pyramid scheme capstone small.jpgAmerican Lawyer released their annual survey of managing partners at top law firms. Despite a high level of uncertainty, managing partners still remain optimistic about the future.


You’d think all of the layoff news, dissolution rumors, half-bonuses, and the terrible American economy would make Biglaw chieftains more than a little worried about the future of the industry. But no! Everything’s going to be fine. Pay no attention to the man behind the curtain:

But managing partners are still reluctant to throw away their head cheerleader pompoms. Even as uncertainty clouded the responses of the 112 firm leaders who answered this year’s survey, they remained surprisingly upbeat about their firm’s prospects. Make no mistake: Firm leaders know the boom has busted; most of them responded to the survey after September 15, the day that Lehman Brothers Holdings Inc. filed for bankruptcy and Merrill Lynch & Co., Inc., was sold. Few, however, were willing to say–at least for now–that their business will be dramatically different as a result. Even in a time of financial turmoil, they’re counting on clients to continue to demand high-end legal services.

The results are really not that surprising at all, once you become accustomed to the never ending flow of BS that law firm managers spout right up until profits per partner take a significant hit.

But it is always funny to see the disassociation between a firm’s public statements and their internal machinations. Obviously, all of this public backslapping is for the benefit of clients who are not paying enough attention:

Still, one aspect of firm management may never change. In one of the most interesting responses, law firm leaders reported that they are still planning to raise billing rates in 2009. Ninety-eight percent of respondents to our survey said that their rates will be higher next year, though 63 percent said the rise will be 5 percent or less. (By contrast, 62 percent reported in 2007 that they’d raise rates by more than 5 percent.) It may seem counterintuitive to raise rates when clients are hurting, but in interviews, managing partners insist that, for most clients, value trumps rates.

That makes perfect sense. Charge more + Pay less (bonuses) = Stable PPP notwithstanding an economic crisis of global proportions. “I love this plan! I’m excited to be a part of it!”

After the jump, let’s bring out the Stay Puft “Straw” Man.

double red triangle arrows Continue reading “Managing Partners Expect Associate Head Count To Remain Stable:
ATL Expects Associate Head Count to be a Useless and Misleading Statistic”

Wilmer Hale logo.JPGWe’ve reported on various firms cutting back some of the “perks” that used to be associated with Biglaw. But Wilmer Hale has decided to hit associates where they eat, literally.

A memo went out to New York associates “updating” the firm’s overtime meal policy. For you law students out there who are not aware of the system, law firms usually allow lawyers to charge late night meals to clients. A long, long time ago astute managers realized that underlings perform better when they are fed. Apparently, there is a complex biological process that allows workers to convert the nutrients found in bread and water into menial legal tasks.

But Wilmer Hale has concluded that adenosine triphosphate is an “optional” luxury for associates lucky enough to work past 8 p.m. Paul A. Engelmayer, managing partner of Wilmer Hale’s New York office, clarified the overtime meals policy this afternoon:

The firm’s policy is to reimburse lawyers and bill clients for up to $30 per overtime meal not simply because a lawyer is present and working at the office at 8PM, but, rather, because the lawyer had to be here at that time to meet a specific client need or deadline. Just because a lawyer chose to work late does not mean that a client should have to pay for his or her food. Partners are constantly writing off evening meals billed to clients where it was impossible to justify to the client why they should be paying for a lawyer’s food. Please don’t bill clients for overtime meals where there isn’t a justification that you’d feel comfortable articulating to the client as to why the client should be paying for it.

I once knew a New York associate who always “chose” to work past 8 p.m. for no good reason. He was a great guy and a good attorney, until “the incident.” Now he lives at Bellevue and eats pudding out of a Redweld.

Look, we all know some associate at the firm who “abuses” the overtime meal system. But the vast majority of people who are working after hours are there because they have to be, not because they want to be and certainly not because Seamless Web is a bigger draw than a beer and a bed.

But Wilmer Hale presses the point, after the jump.

double red triangle arrows Continue reading “More Shock Doctrine: Wilmer Hale ‘Clarifies’ Late Night Meals Policy”

damages dewey leboeuf.jpgIf things are a little slow in New York law firms, perhaps they should consider starring roles in the pictures. We’ve covered movie shootings at firms before, because it seems somewhat glamorous to host the Hollywood types and to see your firm later on the big screen.

