20 lawyers dismissed this year by Fried, Frank, Harris, Shriver & Jacobson agreed. ''Maybe I was deceiving myself,'' he said. ''They'd always portrayed themselves as something other than the factory I guess they are.''
''I feel like an idiot, I really do,'' said another lawyer, one of 10 dismissed by Rosenman & Colin. ''When it comes down to money they'll just turn around and stab you in the back. Everyone is saying I'll get over it, but it's something I don't think I'll ever get over. I really felt that I was a good lawyer.''
Just as they do today, the firms and the fired lawyers dispute the departures:
Merit was the only issue, contended Arthur Fleischer Jr. of Fried Frank.''People who are not functioning as their peers are, are told that it doesn't make a lot of sense for them to stay here,'' he said. ''That goes back to time immemorial.'' He dismissed as nonsense the suggestion that anyone had been dismissed for economic reasons.
''I know most of the people who were let go, and most of them got great reviews,'' one recently dismissed Fried Frank lawyer countered. ''Don't give me this garbage that they were scum.''
''Even though they're fooling no one, it's easier to say 'These people weren't cutting the mustard' than to say 'We're not cutting the mustard,' '' an associate dismissed by Shea & Gould said.
Cf. Shinyung Oh, laid off by Paul Hastings, who wrote in her famous farewell email: "What I do not understand is the attempt to blame the associate for not bringing in the business that should have been brought in by each of you [the partnership]...."
In addition to Fried Frank and Roseman & Colin (now part of Katten Muchin), the firms that get shout-outs in the NYT article for laying off lawyers back in 1990 include Cahill Gordon, Milbank Tweed, Willkie Farr, and Shea & Gould (which no longer exists -- so maybe the layoff victims got the last laugh).
But at least Willkie gets props for being honest back then:
[O]ne managing partner, Robert Hodes of Willkie, Farr & Gallagher, acknowledged that some of those discharged at his firm were for economic reasons, and that they understood that this was so. ''There was no way not to be candid,'' he said. ''These are very smart people.''
We've given you mere excerpts from a longer, and fantastic, article. Take a trip down memory lane and read the entire piece by clicking here.
After an introduction by ATL associate editor Kashmir Hill, who is now one of his students at NYU's journalism school, we reached out to David Margolick, author of the original 1990 article. We wanted to see if he had any comment on his piece in light of recent developments in the legal profession, including the return of stealth layoffs. He replied, by email:
I don't have any great profundities for you. I've lost touch with that scene and, in fact, wasn't even aware of any 'meltdown.' That old clubby world was starting to break down back in my era, and it was one of the themes in my work, but it basically remained intact. It just seems inevitable that another another, more fundamental restructuring was in the offing.
Perhaps that more fundamental change will come about in the next few years, if the world of Wall Street undergoes deeper change that spills over into the legal sphere. But only time will tell.
Wooed, Wined and Overworked, Wall St. Lawyers Meet Pink Slips [New York Times]
(80) Comments
1
first!
firsty
first
Back in the '90s, journalists used to repeat entire paragraphs in their articles. It was no big deal.
First to say an entire paragraph of the article is repeated in the quotation.
what's the point?
I love Lat.
sloppy, very sloppy and i never comment about this shit....
sloppy, very sloppy and i never comment about this shit....
Lat for EIC '08.
What about stealth no-offers? Foley won't call its summers to let them know they don't have an offer. A feeble attempt to protect their image despite screwing over a large portion of its summer class.
10-
You mean, other than your comment in 9.
"On the spectrum of hardship cases, the plight of 25-year-olds making $85,000 a year, most with skills more than sufficient to find work elsewhere, is admittedly not the saddest." I thought associates make a lot more than that?
NYC=TTT
FF DC conducted stealth layoffs this year. Ask the 5-7 (former) litigation associates who departed earlier this year.
UVA lays off Asians all the time, its no big deal.
14 = genius
Peat and Repeat are in a boat. Peat falls out. Who is left?
To summarize:
Michael: Tom Hagen's no longer consiglieri -- He's gonna be our lawyer in Vegas. That's no reflection on Tom, but that's the way I want it. Besides -- if I ever need help, who's a better consiglieri than my father? Well, that's it.
Tom: Mike, uh - why am I out?
Michael: You're not a wartime consiglieri, Tom. Things may get rough with the move we're trying. And frankly, the performance review I wrote for you last week did not reflect well on your value to the Corleone family.
Tom: Man, that's bullshit! Everyone knows the Corleone family is losing money because it didn't make the deal with Sollozzo, and now the gambling market has gone bust. I had nothing but good reviews under Vito, but suddenly my work isn't good enough?
