Last week, we shared with you a very interesting internal document from Simpson Thacher & Bartlett: a collection of notes or informal minutes from a June 2009 partners’ meeting. The notes discussed attorney headcount, possible layoffs, and compensation, among other subjects.
Today we have even more deliciousness for you: an internal memorandum from executive committee chairman Pete Ruegger to the executive committee, transmitting the complete minutes of the June 8 partners’ meeting. As it turns out, the version of the meeting notes that we previously published was accurate, but not complete.
Here’s an excerpt to whet your appetite. If you think that a return to the heady days of 2007 is just around the corner, as the economy improves and Wall Street strengthens, think again:
• As we dig out of the recession, hopefully with increased utilization and decreased headcount, we should do better in 2010 and beyond, but we do not think our gross revenues and premiums are going to return to 2007 levels and our net income is unlikely to return to 2007 levels in the next couple of years.
As the matrix shows, if we can get our average hours back up over 1800, we can still have a $1M+ [partnership] point at 88% realization. But, Simpson Thacher and our peer firms are going to be less profitable businesses than they were. Pricing and margins are going to continue to be challenging. At least in the short to mid-term.
Indeed. Additional analysis and the complete documents, after the jump.
In his memo to the other members of the executive committee at Simpson Thacher, dated September 30, Pete Ruegger highlights some statements from earlier in the year:
We are going to need to continue to be extremely circumspect in making new partners, and we need to continue to have partners take advantage of our very attractive retirement benefits that commence at age 55. In an environment in which net income is falling and the point is falling, point dilution compounds the negative impact.
Did you catch that, Simpson associates gunning for partner? The firm plans to be stingy when it comes to partnership promotion, at least for the time being. Unless you are a superstar of superstars, you might want to start thinking about other opportunities.
Obviously, with a declining point, everyone is going to do less well. We think we need to continue to improve the relative fairness among partners. We think we need to adhere more closely to the 1999 guidelines, which will mean more “holds” and more “downward adjustments” of points. We are currently planning to accelerate the compensation process to November/December and postpone the new partner process until after the compensation process so that we have a clearer picture of partners, points and prospects, before we add new partners.
This change in the timing of the new partner announcement has apparently come to pass. Check out the News and Events page on the STB website. In 2008, new partners were announced on December 2. This year, we’re already at December 14, and no partner election announcement has been made.
Simpson has a “modified lockstep” compensation system for its partnership, in which partners get more points as their seniority grows, but subject to holds or downward adjustments for less productive members. Working within the parameters of this system, Ruegger identifies some ways to keep partner payouts high while preserving fairness among the partners:
Applying that statement, I think we should (i) continue to identify early retirement candidates; (ii) identify several adjustments downward from the 3.25 and 2.875 levels; (iii) identify a handful of additional holds at 2.5; and (iv) identify a few holds at 2.125. Doing that, and taking a similar approach in the next two or three years, would hold point dilution to ½ of one percent or less over the next couple of years.
This completes the interesting stuff from Ruegger’s memo to the executive committee. Now let’s turn to the new portions of the June 8 partnership meeting memo (“new” = not included or discussed in our prior post).
As previously discussed in these pages, hours are down all over the place. Over 20 percent of ATL readers expect to bill less than 1700 hours this year, according to our recent survey. Simpson is feeling the pain too:
[F]or the first 5 months of ‘09, we are running at 1530 annualized average hours. [May's client hours per day were at a 1669 annualized average hour pace.] If we run at the May pace for the next 7 months, we will be at 1612 average hours for the year. Obviously, this is not the 1850/hr pace we would consider healthy.
Recall, however, that this was the state of affairs back in June. We hear that things have picked up at 425 Lexington since then.
It’s not just the billable hours that are suffering. Rates are feeling the pressure too:
• First, Pricing: As you are all aware, our pricing power is diminished. In more and more areas, clients are seeking discounts or other billing arrangements. On new business pitches, discounts are routinely being sought.
• In 2007, our realization was 110%; in 2008, our realization was 97%; for 2009, we originally budgeted 93%, and we are now running at a realization of around 89%.
• We want incremental business and we are realistic about what is needed to obtain attractive incremental business. We think we are value-added and should be paid as a top-tier firm with top-tier talent, but we need to be competitive with rates. We are giving discounts on some litigation; we are giving discounts on bank and investment bank house account matters; we give busted deal discounts; we are willing to fix fees. If a particular partner rate or particular class rate is a sticking point, we can discount those rates to be competitive. We can quote a blended rate. In brief, we are flexible on rates and want to do what we need to do in order to expand our share of the high-end business out there.
