Just when I thought firms had finally wisened up, SRZ goes and does something like this. All the nattering nabobs of bear market negativism had predicted the market would crumble this week as earnings were released. And yet here we are on Friday and the Dow is still going strong. The recession is over and behavior like this will deservedly get you trampled by the bulls. Kudos to those who have listened to my word. The Dow is up, viva la boom!

These stipends, etc. are excedingly generous. Since the dow is at 1997 levels, and first years were making around $70,000 back then, that's what associates should be making now and any stipend that equals or approaches that is like paying a full-time salary for doing nothing.

Schulte ---> Cerberus ---> Chrysler ---> Bankruptcy

3, are you really trying to find a correlation between where the Dow is and what attorneys should be making?

Rather than comparing where the Dow is at, why not take a look at cost of living and cost of paying down debt. I'd be ok with only making $70,000 a year if I could pay 1997 rent and my student loans were comprised of 1997 tuition.

That's what you get when you staff your firm with TTThe Ohio STTTaTTTe Grads

Don't these Summers have a claim for promissory estoppel against SRZ? I mean, they were lead to believe that the summer program would be 10 weeks. The SAs are losing 2 weeks of a wage that they were relying on receiving. Just look at section 90 of the Restatement.

1, of course, the incoming summer associates, springing forth from the top third of their TTTs as fully formed douchebags, will view those lingering cashiered associates only as fitting sacrifices to make room for their incipient greatness.

I'm just throwing this out there -- hey, I've only been in practice for a year! -- but any chance the 20 laid off attorneys might be able to bring a reliance -- ie, promise or estoppel -- claim against SRZ? I haven't read Restatement 90 in a while, but if the laid off attorneys moved in order to take a position with the firm, seems like they have a winning case. Thoughts?

The estoppel bit is played out, isn't it?

The estoppel bit is played out, isn't it?

That is what you get when you work for a Brooklyn law firm that trys to act like a white shoe firm. Anyone who has worked for this firm should not be surprised at all by their recent antics. Look for more stealth layoffs when the firm's only importnant client, Cerberus, goes under.

10-11... what are you trying to say?

The claim of Cerberus going under is even more ridiculous than the promissory estoppel discussions.

All of ATL's posts, like this one, should begin with the phrase "We're a little late in reporting this news. . . ."

What, no severance?

8 - Amen.

I'm trying to say that it's time to stop talking about it and file some claims! Estoppel is a slam dunk and deserves no more discussion.

-- 10-11.

Doesn't help to be a one-trick pony, I guess. See Cadwalader, Thacher, etc. Seems you can get by being litigation-only but relying on capital markets & finance for all your business is dangerous, obviously.

5, the fortunes of Biglaw have always been tied to Wall Street. Partners have been disproportionately affected by the downturn because they had more to lose by way of stock market-based investments, so the performance of the stock market bears directly on how associates should be compensated.

Nice recovery, 20.

20,

Partners are disproportionately affected? Yeah, the associates are harly affected at all. Sounds unfair. Hold on, I'm still trying to wrap my head around what you just said....

Yeah, do any of you guys actually know how much Cerberus is on the hook for if Chrysler tanks? It's not as much as you think.

Doesn't help to be a one-trick pony, I guess. See Cadwalader, Thacher, etc. Seems you can get by being litigation-only but relying on capital markets & finance for all your business is dangerous, obviously.

21, no, I wouldn't have called it a "recovery." There was nothing to recover from.
--20

Cerberus isn't on the hook at all. Cerberus obviously wants this Fiat deal to go through, but from what I hear, bankruptcy is not a bad deal for Cerberus because they could get the asset off their books and move on.

Cerberus is much, much too big to be destroyed by Chrysler.

==
i think those summer associates definitely have a solid claim for collateral estoppel from what i've read on this news site.

I know number 5 gets his economics lessons from Fox Business Channel, but he has a good point.

A actually good indicator of where the market is right now would be the GDP, and right now the GDP is shrinking basically back down to 2003 ish levels, when the law industries starting salaries was around 125k

Considering the devaluation of the dollar, that's still not a bad amount and is very reasonable. Of course its not totally fair because most law schools have been raising tuition at 3-5 x inflation, but its at least a sensible place to start, as opposed to monkey brain's assertion of 70k

SRZ has the absolute worst secretaries out there.

23: pretty much nothing. what of the reat boondoggles of our time. Big time hedge fund making 20%+ returns each year decides they are so smart they can make auto industry profitable and they "buy" Chrysler (and GMAC, fior another day). They then get a bail out when they lose. stupid gov't and stupid taxpayers -- bailing out richest of hedge funds.

belong in jail

==
i think those summer associates definitely have a solid claim for collateral estoppel from what i've read on this news site.