Michael: Tom, you're out of line. This is strictly merit based. The Corleone family has never laid off a consiglieri, or even a regular thug or soldier, due to financial difficulties.
Kay: I really hope if I have an abortion, I mean miscarriage, I won't get laid off six days later.
Michael: Kay, please. We're the mob. We have a little more class than that.
Can you imagine the comments shitstorm if it had been Elie that repeated a paragraph?
i'm surprised that there have been no "Suck it, Lat" comments.
Since firms typically don't give written copies of reviews, the debate over performance of the firm vs. the associate is useless. Unfortunately, interviewers at prospective employers probably assume it was the performance of the associate. So, really, it doesn't matter what the firm says. What is important is how these interviewers choose to interpret the layoff.
14's right. Way to go, Lat.
I was in a tanning bed naked one time and one of the bulbs near my junk was apparently on overdrive. I ended up with some Fried Frank.
15 = jealous
i smell a mystal post. he wanted to make some blatant errors under lat's name to see if people really hate him or not.
Tanning beds are TTT.
20 = hysterical
trentième
20: You're a genius. Hilarious.
I'm class of '90 so I'm old enough to remember this bloodbath. My DH, class of '88, went to Kelley Drye's corporate dept in a year when they hired a ridiculous 44 first years and paid a staggering $71k.. He was part of the axe-wielding - I think more than half his entering class was.
Mystal to stealth layoff!
32: What did your husband and his comrades do? I'm so curious about that group of lawyers who fell on hard times and what befell them.
Refresh your browser. The repetition of that paragraph in the block quote has been fixed. Everyone can calm down and unbunch their panties now.
Here's the one thing I don't understand about the article (which I admit not reading in its entirety): large law firms have ALWAYS fired people eventually, right? For 99% of them, either you make partner, or they ask you to leave eventually. Unless everyone who was working at Fried Frank back in the day thought they were going to make partner simply by sticking around long enough, then they should have expected it all to come to an end.
FF DC today is a great example of that. They basically NEVER make people partner there. My significant other worked there, and told me that since 1998 there's only been ONE person in litigation to have made partner in the DC office. One! That tells me that if you work there, expect to get fired, eventually, no matter what.
But Lat still hasn't fixed his typo about associates making only $85,000.
Manhattan Lawyer:
http://query.nytimes.com/gst/fullpage.html?res=9D0CE2DB1030F930A15752C1A967958260
37 = double genius. it's a quote from the article. associates making $85,000...in 1990.
36: Some people leave without getting fired. They may lateral to another firm or leave the legal practice entirely.
I got news for everyone - all "stealth layoffs" are somewhat based on economics. In good times, you'll keep almost any warm body around. All "real layoffs" are somewhat based on merit. If you have to axe people, you sure aren't going to do it randomly (unless their union and you have no choice). Everyone understands exactly what it means to be let go, no matter what the firm says.
Manhattan Lawyer:
http://query.nytimes.com/gst/fullpage.html?res=9D0CE2DB1030F930A15752C1A967958260
39, don't be a douche, he is obviously trolling for precisely that response.
Everyone knows that while Manhattan Lawyer claimed to be running ahead of budget and had a weak financial outlook, the decision to cease publication was really based on the magazine's merits.
What the hell is happening to this blog? We can't even get a basic typo like associates having an $85,000 salary! It starts at $160,000, you bunch of d-bags.
Elie = EPIC FAIL
14, 39, 45 = TTT gunners
http://query.nytimes.com/gst/fullpage.html?res=9D0CE0D9103CF933A0575AC0A967958260&n=Top/Reference/Times%20Topics/Subjects/L/Layoffs%20and%20Job%20Reductions&scp=9&sq=skadden%20layoff&st=cse
Islam = TTT
1990 $85,000 = 2008 $142,000
The extra 18 grand is for the increased debt load and hours. Guess it was a better deal back in the day.
Lat, good post but the idea that $160,000 in 2008 dollars is "almost double" $85,000 in 1990 dollars is absurd. According to The Inflation Calculator at http://www.westegg.com/inflation $85,000 in 1990 is $133,254 in 2007 (numbers for 2008 are not available).
It is probable that the average law school loan balance at graduation has increased at a faster rate than first year Biglaw salaries, but those salaries have definitely not almost doubled in the last 18 years.
49/50 - sad but true.
34 - my DH pounded the pavement for a while, landed at a small lit boutique (tho he'd been in corporate), and eventually went in-house. Not sure about his cohorts - he lost touch with them pretty quickly
52, He was able to switch from corporate to lit? How long had he been in? I would love to do lit...