This is all good news for STB clients. If you’re thinking of retaining the firm, the foregoing is information you should know. The firm is “let’s make a deal” mode. In fact:
• We considered lowering our rates, but rejected that idea since we are collecting 100% or close to 100% on a high percentage of our business and are able to provide a discount on most of the rest of our business. We think lowering our rates would have a substantial negative impact on our revenues.
Since Simpson, unlike certain other major firms, hasn’t slashed associate base salaries, it seems sensible for them to keep rates where they are. But raising rates, which has actually happened in the past year, may be a tough sell for 2010.
The memo then gets into some fairly micro-level detail about profitability. It’s interesting, but there really isn’t much we can add to it. Read about it in the full document below (under the “Profitability” bulletpoint).
After predicting that revenue and profits won’t return to 2007 levels “for the next couple of years,” the notes size up some of Simpson’s competition:
• There may be exceptions to these general statements. Weil Gotshal, with its bankruptcy practice, may have an up year; some litigation boutiques may be exceptions to the general rule, but the high-end, full-service firms are not going to escape the change in pricing that has occurred [that includes S&C, Cleary, Davis, Skadden]. [So, we need to get used to being a less profitable business than we were.]
In sum, the business of law ain’t what it used to be. This grim reality affects not just law students and associates, who face vastly diminished job opportunities and partnership prospects, but also partners, at a top-tier firm like Simpson.
Get used to it. Because it’s probably a trend that’s here to stay.
Read the complete STB documents below.
P.S. By the way, we don’t mean to pick on Simpson Thacher; we welcome interesting internal documents from all major law firms. Please feel free to submit them via email. Thanks.
Earlier: A Fly on the Wall at 425 Lex: Inside a Simpson Thacher Partner Meeting
SIMPSON THACHER & BARTLETT — INTER-OFFICE MEMORANDUM
CLIENT NO.: 099999
MATTER NO.: 0921
To: Executive Committee
Date: September 30, 2009
From: Pete Ruegger
Re: Guidance to Compensation Committee
We have agreed to meet with the Compensation Committee in October to provide them with “guidance” as to how they should administer the compensation process in November/ December. I would like the Executive Committee to arrive at a unanimous view, but failing that, I hope we can develop a majority view.
I think our guidance should be that which we agreed to at the May 27 Executive Committee Retreat (Attachment A) and as communicated to the partners at the June 8 partners meeting. See my statement on compensation starting on p.5, including:
“We are going to need to continue to be extremely circumspect in making new partners, and we need to continue to have partners take advantage of our very attractive retirement benefits that commence at age 55. In an environment in which net income is falling and the point is falling, point dilution compounds the negative impact. Obviously, with a declining point, everyone is going to do less well. We think we need to continue to improve the relative fairness among partners. We think we need to adhere more closely to the 1999 guidelines, which will mean more “holds” and more “downward adjustments” of points. [Emphasis added] We are currently planning to accelerate the compensation process to November/December and postpone the new partner process until after the compensation process so that we have a clearer picture of partners, points and prospects, before we add new partners.”
Applying that statement, I think we should (i) continue to identify early retirement candidates; (ii) identify several adjustments downward from the 3.25 and 2.875 levels; (iii) identify a handful of additional holds at 2.5; and (iv) identify a few holds at 2.125. Doing that, and taking a similar approach in the next two or three years, would hold point dilution to ½ of one percent or less over the next couple of years.
Attachment B is the Hersch Base Case circulated at the last Executive Committee meeting, adjusted for the approach outlined above.
I do not think we should propose zero growth in points or zero dilution. I think that sends a message that the higher compensated partners are pulling up the drawbridge and are going to offset the point growth contemplated by our compensation system with freezes or structural adjustments. I think we can achieve the results described in Attachment B within the confines of our existing compensation system.
____________________________________________
6/8/09 Partners Meeting
• On Wednesday, May 27, we had an Executive Committee Retreat at the exotic 30J location. All of us have been dealing with the profound recession that commenced in the summer of 2007 (notwithstanding, its official beginning in December of 2007). The financial meltdown was exacerbated by Lehman’s bankruptcy in September of last year and we have been dealing with the dramatic fall off in financial transaction activity that followed Lehman’s bankruptcy. Obviously, we have endured some very slow months in the last quarter of last year and January and February of this year. March showed improvement; in April, we dipped and in May we resumed our upward trend. So far, for the first 5 months of ‘09, we are running at 1530 annualized average hours. [May's client hours per day were at a 1669 annualized average hour pace.] If we run at the May pace for the next 7 months, we will be at 1612 average hours for the year. Obviously, this is not the 1850/hr pace we would consider healthy.