29, "fairness" has nothing to do with it. The hallmark of a recession is that it costs more money to make less--i.e., more in law school tuition to make less as an associate. Given the historic ties between corporate America and Biglaw, and the certainty that those ties will continue into the future, there is no place for associate starting salaries to be than where they were when the stock market was last at this level. That's the real reason for all these layoff, etc.: positions that are really worth around $70K are being compensated at more than twice that amount. Of course, as the stock market goes back up, associate compensation should too.
--5
P.S. I prefer Bloomberg

what a toilet.

5,

I don't disagree with your analysis. I think salaries should and will come down. I'm an optimist in that I hope law firms just change the model, so that associates salaries are more market-dependent. Consider a model (bearing in mind that I'm just scrappily throwing this together) where base is 80k and the ceiling is capped at 160k. For every 300 hours you bill, you get 10k. At 1800 hours, the associate would make 80k + 60k for a total of 140k. 140k for 1800 hours is not a bad deal.

My problem with what you said was that partners were "disproportionately" hit and "have more to lose." In terms of dollars sitting in a bank account or an investment account, that's true. But, I think we all know that associates and staff are losing more than that - their futures (and future earning potentials).

I think 32 has it right. "Fairness" has nothing to do with it. It wasn't "fair" when associates were being paid twice what they were worth, but law's a business, so the firms bit the bullet and paid. Since law's a business, though, associates are going to have to deal with market economics, and where there's a dramatic oversupply of something, the price inevitably is going to go down.

There once was a law firm named Schulte,
That ought to be feeling quite guilty.
They make CWT
Look like a great place to be,
Yet to their lawyers they have no loyalty.

--Sir Frederick B. Limerick
(circa 2009)

Cerberus may not care about the loss of their equity in Chrysler since Daimler essentially gave it to them for free, but they likely do care about the $1 billion of Chrysler debt they own (which gets paid after the senior lenders). Also, I read in the NYT today that Cerberus promised to pay $1 billion if Chrysler's pension plan went under. $2 billion, even split among the various Cerberus funds, is real money. I'm not saying Cerberus will go under, but they will be hurting.

Also, the reputational harm Cerberus is taking for this one may be even worse for them than the financial harm.

What's wrong with the Fox Business Channel? Oh wait - sorry I know. They don't spend all of their air time kissing Obama's butt.

There once was a law firm named Schulte,
That ought to be feeling quite guilty.
They make CWT
Look like a great place to be,
Yet to their lawyers they have no loyalty.

--Sir Frederick B. Limerick
(circa 2009)

37--they will not get hurt. gov't bailing out Cerberus. Grand theft and we are doing nothing. REVOLT

love all the haters of schulte- consistently gets bashed on ATL for no apparent reason. ATL readers love to punish firms like Schulte for hiring students from both top tier AND lower ranked law schools. Many at white shoe firms find it hard to stomach that firms like schulte and even more successful examples like wachtell, cleary etc. climbed from nowhere in a few short years to make more money than they do. It obviously bothers many people who went to harvard law, yls, etc. when people who went to TTT's make as much as they do as associates, get all the same summer perks and significantly more $$$ if they make partners than they will polishing their white shoes.

(continuing 35's post) . . . to 1997 levels."
--Not 35

@ 38
YOU'RE what's wrong with fox business channel! Ass clowns who can't even post properly. And it's really less that the don't kiss Obama's ass but crawled up Cheney and Rove's.

Don't worry guys, all these layoffs will be a thing of the past once Barack Obama raises taxes on law firm partners. When the partners see their take-home paychecks decrease, they naturally will decide to spend more money on salaries for associates.
It all makes sense, you see.

Yes We Can Change We Can Believe In

44,

My guess would be that the overwhelming majority of law firm partners in NY, LA, and DC voted for Obama. I think they understand the simple premise that a strong middle class helps everyone....even the wealthy when they are paying more in taxes.

At least Obama doesn't take tax advice from Joe the Plumber.

45,

That strategy has worked very well for Venezuela, Bolivia, Russia, Cuba...etc

45,

I understand that a lot of law firm partners in NY, LA and DC voted for Obama. Oh well - no one is perfect.

It's easy to say, we need a strong "middle class" when Obama keeps changing what it means to be in the middle class. I think a lot of people that consider themselves to be in the middle class are in for a rude awakening when they see their taxes going up (especially in lieu of the Democratic budgets that we are looking at).

Besides, there is strong argument that Obama's policies don't actually help the middle class as a whole. They help the lower middle class at the expense of the upper middle class.

Anyways, I have respect for the other side. I just think the dogging on Fox is getting old. All news is biased get over it! CNN is owned by Ted Turner. MSNBC features a series of left leaning commentators. So what if Fox caters to a different audience?

Ok - rant over.

- 44

44- suck on it and deal with it for 8 years. Oh wait..there is always Palin for 2012...or will it be Limbaugh?

