I'm starting to really like Elie. Keep up the good work!

-Prestigious Southerner

fird?

i've never understood how people make partner without bringing in business. call them of counsel, or whatever, but don't call them partner.

2 = Elie

DLA remains TTT

Change is coming

Smart move by DLA Piper. My firm has bloated ranks of income partners. They sit around enjoying 300k a year, and don't generate any business. They figure that they are making good money, are called partners, so why bother working to generate business? This at least gets those income partners to move their arses.

Skadden does not have to do this because they are Skadden.

Skadden Authority

So an income partner can become an equity partner if they put up the starting salary for a first year. Interesting.

Non-issue. If you're an income partner, and know you don't have the clients to match your old salary, you don't move. If you do have enough clients to increase your salary, you've already moved. Unless DLA has relegated certain business-generators to income status, which means they should all be shot, because the good business generators out of that group have already left for greener pastures.

QE also changed partnership structure this year --- instead of the six year fast track (by enlarge a marketing tool) it is now seven years

Question: Does this mean that DLA is eliminating its two-tier partnership structure? If so, does that also mean that those who don't pay are let go?

"by and large," not "by enlarge"

Why is this getting praise?

This isn't an attempt to increase responsibility. This is a short-sighted cash grab, and apparently DLA needs short-term capital.

This is selling the brass ring, when really want to make the transition and can bring in the business would earn it anyways. Look for de-equitizations and lateraling out when these people show why they had buy their way to equity.

Firms, carefully vet future DLA partner laterals; now that the "equity" title can be bought, make sure that they really will bring the business you're expecting.

Business sense: why Elie is a blogger, not a biglawyer.

I always figured that firms invented non-equity partner status so that those senior associates would have an easier time bringing in new clients who aren't privy to the fact that they aren't real partners. Handing a business card out that says "partner" looks a lot better than one that says "of counsel." Plus, even though they don't get equity status, I think most firms still ask for an initial capital buy in.

DLA is still a toilet firm that no-offers summers.

Almost all firms require attorneys to buy into the partnership. The difference is, generally, you are invited to become a partner at most firms--it's an honor. In this situation, it seems that all non-equity partners are allowed to buy in just by offering cash, regardless of merit. It makes me think that DLA is in some sort of financial trouble. Basically, it looks like a way to get quick cash and, eventually, let go of those new equity partners who can't make rain.

Some praise this, I call it shrewed and devious. I'm almost impressed.

And can anyone answer my questions @ 13.

Can I ask a question? As a laid off associates, is there any work available anywhere out there? Please respond.

"But almost doubling the number of equity partners means that profits per partner will be squarely in the hands of each individual partner to generate business."

just read that again. i know what he's trying to say, but he sure as heck doesn't know how to say it!

"As a laid off associates,"

Not for you there isn't.

There seems to be some overseas but not a ton in the states, especially not New York. You might have some luck in restructuring though. Just ask your recruiter (if you don't have one get one) that you're willing to work anywhere and he or she can probably find you a job.

Sorry you got laid off--that sucks.

13 and 18, I don't think this eliminates their income partnership. According to NLJ, they have 1200 partners. If they only have 300 equity partners (according to the post), I take it to mean that the rest are income partners (900 or so). They probably took the 275 income partners with the most business and made them the offer. It incentivizes them to develop their books even more.

I don't think it's a desperate cash grab. DLA doesn't need to get a 150k contribution from 275 people. If everyone bought in, that's 40 million. If half buy in, 20 million isn't going to do anything for a firm that made 1.3 billion last year. They would probably just borrow more against their lines of credit if things were bad. My guess is that they are looking at a large group of income partners who have stopped being productive because they make over 300k a year and aren't incentivized to go out and hustle business. That's a big downside of income partners; since they are still employees, they can rely on a steady paycheck that doesn't change based on what they kill.

Why would a firm double the number of partners splitting the pie, cutting in half the PPP number it reports to AmLaw? I naturally wonder what is in it for the current equity partners. My guess is that the firm really needs capital.

Any contract/income/non-equity partner considering this should find out how much capital the current equity partners have in the firm before contributing. I can assure you that you will not be taking out half the profits, so make sure you are not contributing more than your fair share of capital. Also find out whether you will now be on the hook for recourse indebtedness of the firm and what your projected compensation will be. You may make less even without accouting for the capital contribution.

Major Lindsey & Africa sounds like the title of a British colonial adventure novel, something Kipling would write. Involving literal headhunters, not figurative.