• Our litigation activity is good. Our credit activity, with all the restructuring, is good, and in capital markets, the green shoots are sprouting, so our new matters have picked up significantly. M&A activity in the United States continues to be at very modest levels (levels not seen since 2002). The M&A slowdown is affecting all law firms used to having big M&A shares, and we are no exception. And, in private equity, for all the reasons described by Glenn Hutchins and by our friends at Blackstone and KKR, transactional activity continues to be very slow and is expected to continue to be slow for at least the medium-term.
• It was in that context that we met twelve days ago to review where we are and what actions we should take on pricing, attorney headcount, and partners and points.
• First, Pricing: As you are all aware, our pricing power is diminished. In more and more areas, clients are seeking discounts or other billing arrangements. On new business pitches, discounts are routinely being sought.
• In 2007, our realization was 110%; in 2008, our realization was 97%; for 2009, we originally budgeted 93%, and we are now running at a realization of around 89%.
• We want incremental business and we are realistic about what is needed to obtain attractive incremental business. We think we are value-added and should be paid as a top-tier firm with top-tier talent, but we need to be competitive with rates. We are giving discounts on some litigation; we are giving discounts on bank and investment bank house account matters; we give busted deal discounts; we are willing to fix fees. If a particular partner rate or particular class rate is a sticking point, we can discount those rates to be competitive. We can quote a blended rate. In brief, we are flexible on rates and want to do what we need to do in order to expand our share of the high-end business out there.
• We considered lowering our rates, but rejected that idea since we are collecting 100% or close to 100% on a high percentage of our business and are able to provide a discount on most of the rest of our business. We think lowering our rates would have a substantial negative impact on our revenues.
• If you need to provide a discount or quote more flexible terms to get business or protect business, speak to Alan or Peter. Also, if you need help fashioning a proposal, speak to them.
• [We expect our diminished pricing power will last for a while - certainly into 2010 and probably beyond.]
• Headcount: We continue to be oversized relative to demand in New York corporate, particularly among the younger classes and in California corporate. We have been working closely with Personnel and have aggressively been moving out underperformers and people who have been passed over for partner. We have had 55 departures year-to-date, and including departures for Fellowships, expect to have 90 departures by the end of July. For the calendar year, after factoring in arrivals, we will shrink by 35 to 40 attorneys in 2009, and with our small summer class converting to a small arrival class in 2010, we are on track to shrink by 35 to 45 additional attorneys in 2010 and by an additional 50-60 attorneys in 2011. Obviously, we could “right size” faster if we implemented a lay-off (100 attys). And, we could target the younger corporate classes in New York and the younger classes in California. However, none of the top-tier firms has engaged in lay-offs. We do not want to be the first top-tier firm to engage in lay-offs. From a financial point of view, given the market practice that has developed, with respect to severance, the cost savings produced by a lay-off, as opposed to our aggressive performance-based reductions, is modest [no savings this year / $30K per/point next year]. [The course we are on produces a 100 attorney reduction over a two-year period/ probably only 75 down from today's headcount.]
• The course we are on does produce irregular class sizes – large 2007 and 2008 classes and small 2010 and 2011 classes. We recognize that will present some issues.
• Also, we need a great deal of help from the partnership in order to achieve the reductions we need. We need help finding job opportunities for more senior associates; we need partners to take on added work so we can move out some of the senior associates; and, we need partners to submit reviews, including reviews when performance is below the desired level. [And, we need support in enforcing deadlines.] [Mary Beth will talk more about that in a few minutes.]
• Profitability: We are going to be less profitable in 2009. Here is a revised matrix with average hours and realization as the two axes. This matrix factors in the elimination of bonuses in classes 2005-2009 and some other expense reductions. In this revised budget, we budget 88% realization. We had originally budgeted a point just shy of $900K. That was based on 93% realization and 1550 average hours. We are currently at 89% realization and 1530 average hours annualized – that would produce a $780 accrual point. As you see, at 88% realization, we would need 1650 hours to reach the budgeted accrual point of $897K. As you know, our cash results are running way behind our accrual results. If activity picks up, cash collections are expected to continue to lag. So, we could be headed for a cash point that is considerably lower than the accrual point – possibly $100K. Here’s the cash point for the last 10 years [SLIDE]. If we were to have a cash point in the low 800s, down 1/3 from our 2007 peak, I think we have to say that that would not be a disastrous result in the worst recession in our lifetime and taking into consideration what has happened to some of our clients and the severe downturn in corporate activity, particularly M&A and private equity. If we were to have a cash point that begins with a “6,” I think that would be very unfortunate but is in the realm of possibility. Let’s not let that happen.