Good people, smart people, talented people can get fired from law firms or any other kind of job. Take it as a compliment; you are a non-tool and you don't need an 8-year fraternity rush system to prove whether you are worthy to be a "real lawyer" by biglaw's standards. Real clients are out there and need you; pick a specialty that interests you and that you master and go hang a shingle, become a writer, become a consultant, become a lobbyist, whatever interests you.
If you never fail at anything, you are not challenging yourself enough in life. Take the lessons learned along on your new endeavor.
FYI, it is not "that much" more money. Adjusted for inflation, 85K in 1990 is equivalent to 133K in 2007. We still got a 27K bump, but it is not a 100% increase.
But if Lat wanted to suggest that associates are making $84,000 in 1990 dollars, he should have just said so.
Associate salaries may have doubled, but law school tuition has tripled or quadrupled.
57, not at all schools. For example, in-state tuition at Penn is still fairly reasonable, compared to most other state schools anyway.
Fried Frank to 1.21 gigawatts!
representative comment came earlier this year from Roger Meltzer, a partner at Cahill Gordon and the firm's spokesman. ''The quote, layoffs, were not related to any financial problems at the firm; they were related strictly to the merits
Please note the context of 1990 - he made this statement in the wake of the Drexel Burnham bust - which was CGR's meal ticket at the time and nearly took it down too - but at the same time, they just happened to do associate reviews which could not be described as layoffs? Right.....
In other words, this quote was urine, being described to us as rain by Rog.
representative comment came earlier this year from Roger Meltzer, a partner at Cahill Gordon and the firm's spokesman. ''The quote, layoffs, were not related to any financial problems at the firm; they were related strictly to the merits
Please note the context of 1990 - he made this statement in the wake of the Drexel Burnham bust - which was CGR's meal ticket at the time and nearly took it down too - but at the same time, they just happened to do associate reviews which could not be described as layoffs? Right.....
In other words, this quote was urine, being described to us as rain by Rog.
60 (and 61): I can understand the skepticism, but Meltzer was right. If the lawyers laid off had been better lawyers, they would not have let big firm clients go under like that. Pure merit.
making $85k in NYC 1990, you would have been WAY better off than now. you could have easily bought a very nice 2 BR apartment and still had money left over to pay off loans. look at article below: average price of 2 BR aparment on CENTRAL PARK WEST was $405,000 in 1991.
http://findarticles.com/p/articles/mi_m3601/is_/ai_11909158
Just want to point out that the first paragraph was repeated for a reason. When the NY Times archives an article, they put the "lead" first, and the they follow with the text of the article. In this particular case, the lead was simply the whole first paragraph of the article. It therefore appeared twice. Lat just copied and pasted it from the NY Times, which he even links to, and anyone with half a brain could have figured that out by simply clicking on that link.
64, that doesn't excuse his typo re the $85,000. He's been blogging about salaries forever. How could he not have caught that one?
62 - WTF are you talking about? Drexel Burnham went under because Mike Milken (maybe you’ve heard of him?) and several other employees were brought up on a plethora of charges, including RICO violations and insider trading. DBL itself pleaded nolo to six securities violations. Cahill wasn’t implicated in any of this. How is a law firm that was representing an underwriter in high-yield debt transactions supposed to prevent the collapse of said underwriter that resulted from illegal activity that the law firm knew nothing about?
http://en.wikipedia.org/wiki/Drexel_Burnham_Lambert
Law firm partners lying about layoffs? Why is anyone surprised? They lie about anything and everything. If you are lucky enough to be starting out as a first year associate in Biglaw this fall and your firm hasn't imploded, start with the proposition that biglaw partners are the scum of the earth. Then let the few that aren't prove otherwise.
Once again this site gets it completely wrong. Fried Frank actually had its best year last year and their real estate group is doing really well despite the economy. But he ATL is a blog, it doesn't need to do research. So what if the layoffs were a result of a consultant recommending they save money by letting go of too much support staff? ATL isn't accountable. I wish that someone would sue them, but alas no one can go up against the big bad ATL. This place is fucking pathetic. And no I don't work for FF, I just did some cursory research.
Fried Frank had its best year in '07 b/c Private Equity was still booming in the first half of the year. The second half was really bad. The real estate group while being great is very small compared with the bloated litigation and corporate groups that are very slow. While certain other NY firms are making alot of money in the financial crisis, FF sits on the sidelines.
