Top Biglaw Stories: #3 & #2 (Business)
Firms that Froze & Firms that Melted
Bad things happened in the business of Biglaw in 2008. Some people are still so scarred by the experience that they’d just as soon pretend last year never happened.
But the events that transpired in 2008 could have ramifications for the legal industry for a long time.
Our third-place story is the Biglaw salary freeze. It could be the “Shock Doctrine” of the market meltdown. Slashing bonuses during a down year is one thing, but freezing pay (or cutting pay depending on your perspective) is downright deflationary.
We’ve given a lot of “credit” to Latham & Watkins for being the most prestigious firm (according to Vault) to freeze salaries, but as commenters have pointed out, Latham wasn’t the first.
That distinction goes to Squire Sanders. When they froze salaries back on December 15th, the news was so shocking people didn’t know what to make of it. Back then, we said:
The memo below was sent to us by a tipster, with this prefatory comment: “No one really knows what the f*** the second half of the first sentence of the memo means.”
Since then, the following firms have instituted some form of a salary freeze: Orrick, Dorsey & Whitney, Reed Smith, Venable, Sidley, DLA Piper, Arnold & Porter, Sheppard Mullin, and Sonnenschein.
And those are just the ones we know about.
But it’s also important to remember which firms are not on that list. Skadden and Cravath and countless others are going ahead with the expected pay raises for rising classes. Neither Squire Sanders nor Latham set the market for associate pay. They just gave firms another option in dealing with the financial crisis.
Firms need options because you don’t want to work for a firm that is part of our number two story of the year.
Second place melts away, after the jump.
Lehman went under on the same day that news broke that Heller Ehrman’s proposed merger with Mayer Brown fell through. One day later, we reported that Covington & Burling snapped up Heller’s IP department. Two days after that, we reported that Heller was in serious trouble, despite a firm spokesperson who said that Heller had no plans to shut down its D.C. operations. A week after that, Heller informed associates that the firm would be dissolving.
“Life moves pretty fast. If you don’t stop and look around once in a while,” you could be clocked in the back of the head by a global economic crisis.
Heller’s dissolution alone might have made our list of top 2008 stories, but the dissolution of multiple firms, and the fact that dissolution is even a possibility at some shops, makes this our second-place story of 2008.
Thelen dissolved about a month after Heller, and Thacher Proffitt went down about two months after that. And we’ve heard that there have been near misses along the way (Powell Goldstein springs to mind).
Heading into 2009, many believe that there will be additional major firms that go under. The real question seems to be, which one(s)?
But as terrible as dissolution is for the employees that (used to) work at these firms, the threat of dissolution is not what’s keeping Biglaw attorneys up at night. Our number one story of 2008 is the implicit threat that associates work under everyday.
Earlier: Prior ATL coverage of salary freezes
Prior ATL coverage of law firm dissolution
(35) Comments
Comments
LAST!!
fifth!
Arnold and Porter froze?
I know this is totally irrelevant to this post, but is there any way that ATL could get its paws on Mark Teixeira's contract with the Yankees? Just curious if this kinda stuff is available in the public domain.
If we give in then the terrorist win. Why do they hate our freedoms, salaries, and bonuses?
this is like feces all over again.
Comment removed by moderator.
Waiting patiently for SkaddenDC to implode.
5 - freedoms? You mean freedom.
Elie - Doesn't Latham belong in your salary freeze list before the break?
Didn't MWE also freeze?
This post is factually inaccurate. McDermott Will & Emery ("MWE") was the first firm to freeze salaries -- way back on December 9th. Moreover, MWE deserves special distinction and recognition for burying the salary freeze announcement in the third paragraph of the associate holiday bonus memo. The announcement was so subtle that many associates (who were just looking for the amount of their 2008 bonus) did not even notice it. Here's the language that was used: "In addition to the final bonus determinations, Associate base salaries for 2009 will be determined and announced in March at the conclusion of the 2008 compensation process. Until then, current base salaries will remain in effect." Note that this delicate language paved the way for the Squire Sanders freeze and all the subsequent freezes.
10 - agreed, why isn't Latham on that list?
3 - yes.
Does anyone NOT just scroll past these 'top stories' post craptaculars.
Also, add Womble Carlye to the freeze list...
15, apparently no.
Dear Elie,
Maybe you are not aware, but most blogs recap 2008 in 2008. It's January 7. Nobody wants to remember that terrible year anymore. Please stop being so lazy and find something to actually, oh you know, write about.
Given that in-house budgets are going to get frozen or cut, it is just a matter of time for the holdouts to freeze salaries. Right now, if we see a rate increase, we are just going to scale back the work we farm out. OTOH, these firms could generously dip into the partner's profits to pay for the raises .... WTF, I must have drifted into dream land, what was I thinking.
4 - No. If the Yankees were a publicly traded company that reported to the SEC, then yes, since it would be a material contract upon which their business is substantially dependent. Since they not, you are SOL.
12 is right - MWE paved the way for all of this - though it actually was the Bryan Cave freeze to April 2009 (not the MWE partial freeze to March) that apparently is actually responsible for prompting Squire Sanders (Bryan Cave's former merger candidate...) to go for an entire year freeze for 2009 -- all of course thanks to ATL for its wonderful reporting of the partial freezes, thereby rapidly spreading the disease to other firms' partners' minds that they could get away with this tactic and "blame it on the economy" (wonder whether PPP will take a dip at all at any of the freezing firms)...
Have any other firms in Atlanta frozen salaries besides Womble Carlyle and Bryan Cave (PoGo)? Surely, its coming, right?
ATL has really sucked since the holidays.
"Skadden and Cravath and countless others are going ahead with the expected pay raises for rising classes."
Elie - Could we get a list/open thread of/for those? My firm has not announced salaries for this year, and many associates here are curious about what we are currently earning. Thanks.
Dickstein just froze salaries.
Dickstein just froze salaries.
I miss the Glass Cock.
Shearman is freezing salaries. not really a surprise, sucks nonetheless
24: w(hy)tf are you asking this on a blog? Just check your own paltry paystub. Moron.
29: STFU. We don't get paid until the middle of the month, and since no announcement has been made, it is assumed that the decision will depend on what other firms are doing. The majority of the coverage on ATL is of freezing firms - it would be better for those of us in uncertain situations for there to be more news about firms who are doing business-as-ususal raises.
-24
You morons need to stop (a) blaming ATL for salary freezes and (b) living under the delusion that if ATL stopped reporting salary freezes or started to trumpet firms that are NOT freezing salaries, your shiity-ass firm would not freeze assocaite salaries.
Please stop. They will freeze because other firms are doing it, and they don't need ATL to know that the trend is spreading like the clap on spring break.
Baker Botts Houston to fire many attorneys. So much for Texas being untouchable.
I don't understand the drama here. A handful of firms are freezing salaries while "countless others are going ahead with the expected pay raises for rising classes" but are not getting the same coverage. Since ATL is the best source for the names of these countless firms (and the source making the claim that they exist), why isn't this the sort of thing that would be discussed on here?
Specifically, are S&C, DPW, STB, CGSH, WGM, PW, K&E paying usual raises this year?
-24
31 nailed...my SHEEP; which then gave me the clap. Thanks. Jerk.
Thirty-fifth.