• As we dig out of the recession, hopefully with increased utilization and decreased headcount, we should do better in 2010 and beyond, but we do not think our gross revenues and premiums are going to return to 2007 levels and our net income is unlikely to return to 2007 levels in the next couple of years. As the matrix shows, if we can get our average hours back up over 1800, we can still have a $1M+ point at 88% realization. But, Simpson Thacher and our peer firms are going to be less profitable businesses than they were. Pricing and margins are going to continue to be challenging. At least in the short to mid-term.
• There may be exceptions to these general statements. Weil Gotshal, with its bankruptcy practice, may have an up year; some litigation boutiques may be exceptions to the general rule, but the high-end, full-service firms are not going to escape the change in pricing that has occurred [that includes S&C, Cleary, Davis, Skadden]. [So, we need to get used to being a less profitable business than we were.]
• Again, what are we doing about the expense side of the equation? You will see from the 5-month numbers that our expenses to date are below last year. We, as you know, have eliminated lots of costs. As I mentioned, our revised budget eliminates bonuses for the younger classes (2005-2009). As previously mentioned, we are about to have a staff reduction for unnecessary positions [some secretaries, some receptionists, some people in duplicating].
• Partnership: We have an extraordinarily talented partnership. I think we have the best partnership of any firm, particularly when it comes to the breadth of our talent. I don’t think any firm is as outstanding as we are in as many complementary areas. We have been around 125 years, and I think we will continue to be among the top handful of competitive high-end firms, as long as there are high-end law firms.
• Compensation: Our modified lock-step compensation system serves us well, helping to create the sharing and collegial team approach that enables us to deliver quality legal service across our substantial band of talent to our sophisticated clients.
• Obviously, outside of litigation, restructuring and real estate, our average partner hours are way below where we would like them to be. The demand for our services is below what we would like. We have experienced ebbs and flows before – times when litigation carried us; times when M&A outperformed; times when private equity generated huge premiums. Currently, in corporate, and particularly in M&A, we are in a trough.
• Our compensation system is based on the long haul, not the snap-shot approach. But, our overall business is smaller than it was in 2007 and seems to be more similar in size to our business in 2005 when we were 23 partners smaller than we are today. We are going to need to continue to be extremely circumspect in making new partners, and we need to continue to have partners take advantage of our very attractive retirement benefits that commence at age 55.
• In an environment in which net income is falling and the point is falling, point dilution compounds the negative impact. Obviously, with a declining point, everyone is going to do less well. We think we need to continue to improve the relative fairness among partners. We think we need to adhere more closely to the 1999 guidelines, which will mean more “holds” and more “downward adjustments” of points.
• We are currently planning to accelerate the compensation process to November/December and postpone the new partner process until after the compensation process so that we have a clearer picture of partners, points and prospects, before we add new partners. We would still plan on new partners being added effective Jan. 1, 2010.
• As you all know, the key variable to our business is revenues. Our costs have been whittled down. And, at this point, are mostly fixed. If we can add to revenues, we can add to net income. I think our business development efforts have never been better. We need to keep at it and add incremental revenue. Our business environment has never been more competitive. We need to win that new business. We want to emerge from this recession with bigger and better market share than we have ever had.
• [The Executive Committee is focused on all of the matters that all of you are worried about. We need to communicate better. In that regard, we will schedule a partners retreat, probably in New York, certainly in the next 8 months, if not sooner.]
• Again, we are going through an unprecedented challenging time. We have a strong and talented partnership – we will get through this.
THIRD
TENTH
First
This doesn’t really tell us anything new.
You guys just cost STB a couple million. If any clients were hesitating asking for a discount, they’re ALL going to now that they see how STB’s been discounting its services to others.
Who’s the source? And I don’t mean the name – are they pushing out partners and someone decided to get some payback?
We need to bomb Margaret Thatcher back to the stone age!
-DOJ Secure
nice
Even more interesting than reading this, imagine being able to watch a STB’s partner’s reaction when he sees that this is on ATL.
They are just playing you…. a fake leak to depress compensation on all levels.
The reality is that associate salaries keep going down with all the salary freezes and diminishing bonuses. The comp is still not where enough top law school grads would choose not to go into Big Law and reverse the downward comp trend.