#69 - you claim "While certain other NY firms are making alot of money in the financial crisis, FF sits on the sidelines."? Below is a copy of the Statement put out by jacob and spendlove at Fried Frank in September.
#68 - You may want to read it also.
August 20, 2008
After Layoffs, Fried, Frank Announces Promotions
On the heels of the firm’s confirmation earlier today that it laid off administrative staff in D.C. and New York, Fried, Frank, Harris, Shriver & Jacobson has announced the promotion of five lawyers in those two offices to partner.
In an e-mailed joint statement, the firm’s chairperson Valerie Jacob and managing partner Justin Spendlove said the promotions “reflect the strength of the firm and its continuing growth.”
The following lawyers will be elevated to partner on Sept. 1: Corporate associates Andrew Barkan and Murray Goldfarb in the New York office; bankruptcy and restructuring associate Jennifer Rodburg in the New York office; real estate special counsel Michael Barker in the New York office; and corporate associate Bradford Lucas in the D.C. office.
#69 - you claim "While certain other NY firms are making alot of money in the financial crisis, FF sits on the sidelines."? Below is a copy of the Statement put out by jacob and spendlove at Fried Frank in September.
#68 - You may want to read it also.
August 20, 2008
After Layoffs, Fried, Frank Announces Promotions
On the heels of the firm’s confirmation earlier today that it laid off administrative staff in D.C. and New York, Fried, Frank, Harris, Shriver & Jacobson has announced the promotion of five lawyers in those two offices to partner.
In an e-mailed joint statement, the firm’s chairperson Valerie Jacob and managing partner Justin Spendlove said the promotions “reflect the strength of the firm and its continuing growth.”
The following lawyers will be elevated to partner on Sept. 1: Corporate associates Andrew Barkan and Murray Goldfarb in the New York office; bankruptcy and restructuring associate Jennifer Rodburg in the New York office; real estate special counsel Michael Barker in the New York office; and corporate associate Bradford Lucas in the D.C. office.
#36 - Look at the number of Partners at FFDC and then the number of Partners at FFNY. FFNY way out numbers the Partners in FFDC. When it comes time to vote on naming new Partners - do you really think FFDC has a chance in hell of getting through one of their associates for Partner if FFNY has their own in mind? Look back over the years and the 'token' few Partners ever made on recommendation from FFDC. Look at the announcements they made over the years announcing new Partners made you might find a name or two from FFDC and sometimes none.
#36 - Look at the number of Partners at FFDC and then the number of Partners at FFNY. FFNY way out numbers the Partners in FFDC. When it comes time to vote on naming new Partners - do you really think FFDC has a chance in hell of getting through one of their associates for Partner if FFNY has their own in mind? Look back over the years and the 'token' few Partners ever made on recommendation from FFDC. Look at the announcements they made over the years announcing new Partners made you might find a name or two from FFDC and sometimes none.
#36 - Look at the number of Partners at FFDC and then the number of Partners at FFNY. FFNY way out numbers the Partners in FFDC. When it comes time to vote on naming new Partners - do you really think FFDC has a chance in hell of getting through one of their associates for Partner if FFNY has their own in mind? Look back over the years and the 'token' few Partners ever made on recommendation from FFDC. Look at the announcements they made over the years announcing new Partners made you might find a name or two from FFDC and sometimes none.
#16 - FF DC might be doing stealth lay offs, but most of those "5-7 (former) litigation associates who departed earlier this year" did so voluntarily.
#16 - FF DC might be doing stealth lay offs, but most of those "5-7 (former) litigation associates who departed earlier this year" did so voluntarily.
#76 - Did you ever watch them 'freeze' an associate out? He or she sit at their desk with nothing to do, nothing given to them day after day....one feels so sorry for them. Then they start coming in late, then not until noon, then not at all. One knows they are out looking and can only hope they find something soon. Nasty and cruel in a way how they do them when not wanted!
#16 - "...most of those 5 - 7 litigation associates..." most of them okay but that means some were put out. What about all those 38 associates who had left FF between Nov. 2006 to Jan. 1 2008 - how many left voluntarily and how many were put out? How many more since January 2008 have left voluntarily and how many put out?
#71 - Do you work for FF PR dept? So the managing partners say the partner promotions reflect "the strength of the firm and its continuing growth.” Of course they are going to say that. 5 partners is by far the fewest that FF has made in a year in the past few years. The firm hasn't made a litigation partner in a number of years.
#79 - Who is left in the DC Litigation department? Two Partners walked out together this past year. Litigation associates left ... one has to ask why? So why no promotion to a Litigation Partner in DC, only Corporate. One would think they'd want a replacement, wouldn't one?