Engineer 1: Hear about DLA?
Engineer 2: Yea, they need to step it up.
Engineer 1: totally! HIGH FIVE!

Legal Department: Get back to work, slackers. Those products aren't going to engineer themselves...

$150k capital contribution? WTF? At most big firms it's closer to a million (but the firm arranges an interest-free loan to assist).

>They would probably just borrow more against their lines of credit if things were bad.

Unless their lines of credit were pulled. Not saying that's what happened, but it would help explain.

Lines of credit pulled . . . but . . .but . . . they're the largest law firm in the world!

Or they simply might not be able to pay their obligations as they come, i.e. they might have some serious liquidity problems at the moment. This is probably just speculation, but more than one of my clients has recently had to go through some sort of restructuring because they've drawn down too much on their revolver and no longer have the cash flow to pay it back. Do this for long enough and you don't have enough cash on hand to operate your daily business.

I'm just sayin' ...

Maybe it has nothing to do with their lines of credit. Maybe they are just cutting salary costs, and forcing a significant number of people to rely on the business they generate to pay their salaries. The capital contribution could be a requirement of the partnership agreement. If they really needed some cash, why not make it 50 or 75k. They'd get more people to pony up, yea? DLA's revenues grew 12% last year. I doubt they are sinking.

23 - read the Chicago Sun Times article -- it looks like they're eliminating the income partnership tier altogether. The 1,200 number could be the total number of partners worldwide, while the 275/300 numbers are for the US alone.

Incorrect cite.... It's Crain's Chicago Business, not the Sun Times

What I'm about to say goes to the young partners, not the senior "Deadweight partners." Make no mistake -- this is horrible for these non-equity partners. A jr partner at that firm now has the choice between putting new capital at risk when the milestones he'd have to reach to generate business can't be done in the current business climate or getting laid off when he doesn't put up cash.

They're wiping out a generation of young attorneys at their firm to save the more senior partners, who are more established and with larger books, and it will not make one iota of difference for the younger associates, who face a brutal cull soon enough.

Why don't you ask DLA why it was so dishonest throughout its summer associate program? Why don't you ask them why they no-offered so many summers and blamed it on performance?

I wonder what the floor is for equity partnership. That's a hard call to make -- if you had great business generation, you were already up for equity partner. If you don't, I'm not sure that you can afford to feed yourself on the percentage you'll get and the $150,000 cash investment.

They need to combine this with removing underperforming equity partners.

I wonder what the floor is for equity partnership. That's a hard call to make -- if you had great business generation, you were already up for equity partner. If you don't, I'm not sure that you can afford to feed yourself on the percentage you'll get and the $150,000 cash investment.

They need to combine this with removing underperforming equity partners.

"But the real savings for DLA come from not having to pay bloated salaries for non-equity partners:"

Epic fail.

MysTTTal

I think 33 is spot on. To think of this as any thing other than a measure to protect equity partners, particularly the senior ones, is naive.

wow, I should have saved money on law school tuition. With the 200K I would have saved, I could have bought a porsche (used obviously) and become a partner at DLA.

Could the minimum equity partner comp really be lower than $300K?

"But almost doubling the number of equity partners means that profits per partner will be squarely in the hands of each individual partner to generate business."

That's... just awful.

#19 writes:

"As a laid off associates"

Elie? Is that you?

29 - wow, your business acumen is just amazing.

i will do strange things to my body for a lot less than $150k if it means getting a job.

-nervous T-10 1L
email job leads to nervoust101l@yahoo.com

P.S. Ellie sucks at his job. Here's the resolution to the Cadwalader story. Link & Carroll out. Palmer and Zirinsky in.

http://amlawdaily.typepad.com/amlawdaily/2008/11/cadwalader-to-o.html

Gallion out!

@44, thanks for the update...Elie, you blow

looks like the dissolution rumors were overblown. Seems like its probably a good idea to throw the securitization guys out on their asses

This is a guise to raise short-term capital and is a sign of desparation. It signals that the firm can't get third-party financing and is essentially using its employees to raise the capital for them. Presumably the employees have better credit than the firm itself. What a great source of interest-free financing for firm under the guise of "equity partnership". Also, the firm can play a bit of a timing arbitrage in 2009 by compensating these same individuals at fiscal year end. Moreover, they eliminate a huge payroll drag, subsidize health coverage, and OSADI.