I question those who are so quick to say everything has changed forever. Things are picking up and the clients will get careless and accept higher rates soon. Look at the I-banks, less than a year after the crash they’re paying record bonuses like it’s no big deal. There will be a rough few years, but I think making too much out of this recession is misplaced. But what do I know. . .
who says lawyers can’t rum businesses?
This is why I love (and hate) ATL. Nice inside scoop.
Where did you get this? And why are you publishing it? Seems pretty snarky to me ATL.
Hey, can anybody explain all that stuff about points?
Let me just summarize:
While the economy is down, we expect to make less money then we did before, when the economy was up.
YAAAAAAAWWWWWWNNNNNNNNN
Let me just summarize:
While the economy is down, we expect to make less money then we did before, when the economy was up.
YAAAAAAAWWWWWWNNNNNNNNN
BOOOOM goes LATANUS!
No way this tipster doesn’t get canned if s/he pulled this from the doc system. A simple check of the doc’s history will lead to one fewer attorney.
what is cash point? what is realization?
A real article on ATL? What’s going on here?
I don’t know much about trade secret law, but dang, isn’t there some kind of cause of action for STP against the leak and ATL? I’m sure ATL has some protection as being part of the press, but jesus, this could cost STP a lot of money if clients figure out how to game them from this. If I were them, I’d be looking for someone to sue.
Fascinating glimpse behind the scene. I dont’ really care, but if I did, I’d say – I hope whatever person procured and submitted this to ATL was very very careful about covering his or her tracks. This is pretty major shit…
15: What does Stone Temple Pilots have to do with any of this?
11 — Umm, yea… those guys at Bear Sterns and Lehman Brothers are really cashing in.
The ship be sinking…
11 — Umm, yea… those guys at Bear Stearns and Lehman Brothers are really cashing in.
25,
I was actually referring to the motor oil. STB, my bad.
15
Do you think I could make $1B as a porn star?
–Tiger Woods
I just care about class of 2012.
31 if you really cared you would advise all of your classmates to drop out before next semester’s tuition deadline.
Realization – how much you get from the client versus how much you billed. I don’t know how this could ever be110%, or even 89% for that matter. Realization should be about 90%, any higher and the fees are too low, any lower and either the fees are too high or the collections are not properly monitored.
Point is probably percent of profits that each partner takes home – the points always add to 100, so if a new partner is admitted, he gets some points, or fraction of a point and this takes away from all the other partners.
Just a thought-
Who are the 55 year old partners at Simpson? I hate to start the witch hunt for the leak, but sounds like a partner is about to be forced into retirement and he is pissed.
“But, Simpson Thacher and our peer firms are going to be less profitable businesses than they were.”
Don’t you guys know when you’re getting played by PE? It’s his revenge for that series you run that he hates.
“I think we should (i) continue to identify early retirement candidates…”
What exactly does it mean to “identify” early retirement “candidates”. Going after partners in their late 40’s/early 50’s (retirement benefits start at 55) and then kicking them out? If not, then what happens when they are “identified”? (They just end up on a list and everyone says “Yay. We identified people?”) This is age discrimination and someone should report these jackasses to the EEOC
http://www.nytimes.com/2007/10/06/business/06legal.html
This memo is an amazing get. Nice work ATL.
33 – points don’t always add up to 100. They add up to a number that is the denominator. Skadden has thousands of points in their partnership ranks
36 – you’re an idiot
Thanks Obama! No wonder your approval rating is approaching Bush levels.
ha . . . i’m with 35. the whole idea is pretty funny: he hates the dookapile series, so much so that he sought revenge. hahhaahahha. yeah, i like that.
ha . . . i’m with 35. the whole idea is pretty funny: he hates the dookapile series, so much so that he sought revenge. hahhaahahha. yeah, i like that.
As a profession, we’re total puffs for not demanding to know more up-front about the f-ing inner worknigs of the “brass ring” that we’re supposed to be chasing.
The partners they are pushing out should all just hang a shingle or go work for the government.
As a profession, we’re total puffs for not demanding to know more up-front about the f-ing inner worknigs of the “brass ring” that we’re supposed to be chasing.
Wow, 1530 annualized average hours. I didn’t realize that things were ever that slow.
45 – A 55 year old STB partner has likely been making millions for years and shouldn’t have to worry about money any more, even with the decline in the stock market. Not sure if you’ve noticed, but the market has rebounded pretty nicely.
For all the idiots who think that this memo is BS, this memo could have come from any midlaw or biglaw firm. I know of a midlaw firm facing the same realities, and looking at the same solutions, including forced retirement @ 55 and creating a 3d tier of partnership (equity, income and PINO).