But now we’re getting news that Dewey & LeBoeuf has deigned to be a set for the little screen. From a Dewey tipster last week:

[T]hought you might be interested to hear that yesterday and today we have production crews from the tv series “Damages” in our building at 1301 Ave of the Americas filming scenes for their upcoming season. It’s quite amusing actually. Crews are on our 23rd and 43rd floors, so people are tip-toeing around and there are signs all over the place that read “Filming in Progress … please avoid the Area.”

This is the second time D&L has been used as a set. Scenes from Michael Clayton were also filmed here. Needless to say there were many star-struck associates who got a chance to see George Clooney walking the halls.

In case you don’t know about it, Damages is a legal series on FX that starts Glenn Close (aka, bunny boiler from Fatal Attraction), William Hurt and Ted Danson.

Oscar-winning film Michael Clayton and mega-wattage star George Clooney meet the standards of Biglaw prestige. Film away. But a legal series on FX?

Oh, Dewey, like Glenn Close, your acting career is on the decline.

Before Thanksgiving, we were hearing rumors of layoffs in Dewey’s New York office. Like an aging Hollywood star, going to the small screen may be an act of desperation. Filming revenues must pay the salaries of a couple of first year associates.

Earlier: Davis Polk: It Ought To Be in Pictures?

Nationwide Layoff Watch: Performance Review Attrition at Dewey & LeBoeuf

Gleaming tower of cars.JPGAre we going to have a domestic auto manufacturing industry in 2009? Nobody knows. But just in case the government doesn’t bail out Detroit, law firms are jockeying to work on the bankruptcy.

AmLaw Daily reports that three firms are the early favorites to capture the bankruptcy work: Weil, Gotshal & Manges, Kirkland & Ellis, and Skadden.

Timothy Pohl, part of Skadden’s ruling class, sounds confident that his firm is in the running:

Pohl says Skadden has historically done work for former Chrylser owner Daimler, which sold 80 percent of Chrysler to private equity firm Cerberus Capital Management in 2007 for $7.4 billion. Skadden also does work for Ford, says Pohl, adding that the firm has yet to be contacted by either automaker.

“I’m not convinced that any [of the Big Three] are hiring advisers yet,” Pohl says. “But between us, Kirkland, and Weil, I’d say that the three of us have the largest [bankruptcy and restructuring] groups with a big falloff after that.”

Obviously both Skadden and Kirkland have the chops to handle the work, but isn’t the real question “Why not Weil?”

It’s uncertain whether a potential Big Three bankruptcy might present a similar problem for Weil–and how the firm would manage to juggle its Lehman, Lenox, and other client obligations in the event of such a resource-draining retention. That’s especially true given that it’s unclear whether a potential Big Three filing would proceed on a liquidation track (a la Lehman) or as an infinitely more complicated corporate restructuring.

At some point, Weil has to run out of bankruptcy lawyers. Right?

On Kirkland, after the jump.

double red triangle arrows Continue reading “If the Big Three Fall, Which Law Firms Rise?”

law firm associate bonus watch 2008 biglaw bonuses.jpgAs 7th year associates at Half-Skadden and Skadden-Mart come to grips with the fact that they will be getting a smaller bonus than 1st years at Skadden, let’s take a look at a curious article that came out on November 20th. The same day Cravath announced their reduced bonuses (and threatened their people about 2009) Chairman Chesler spoke to American Lawyer:

Evan Chesler, the presiding partner of Cravath Swaine & Moore, stresses that firms do not need lots of offices to be diversified. “It is too easy to confuse geography with geographic reach,” he says. “It is not the same thing.” …

Although Cravath has just one small outpost in London, the firm is highly diversified, Chesler maintains. “We certainly do Wall Street work, but we always have done work for companies not on Wall Street, companies that make things and are located all around the world, and will continue to do so.”

Apparently, for Chesler “it is too easy to confuse” words with deeds. Either the firm is diversified and is in a good position to weather this economic storm, or it is not. I’m sure that Chesler’s employees do not really appreciate Chesler running around publicly talking about the health of the firm, on the same day he sends around internal memos warning:

[A]ssociates should be prepared for the likelihood that the economy and the Firm’s financial performance next year will not show a significant improvement over this year and they may receive significantly reduced or no year-end bonuses next year.