If you're at DLA and cheering the move, you really need to read a business book.

This is the beginning of the end, but someone like Elie who has about 2 years of big firm experience wouldn't know that. There is nothing "really interesting" about this. This is a sign that the firm lacks liquidity and is on its way to mass layoffs, satellite closures and massive downsizing. This isn't the first firm to do this and it wont be the last.

19,

Yes. Intellectual property, patents.

From 44's Link (pardon the pun.)

Anwyay, do these two sentences make sense together?

"It really is part of our normal succession," Link says. "It's not something I've been part of planning for."

Anyone know how much business a partner has to generate plus hours billed under the new plan to make as much as they did as a nonequity partner?

Maybe more firms will jettison their useless partners soon. K-Lo the Ho's gotta go!

Such a move only makes sense if the no-business and overpaid-service equity partners are made "of counsel" or are shown the door.

Service partners who do work senior associates could parlay into partnership are as big a scourge as deadbeat partners. Yes, they pay for themselves but their presence too often results in firms having a "lost generation" - a ten or so year gap between equity and non-equity partners - that can eventually suck the life out of a firm if it's not dealt with.

Fitty tree: those senior associates who could parlay that work into partnership... do they have clients? or would they be more service partners? if they had clients, seems like they could still parlay that into partnership if they did good work

Or maybe all the service partners should get a certain amount of time to generate clients or they get axed in favor of younger senior associates?.

48 is exactly right.

Is Elie even a lawyer? There is so much BS in this post that I don't even know where to start. Why hasn't he been replaced yet? WE WANT SOMEONE MORE COMPETENT WRITING. Thank you.

Who else is tired of the complaints about Elie? He's doing a good job and getting better. If you don't like it, just stop reading. But enough whining already.

elie sucks...but, for the right price, i will gladly accept a job massaging his feet.

-nervous T-10 1L
email job leads to nervoust101l@yahoo.com

Stories like this show the instability in firms that grow too fast by attracting greedy and illoyal lawyers from other firms. Don't expect any loyalty from anyone who just comes for the money. I wonder if a firm like DLA Piper or K&L Gates has any kind of firm culture where identification with the firm you work for is even remotely possible.

Kudos to the vast majority of commentators on this post...actually thoughtful and mature discussion. Now where is that glass cock?

"Why don't you ask DLA why it was so dishonest throughout its summer associate program? Why don't you ask them why they no-offered so many summers and blamed it on performance?"

I worked with a bunch of summers. You don't to blame it on performance -- it WAS performance. You don't even want to know what I had to say in some of my evaluations.

"Why don't you ask DLA why it was so dishonest throughout its summer associate program? Why don't you ask them why they no-offered so many summers and blamed it on performance?"

I worked with a bunch of summers. You don't to blame it on performance -- it WAS performance. You don't even want to know what I had to say in some of my evaluations.

47 = epic fuctard

at most law firms with income partners, said income "partners" are partners for tax purposes and pay their own health, own fica (self employment tax) etc.

Nothing like buying yourself a job . . .

What do people currently at DLA think about this? What do you think the impact will be, if any, on your day to day work?

It's smart. Costs have been cut. It is a capital call but not aimed at the existing equity partners. The money raised by the capital call will give the firm time to restructure. The firm may also make a smaller capital call to all the existing equity partners.

Lee Miller is a sharpie - he brought a sleepy regional firm to a large international firm in less than 10 years.

In another classic case of law firms playing follow the leader, after DLA was able to raise millions selling equity partnerships to 275 income partners, a number of Chicago firms are rumored to be considering a similar way to raise capital. Sonnenschein, Katten, Jenner and Bell Boyd followed are all rumored to be considering raising capital to stay afloat in a difficult economy by selling associates the right to keep their jobs.

Chicago to 125!

I think the bar for partnership suddenly got raised a notch or two...

- Nervous DLA 6th year

This is a fire-engine red flag suggesting that this "largest real estate firm in the Milky Way" is in deep financial trouble. "Buddy can you spare a dime? Income partner buddy, can you spare 150 K?" Looks like the hordes of real estate lawyers sitting around twiddling their thumbs from sea to shining sea and beyond are coming home to roost. It's not surprising that DLA, unlike other firms with heavy real estate concentration (Sonnenshcein, Katten) didn't lay off dirt lawyers proactively--now they appear to be scrambling to stave off the economic consequences of that inaction.

I think a large capital call like that was probably initiated by banks who refused to make loans to DLA to make payroll.