PS: two of my buddies just made partner, and after seeing the “benefits” both wondered aloud what all the work was for. Throw in downward pressure on young partners and the brass ring is looking mighty tarnished.
Video of the partnership meeting here:
http://www.youtube.com/watch?v=FLAVsPMzPRU
Wow, breaking news on a 6-month old memo.
what does SNOOKI have to say about this?
Isn’t it unethical for a practicing attorney to disclose confidential information?
Let me put it this way — if any practicing attorney knows the attorney who leaked this document, don’t they have a duty to disclose that information to those states wherein that attorney is barred?
In a recent article about Lat, we learned that he is acting as General Counsel to Breaking Media. Doesn’t Lat therefore have a professional obligation to report this?
46 – so even at 1530 hours per associate. Say a first year bills at 325 an hour (I have no idea what STB’s rates are but I am guessing that is close), he is till bringing in 500k (minus 10% realization loss). So, minus the first years salary, is this person profitable or does overhead cost that much? I would think that this associate is still adding 150k of profit to the partners pockets. Not great, but seems like a first can still turn a profit when associates bill 1500. Does anyone disagree? What is a fair “break even” point of when an associate is being profitable???
@45,
Seconded. My undergrad classmates at the big consulting firms all have pretty resolute pictures of how partnership works.
Amazing that associates are kept in the dark for so long. You’ve got to prey for the benevolent (yeah, right) or disgruntled (99.99%) partner to talk-out-of-school just to get the vaguest idea.
54-
“pray”
53 – You are looking at it from the wrong direction. Associates are only billing the work that comes in, they are not generating the work so they are not actually generating income for the firm. From a business perspective, hours billed is just a measure of utilization, not a measure of profit. Management looks at 100 associates billing 1500 hours and sees that it can have 75 associates billing 2000 hours handling the same amount of work. 25% of the pool is basically slack.
David, this is a great scoop. Congrats, and welcome back to covering this kind of news more!
33, realization is not “how much you get from the client versus how much you bill.”
At most firms, realization is how much you get from the client compared to your hours logged multipled by your standard billing rate.
So if you’re offering a 10% discount, your realization rate for that client just got whacked to 90%. If a parter writes down some of your time, your realization rate just got whacked again.
On the other hand, if you do some flat fee work and are very efficient, or if you do some successful contingency work, your realization rate can very easily exceed 100%.
Sunshine is a beautiful thing.
@52 – You are dumb.
To those saying this costs the firm money: do you really think clients were not already trying to negotiate alternative fee arrangements? Give me a break, morons
Looks like a zombie partner decided to be a whistle blower. Just another reason to take out zombies early.
PS This is, ultimately, good news for associates. No-business overpaid zombie partners have been pulling up the ladder on associates for years. If you’re an ambitious associate you want a firm with as few zombie partners as possible because they survive by eating the brains of the successful.
Thank you to 58. That was a very helpful explanation.
@60, I agree with you. 52, you are dumb. I don’t think you quite understand what “confidential information” is. It’s not minutes to a partnership meeting, it’s legally protected information gained from a client in your course of business. Employees can leak “private” information about the firm all they want and not get in legal trouble. They can, of course, get fired and shamed, but that’s about it. And your comment about Lat being the GC of breaking media doesn’t even make sense.
Who is a disloyal drone that is leaking these documents? Oh wait, let me guess, one of the secretaries who got fired this year and is now an angry little POS. Leaking these kind of documents is totally uncalled for and violates the ultimate rule of law: confidentiality. It does not look good for any of these firms that have had their internal strategies or even stupid emails leaked because if I were a client the one thing I would ask is if X firm cant keep its own documents off the internet, what about mine?
I know ATL is a legal “tabloid” but it should also have some sense about leaking sensitive documents.
Possibly some signaling by S &C that they wish to cut salaries but don’t want to be one of the first top firms to to so? Dangerous game if that is the case.
I meant Simpson-
66
@64, 65 here: Partnership minutes actually are confidential documents that are meant only for the partners, not you, me, or any associates. Law firms are not public companies, you have no right to their partnership minutes and they have no legal obligation to disclose them. You are correct that employees can leak this information, but that is probably not a wise move. Also, its not like this is watergate and there is a pressing need for this information.
65–secretaries are not lawyers, ergo, there is no confidentiality expectation when material like this is disclosed to them. You’d think that STB partners would understand that.
69. You really don’t think there is a confidentiality expectation for all employees of law firms? They may not be ethically obligated in the same way the attorneys are, but the expectation certainly is there.