If you want to criticize Cravath associates, don’t call them “greedy and entitled,” instead call them “foolish” for believing their own management. Believing their own firm is a mistake I’m sure most Cravath associates will not make again.

After the jump, guess who else was talking.

double red triangle arrows Continue reading “Cravath & Simpson & Mixed Messages”

lawyers hanging on.JPGAre you still trying to catch your breath from the bonus announcements at Skadden and Half-Skadden (f/k/a Cravath)? Or are you waiting patiently for S&C to “settle” this bonus debate among top firms? Either way, most people are still just trying to understand why Cravath low-balled the market yesterday.

A couple of days ago we mentioned a theory that has become very popular over the last 18 hours: firms are going to give low bonuses to look responsible to their clients. On Tuesday, we explained the theory like this:

So, reason one: If they give you a bonus, you might tell someone, um, like Above The Law. And reason two: pressure from clients to control costs. Anonymous firm leaders say they fear the effect a big bonus announcement would have on their fee negotiations with belt-tightening clients, especially those in the financial sector.

Some people really believe this is happening, and are using Cravath’s bonus announcement as Exhibit A. One tipster even asked ATL to “stop reporting bonus information.”

But while we can’t know what kind of paranoia is gripping law firm leaders at the moment, we’re pretty sure that clients don’t actually care about associate bonuses.

Our friends at What About Clients attacked this issue yesterday:

So ATL also asks in the post, what about clients? Should great clients care about associate bonuses this year–this evil and financially difficult one of 2008–more than any other year?

The answer: absolutely not.

More analysis after the jump.

double red triangle arrows Continue reading “Do Clients Care About Associate Bonuses? Answer = No”

animated siren gif animated siren gif animated siren gif drudge report.GIFIf you work at Cravath, Swaine & Moore, prepare to be very, very angry. From the bonus memo just issued by presiding partner Evan Chesler:

Both 2006 and 2007 were extraordinary years for our Firm. In 2006 we paid large year-end bonuses to our associates, and in 2007 we further supplemented those bonuses. As a result of the deterioration of the business environment, the Firm’s financial performance in 2008 will not be in line with those earlier years. While the Firm believes that we should pay year-end bonuses this year, in light of the current business climate we do not think it is appropriate to pay the full bonuses that were paid in 2006 and 2007 or the additional supplemental bonuses paid in 2007.

Just yesterday, Skadden announced that they would match the 2006/2007 bonuses less the “special” bonus paid in 2007. For Cravath to come in under that number is pretty surprising. The official Cravath bonus structure for 2008 is as follows:

law firm associate bonus watch 2008 biglaw bonuses.jpgClass of 2008 — $17,500 (pro-rated)

Class of 2007 — $17,500
Class of 2006 — $20,000
Class of 2005 — $22,500
Class of 2004 — $25,000
Class of 2003 — $27,500
Class of 2002 — $30,000
Class of 2001 — $30,000

Suddenly, the question is no longer “Is Skadden the ceiling?” Instead, we must ponder “Is Cravath the floor?”

Done being angry? Okay. Now prepared to get very, very frightened:

Given the uncertainty of the economy and the business climate going forward, we will not be able to address the issue of whether there will be any year-end bonuses in 2009 until this time next year. However, associates should be prepared for the likelihood that the economy and the Firm’s financial performance next year will not show a significant improvement over this year and they may receive significantly reduced or no year-end bonuses next year.

Update (6:22 PM): Of all the tips that have crashed ATL’s inbox in the last 45 minutes, this one best captures the raging rage people are feeling:

WTF does Cravath think it’s doing? They’re basically threatening no bonus for NEXT YEAR? They’re not being Nostradamus, they’re trying to force people out. Cravath associates will get that memo, collect their garbage 2008 [bonus] and lateral the hell out before they get screwed again.

Why not just conduct stealth layoffs? Forced attrition is the same thing. Go home, Cravath. You’re embarrassing yourself.

Read the full memo after the jump.

double red triangle arrows Continue reading “Associate Bonus Watch: Cravath Offers Less Than Skadden”

Women lawyers pay.JPGWhenever we do a post on gender inequality in the legal profession, some readers insist on finding arguments to make the income gap “acceptable.”

Another survey was released yesterday, this time from the National Association of Women Lawyers, that shows pay and promotion inequality is still the norm.