I think a large capital call like that was probably initiated by banks who refused to make loans to DLA to make payroll.

66=DLA PR consultant or Lee Miller's secretary

Folks, not all non-equity/income/service partners (or "of counsels" in some firms) are young (meaning recent senior associates); some have been around for years. A $150k buy in is dirt cheap. And "more senior partners, who are more established and with larger books" don't need protection - they already have it via their books. Unlike some commenters, I don't see this as a sign of cash flow problems but rather DLA may have realized benefits of some of these partners outweighed the costs and came up with a PR-neutral way to eliminate the least productive ones. Would you prefer that they lay off associates who have yet to even reach point of drumming up business?

73=Lee Miller's other secretary
p.s., He's not cost cutting his secretarial support

Wow, an ATL post not followed by a string of profanity-laced, mindless comments. This is a change.

It will be interesting to see how the next 9 to 12 months pan out. It appears that DLA Piper is reversing the last 20 years of major law firm structuring. One tier partnership? How does that translate to voting power?

It will be interesting to see how the next 9 to 12 months pan out. It appears that DLA Piper is reversing the last 20 years of major law firm structuring. One tier partnership? How does that translate to voting power?

From the Sun Times Article, quoting this TTT's mouthpiece O'Malley:

"Stepping back and looking at the larger economic environment, none of us thought in happier days your balance sheet would be stronger than your lender’s,”

Is this an observation he offered up to the income partners, whose "balance sheet" this TTT is now raiding in lieu of its bank, which declared no mas?

This is good move. It is equivalent to a closed corporation doing a private placement deal to get more capital.

From my contact inside DLA... partners who don't buy in are OUT!!!

Sounds to me like they are getting rid of large numbers of income partners. This is not about raising capital; it is about culling the partnership ranks.

54, this is 53. The answer is "the latter". It's time to return to an up or out policy unless, perhaps, non-equity partners are permanently capped at the senior associate level.

Deadbeat partners and Service partners need to have their incomes adjusted to market levels if firms are to survive. Think about it. "Hi, I'm Bob Service-Partner; I'd like to work at your firm for your partner Bill Rainmaker because I've heard he has great work. My income requirement is $800,000/yr base. Also, I'll need first dibs on any work that comes in to Bill. In the event I forget to save for my retirement, I want the firm to agree to employ me indefinitely, giving me preference on any work that comes in and rights to suck up work from associates if there isn't enough for me. Oh, and I have no business of my own. So when can I start?" What do you think the answer would be? I bet it's the same as the market's answer. So why should firms pay them far above market valuation?

Service, Income and Deadbeat partners are law firm equivalents of UAW members. Odds are they'll have a similar fate.

54, this is 53. The answer is "the latter". It's time to return to an up or out policy unless, perhaps, non-equity partners are permanently capped at the senior associate level.

Deadbeat partners and Service partners need to have their incomes adjusted to market levels if firms are to survive. Think about it. "Hi, I'm Bob Service-Partner; I'd like to work at your firm for your partner Bill Rainmaker because I've heard he has great work. My income requirement is $800,000/yr base. Also, I'll need first dibs on any work that comes in to Bill. In the event I forget to save for my retirement, I want the firm to agree to employ me indefinitely, giving me preference on any work that comes in and rights to suck up work from associates if there isn't enough for me. Oh, and I have no business of my own. So when can I start?" What do you think the answer would be? I bet it's the same as the market's answer. So why should firms pay them far above market valuation?

Service, Income and Deadbeat partners are law firm equivalents of UAW members. Odds are they'll have a similar fate.

Great news for senior associates at DLA. Or not.

Trimming the fat of useless income partners is a good thing, but good luck to DLA in its future associate recruiting efforts. There are 10- and 11-year associates there who have not yet made partner (I know some of them).

Combine that with this new structure, and how on earth do they think they are going to recruit savvy associates ever again?

@78 - What does 'TTT' mean? (Forgive my ignorance)

@78 - What does 'TTT' mean? (Forgive my ignorance)

84 - Not to disparage your friends, but it seems pretty unlikely that 10- or 11- year associates have not "yet" made partner . . .

84 - Not to disparage your friends, but it seems pretty unlikely that 10- or 11- year associates have not "yet" made partner . . .

84 - Not to disparage your friends, but it seems pretty unlikely that 10- or 11- year associates have not "yet" made partner . . .

85: Third Tier Toilet