Idiots (not 60 and 64),
There is a difference between legal liability and ethical violations, and just being a disloyal douchebag to your partners/firm/employer.
Best Personal Regards
69: It was just in theory but thanks for the pr explanation. Now here is something that will blow your mind, even when secretaries are hired they sign a thing called a NDA and can be subject to a civil suit if they are found to divulge any non-public information about the firm/clients like these very private partner minutes. ZING!
“Applying that statement, I think we should (i) continue to identify early retirement candidates.”
Age discrimination that isn’t allowable b/c “candidates” are partners/owners of firm. http://www.nytimes.com/2007/10/06/business/06legal.html
Ok, 72 is not necessarily an idiot. But secretaries generally don’t sign NDAs.
-71
The only way to deal with underperforming partners:
http://www.nytimes.com/projects/magazine/ideas/2009/#z
Will the big firms please die, already?
53 – good question.
Factor in salary and overhead (including physical overhead, support staff, health insurance subsidy, etc.) and that 450K number probably creeps down pretty fast. Having said that, it seems like they would be able to make some profit. However, If you have 5 folks billing at this rate, letting one go makes a lot of sense from a profit standpoint.
The firm could save a ton of money by dumping the two partners responsible for the Prediwave malpractice fiasco.
Me FTW.
73, plus early retirement is not generally considered age discrimination because the employer is offering the employee a benefit (early retirement), not taking something away. Forced retirement is different.
Nice piece ATL.
Dear 53: Think of it this way: how much money is STB “losing” by having 5 first-years billing an average of 1150 hours each for a total of 7750 hours, rather than 4 first-years billing an average of 1937 hours each for a total of 7750 hours?
79-The material in question is not addressing a partner’s voluntary retirement. In contrast, it suggest that management will take some action to target older attorneys to push them towards retirement. Presumably, all partners are already aware of the retirement benefits they are entitled to. Who the hell are these management partners to “identify early candidates” for the benefits? Unlawful, age-discriminating, ones.
74: Any business worth its weight has every employee, from low level line workers to CEOs sign NDA’s…any business that doesnt is asking for it
11 is right. “Buy when there’s blood in the streets, especially when its your own.”
People have a nasty habit of extrapolating much too far into the future based on relatively short-term recent experiences.
Would this be a breach of fiduciary duty to the partnership if leaked by a partner?
Why isn’t ATL covering Barrygate?
What kind of deviant would feel good about sending an Executive Committee communication to a ATL?
85 – check the Restatements.
Barrygate, Barrygate, Barrygate!!!
what is Barrygate???
Mutatis Mutandis, I don’t believe this is correct, notwithstanding anything in the above to the contrary.
88 – I prefer to use my research skills on something I can bill. Just thought it was odd that this had not come up amongst all the talk of vengeful partners and STB finding someone to sue, and I figured someone would immediately pick it up as viable or berate me for suggesting it. Wouldn’t it be something like the duty of loyalty under the UPA, anyway?
-85
90- PH NY here. From what we’ve heard, the Napoleonic shitbag had a flaming affair with an m&a associate. When he suddenly broke it off (as he was getting married at the time), the associate freaked out and needed to be confined to a mental institution for almost 2 wks. When she got out, she was terminated for “performance reasons” although she was the top biller/performer in m&a for the previous 2 yrs. We hear she’s now busy writing her screenplay.
93: Holy shit! LMAO!!!
Barrygate, Barrygate, Barrygate!!!
81, your math sucks…
Barry’s my hero!!!
Weil is going to demolish in profits this yr. They cut costs and probably have more business than ever before.
This leak is part of an effort by a dissident group of senior partners at STB and may be other firms to force compensation down, rates down, and wrest control back from the younger crowd of Jr/equity partners.
LOL! As a former partner of Barry’s, I can tell you that this is not the first time he’s put himself in hot water by thinking with his tiny, little dingle.
i want to know about barrygate.
Barry ma homey!
I wish I could swing my putter like Barry.
-Tiger Woods
98 – If Weil is doing so well, then why did they defer the incoming class until January? Even the bankruptcy associates were deferred.
100 – If his cock were as big as his ego, he would be the white man’s answer to Mandingo.
105 -
Did you not just read the memo explaining it pretty well? $$$$$$
98 & 104 – werent some of the Weil incoming associates deferred to January 2011??
107 – well, the 2011 deferral was optional. Still, if Weil were killing it, the new associates would have started in September as usual.