The WSJ Law Blog puts the facts plainly:

There is also a considerable pay gap. At 99% of the firms, the top-paid partner is a man; on average, male equity partners earn more than $87,000 annually than female equity partners. (Fifty-nine firms in the AmLaw 200 reported compensation data.)

Can you imagine what those numbers would look like if the other 141 AmLaw 200 firms had bothered to report their compensation data?

The survey itself deals straight-away with one of more common justifications for continued inequality:

In spite of more than two decades in which women have graduated from law schools and started careers in private practice at about the same rate as men, women continue to be markedly underrepresented in the leadership ranks of firms. Women lawyers account for fewer than 16% of equity partners, those lawyers who hold an ownership interest in their firms and occupy the most prestigious, powerful and best‐paid positions. The average firm’s highest governing committee counts women as only 15% of its members – and 15% of the nation’s largest firms have no women at all on their governing committees. Only about 6% of law firm managing partners are women.

Let me access my inner Joe Biden and repeat that: two decades, starting careers in at the same rate as men, 16% of equity partners.

More survey results after the jump.

double red triangle arrows Continue reading “More Evidence of Sexism in the Legal Community”

law firm associate bonus watch 2008 biglaw bonuses.jpgWe’ve tentatively started the Associate Bonus Watch for 2008, with news of Orrick’s and McDermott’s bonus plans, and the not-really-news that Morgan Lewis will not make bonus decisions until after the holidays.

With the dismal economy and the widespread law firm layoffs, we speculated last month that regular bonuses may be less than last year, and “special” bonuses would likely disappear. The New York Law Journal agrees with us, and suggests two other reasons for it:

The scale of the expense and the almost compulsory nature of the market are widely resented by partners. But they also realize bonuses play a huge role in associate morale, recruitment and retention. Most managing partners who spoke to the Law Journal about bonuses cited potential problems with associates in requesting anonymity. But this year they all also mentioned another interest group keeping a watchful eye on bonuses: clients.

So, reason one: If they give you a bonus, you might tell someone, um, like Above The Law. And reason two: pressure from clients to control costs. Anonymous firm leaders say they fear the effect a big bonus announcement would have on their fee negotiations with belt-tightening clients, especially those in the financial sector.

Orrick chairman Ralph Baxter notes that while Orrick will still pay bonuses, “performance factors, including billable hours, will reduce the number of associates at the firm” who actually get a bonus.

The article suggests that the dismal economy could provide the opportunity that some firms have been looking to escape the bonus bidding war, and eliminate associate bonuses all together. We know you’re worried. In a recent Lateral Link survey by Justin Bernold, one out of every thirteen respondents was unsure when, or if, bonuses would be paid. But as The New York Law Journal notes:

Of course, much will depend on what Cravath and Sullivan & Cromwell do.

As always, we welcome bonus news and memos via email (subject line: “Associate Bonus Watch”).

Firms Rethink the Value Of Associate Bonuses [New York Law Journal]

Earlier: Associate Bonus Watch: McDermott Will & Emery is Sticking to the Plan … For Now

Associate Bonus Watch: Orrick Stands Behind Bonus Structure

Associate Bonus Watch: Morgan Lewis Pushes Back Bonus Decisions

Open Thread: Associate Bonus Speculation

law firms screwed.JPGPartners at top D.C. firms are worried that they might not be getting bonuses this year, just like associates. The Washingtonian reports that management might not be able to reward their partners as they have in years past:

Usually firm managers try to lowball revenue estimates and then surprise partners with a bigger-than-expected bonus. That final paycheck will come after the first of the year, after all bills and accounts for 2008 are tallied. Many law firms are worried that adjustments will be small or that revenues will not make the estimates. So end-of-the year cost cutting has been rampant.

If associates could get squeezed out of a bonus for simply doing all the work that came across their desk, then we hope partners aren’t expecting huge payouts for bringing in barely enough rain to fill a shot glass.

It’s fashionable to call associates greedy, entitled, warm buckets of spit whenever the markets tank. But now some partners are complaining about not being able to retire to their golden encrusted nursing homes as they had planned.

Firm leaders say that some partners scheduled to retire late this year have postponed their plans because of drops in the value of their IRAs and other retirement vehicles.

Are we living in a bizzaro-world where the pain will be spread evenly between partners and associates? Read more after the jump.

double red triangle arrows Continue reading “Washington Partners are Worried About Profits”

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