@46 "That strategy has worked very well for Venezuela, Bolivia, Russia, Cuba...etc."

And he finally shows his true colors. He's one of the crazy Hannity types who thinks Obama's a communist. Try replacing "Venezuela, Russia, Cuba...etc." with CLINTON. Yes, it did work.

20--largely unfunded retirement arrangements for partners, i.e., dependent on future firm earnings and viability=significant concern going well beyond lower current ppp.

I love how the liberal response is to initially just refer to a Conservative as crazy, stupid, or - wait- my favorite "suck on it".

Wow you got me!

- 44

44/51 - Yes because having Palin as your VP candidate represents much more responsible decision-making than telling some random Conservative who uses the word "anyways" to suck on it. Well, anyway...

Just when ATL couldn't get any worse, people start e-fighting over politics.

52,

Are you really going to go there? Again, referring to a Conservative as stupid is you're only defense?

Biden on Obama: "first mainstream African-American who is articulate and bright and clean and a nice-looking guy."

http://www.usatoday.com/news/washington/2007-01-31-biden-2008_x.htm?POE=NEWISVA

I tried to find you the video but the ultra authoritative and unbiased CNN took it off their site.

This is not the only time Biden said something dumb.

- 44

really dumb to use the "performance" excuse in this economy. could only imagine how prospective attorneys and clients view that statement.

44 - Not calling a Conservative stupid, just calling you stupid. Stupid.

- 52

Partner Emeritus,
We implore you to come back and display your Donald Moffat-like face. Unless, of course, Donald Moffat's lawyers have prevented you from doing so, which is the only possible explanation for your absence.

Everyone seems to be getting away from the main point here that Schulte is an awful place to pick up a paycheck unless you 1) enjoy getting screamed at on aregular basis, 2) enjoy having last minute work dumped on you on a regular basis, 3) enjoy working in crappy office space, and 4) have no issue with being let go with no severance. Harvard alums are not jealous of firms like Schulte, they laugh at firms like Schulte becasue the TTT grads have to go through so much more crap to pick up the same paycheck.

45, you may have surmised from my statements in 44 that the associates are the ones getting screwed by tax hikes, not the partners. The partners see their take-home pay go down, so they offset it by cutting their expenses, including business expenses (i.e., associate salaries). They don't really care that Obama is in office as they are not hurt that much.
(I'm also not sure your guess is correct. Most wealthy people outside of Hollywood and multi-billionaires are Republican. Also, creating more refundable tax credits, formerly known as welfare, to people who pay no taxes, does not build a middle class)

The associates who voted for Obama, on the other hand...

Let me put it another way. If a partner gets a tax hike of $5000, and he decides to spend $5000 less on fancy shops/restaurants, who is hurt more, the partner or the shops/restaurants?

47/51, please stop impersonating me.

-- the actual 44

58 is right on the money - Schulte is a terrible place to work. I never worked at CWT (but did work at Schulte), but from what I have read about CWT, Schulte is no better than CWT.

The abuse that Schulte associates take is unbelievable - I'm so glad I'm not there anymore. Just for the record, I was not one of the (many) associate that got cut.

but a few years back there was one unbelievably smokin' recruiting staffer there....sigh...

45, yes Obama is doing much better taking tax advice from Secretary of the Treasury (and head of the IRS) Tim "Turbotax" Geithner and Ways and Means Committee Chairman Charlie "owner of four rent-controlled apartments, unreported Dominican Republic villa rental income, Nabor bribe for offshore tax loopholes" Rangel.

Way to throw stones in a glass house, dude.

Tying salaries to the stock market, now theres a ridiculous idea. The relevant consideration is how much money the firms make off the associates and nothing else...as in the billable hour. If firms are going to lower the hourly rate of associates THEN they ought to cut salaries. The stock market doesn' t mean a thing. Marginal revenue > marginal cost = hire. No reduction in MR = no need to reduce MC. Since law firms essentially operate as an oligopoly (lock step salaries, benefits, bonuses, prices etc.) then absent drastic changes they don't raise or lower compensation because they risk everyone matching increases and letting them twist in the wind on reductions.

Enough people get laid off and it might be a drastic enough situation that they can cut salaries and still get the staff they need...but not surprisingly only a few outlier firms have taken the risk that it won't hurt them in the long run. Even if they give back those salary cuts later on you can't tell me a lot of associates won't lateral the first chance they get when the economy recovers.

As for the knocking of SRZ...I just don't get it. I like being an associate here. The negatives are the same negatives as at every other big law firm. But from what I hear from my friends at the other V100s SRZ treats us far better than any of their firms do. Plus the firms PPP are always top 15. So what exactly is wrong with the firm and why is it not top tier? Sorry, but I just don't get it.

41 - Maybe the reason people are "hating" on Schulte is because they pull crap like stealth layoffs.