98, outside of the NY office, Weil’s offer for 2009 summers (c/o 2010) was sub-30%
108 – What’s the point of starting new associates and paying them 160k to bill 1800-2000 hours if you can just have the ones you’re already paying bill 2000-2200 hours?
I don’t understand how some of you can read the memo and not see the reason for deferrals, even if a firm is busy.
After reading this, why would any ST client pay full quoted rates? With this public, they have effectively discounted all of their rates, with the only question being how low. The “targeting” of 55-ish partners for retirement is a plaintiff’s wet dream: Nothing in these portions of the memo indicates that “targeted” individuals are limited to those whose job performance is deficient; the only expressed criterion is age. The author of this piece of evidence ought to have his own points docked for what this is going to cost the firm in litigation. There is so much in this memo that a prudent lawyer would never commit to writing; clients and potential clients should reflect on that, however low a discounted rate they may get.
After reading this, why would any ST client pay full quoted rates? With this public, they have effectively discounted all of their rates, with the only question being how low. The “targeting” of 55-ish partners for retirement is a plaintiff’s wet dream: Nothing in these portions of the memo indicates that “targeted” individuals are limited to those whose job performance is deficient; the only expressed criterion is age. The author of this piece of evidence ought to have his own points docked for what this is going to cost the firm in litigation. There is so much in this memo that a prudent lawyer would never commit to writing; clients and potential clients should reflect on that, however low a discounted rate they may get.
The person who leaked this memo should be shot in the balls!
Coverage of this story reminds me of the good old days of ATL.
Welcome back to the keyboard, Lat.
Funny how he says he doesn’t want them to be “the first top-tier firm” to use lay-offs. Obviously dozens of well known large firms that consider themselves “first-tier” have engaged in lay-offs. Does ST deserve its self-annointed status in a more rarified “tier” or is it engaged in self-delusion? This doesn’t read like the kind of memo that would come out of a first-tier firm.
Whomever leaked these minutes will be “Wilmer’d” soon enough.
115, unfortunately if you have worked at ST you would have noticed that they are obsessed with themselves being an “elite” firm, a “top-tier firm” (not my words, but theirs) so I can’t say I am at all surprised to see this mentioned in this memo, they do it all the time.
Ah, gold quality journalism has returned to ATL. It is good to see ATL back in shape, kudos to Lat.
How will peer firms such as CWT, Sherman, and Alston react to this?
119 – those firms are not peer firms, you fucking loser.
98 – perhaps, but the question is whether it will last. Bankruptcy is definitely on its way down. Is Weil ready for 2010 and beyond when bankruptcy work starts drying up (at least to the level required to keep Weil’s large bankruptcy practice busy)?
119, it’s not “Sherman”, it’s “Shearman”, you fucking loser.
Under the Age Discrimination in Employment Act of 1967, there is an option for waiver. Perhaps the partner agreement has a waiver and management can do whatever they want, within reason.
Regardless, guys at my corporate america job used to terminate old people all the time, it was no big deal. Protected class not withstanding, new younger management came in and cleared “all the grey hairs”
115, the best firm that engaged in layoffs is Latham, and even before then, it was close but still a bit short of “top tier.”
Dear 123:
You stubbornly refuse to comprehend basic employment law making me think you are management at a Biglaw (probably Sidley again) taking yet another shot in your foot. While waivers signed as part of voluntary retirement packages can be okay (even the EEOC has draft language for those), courts have held that “an employee may not prospectively waive his or her rights under either Title VII or the ADEA.” Adams v. Philip Morris, Inc., 67 F.3d 580, 584 (6th Cir.1995) (Adams v. Philip Morris, Inc., 67 F. 3d 580, 584 (6th. Cir.1995) (“A [party] cannot purchase a license to discriminate”).
Expect to see law firms busted for targeting 40+ year old employees and partners in their layoffs.
CHECK YOU EPLI COVERAGE
Love,
Salt & Pepper Boy
125: “an employee may not prospectively waive his…”
Partners are not employees.
126-Read the Sidley decision and just a few decisions on ADEA waivers. Then we’ll talk.
“Did you catch that, Simpson associates gunning for partner? The firm plans to be stingy when it comes to partnership promotion, at least for the time being. Unless you are a superstar of superstars, you might want to start thinking about other opportunities.”
The problem is that STB is loaded with delusional, self-proclaimed “superstars.” If you truly had half a brain, you would come in, get your money for a few years, and get out. The problem is that those who stick around are second rate at best. What is the deal with the salt of the earth that seems to hang around indefinitely?
breaking news: biglaw partners are greedy assholes