Axing 50+ lawyers over a few months in this economy, for "performance" reasons..... Who are they kidding?

63 - Are you denying that significant numbers of people are being fired at SRZ - under false pretenses? That sounds like a significant "negative."

Amazing that any law student or associate would even daydream briefly about suing their employer.

Ever hear of pacer? All the state systems are improving rapidly as well. I, er, know some employers, and background checks that include lawsuits are absolutely routine, and if one pops up, and it's not clearly non-employment related, the resume gets tossed. and the candidate never finds out.

Soon (actually now if the employer is of any size) the only employment someone who has sued a prior employer will ever get is either with the gov or a (non-franchised) pizza shop.

Just shows you how worthless the real world thinking of law students/associates is.

Since the Dow is up today, I'm looking for a good restaurant in Skokie, IL where I can eat quality bbq while reviewing my promissory estoppel claim since associates should be paid based on the stock market, and when it goes up should get $190k in New York. Kids in my high school used to do it all the time, so let me smell the juicy insides.

20 - Are you really that stupid or are you just willing to go back to 1997 partner compensation also. You know when SRZ partners made 600k instead of 2,300k??

Wait till SRZ announces the junior associate pay cut. Lots of fun. Hope partners can make their Mercedes payments.

67, which part of Skokie?

67 troll mashup is the best comment in this thread.

schulte sucks

Re SRZ's biggest client Cerbereus: they are finished, and so is their 'go to' law firm SRZ. Chrysler and GMAC demonstrate they are the stupidest PE firm of all time. No credible pension fund or other investor will give them another dime.

I'm going to play "The Mentalist" here for a second and read 73's mind:

"I have heard about private equity firms and sometimes I read the Wall Street Journal. But I've never read any private equity documents and I don't fully understand how they make money or the types of arrangements that they have with their investors. And I still hate SRZ for not giving me an offer after my callback."

See THIS is how you'd write an article about ONE firm's employment plans. Notice the lack of doomsday predictions and forecasting of the impending demise of law firms as we know them.

Bring back Lat

Cerberus was by no means Schulte's only client. Schulte was always one of the main firms for hedge fund representations, and was a pioneer in the practice. However, SRZ grew a lot as the hedge funds grew (particularly Cerberus) to attempt to be a "full service" firm right as the bubble and lots of hedge funds blew up. They have a good practice representing hedge funds in restructurings but I'd expect a lot more lawyers to go as the firm basically resets to 2002 size and profitability.

As usual, nothing is black and white- just varying shades of grey. Is business off, yes. Are there poor performers, yes. If business is off, do performance standards rise? Rhetorical questions cannot do justice to the pain of those laid off. Similarly, the survivors (both partners and non partners) wince and struggle with the reality. Though less than transparent (none of the AMLAW 100 are transparent) SRZ appears better than most- consider both the numbers and percentages. My take is that the vast majority of those who suffered the axe in the last 12 months are victims of the business down cycle. Good luck to all, especially the SRZ alums.

Only 20 attorneys. You are a bunch of pussies. I can fire 20 attorneys by 10:15 am.

Dave Gordon

69 - Uh, what associate pay cut? Details, please.....

79 - can't divulge - ask around

lol @ 78

Cerberus represented a LARGE chunk of SRZ revenue. I doubt that that will dry up completely, but the steady stream of big time PE work from Cerberus will slow down once Chrysler and GMAC issues wind down.

I think 76 has is right, except for one issue. SRZ still has a premier hedge fund practice. However, many hedge funds (not all) have been forced to move off the 2%/20% business model. In addition, many will need years to recoup losses to reach their former high-water marks, which is when they can start earning their 20% (or whatever the new reduced rate is). As a result, fewer (not all, but a nice amount) funds will be able to afford SRZ's high fees. As a result, the will probably be forced to move to shops that bill out at a lower rate (either top non-NY firms or boutiques like KKW&C). There will probably be more work as new regulation rolls in. However, I am not sure that I would even assume that the investment management group will return to its 2002 situation.

The one change/upside is that the litigation group has more work than before and can leverage the firms hedge fund experience to deal with litigation issues regarding the many fund blow ups and fraud cases. That may boost the bottom line in the short term. However, SRZ will probably need to reinvent itself in some way in the next 2-3 years to retrench at its 2002 level.

They have some very good attorneys there at the top, so there is a decent shot that they will figure something out.

3 et al.:

Even assuming, arguendo, that partners have had more exposure to the performance of the stock markets because of short-sighted investments and have taken a hit on them, why should associates feel the pain for their stupidity? When you're 10 years out of law school/10-15 years away from retirement, you should be saving more of your income anyway, so I don't have any sympathy for partners who make 10X my income who think that I should be making less.

Were any first-years let go?

Yes, there were definitely first year Associates let go.