On Friday, we reported that Cravath offered a voluntary deferral option to up to 50% of its incoming class of first year associates. People who are not yet associates can count on $80,000, health care, and loan repayment assistance from the firm in exchange for taking a year off.

Apparently, that was the last straw for associates that have been laid off from Cravath over the past several months. Tips started pouring in to Above the Law reporting stealth layoffs that have been taking place at the firm since December 2008.

Tipsters -- including sources that claim that have been laid off -- report that at least 25 people have been let go from Cravath for "performance" reasons. And sources still at the firm expect more layoffs to come this month:

Cravath Swaine & Moore has been doing stealth lay off of associates since December '08 (using performance evaluation as the excuse). Since January of 2009, they have been doing stealth lay offs more aggressively. Rumor has it that stealth layoffs of staff will be happening this month (June).

We directly asked the firm whether or not these reports were true. But to this point, the firm has declined to comment.

So if the firm has a performance reason for letting these people go, it is not sharing it with us. But regardless of why people are being let go, some laid off associates are annoyed that they are not getting the same treatment during the recession as 2008 summer associates.

I was fired. I don't know why. I don't know why I'm not getting $80,000 to wait out the terrible economy.

After the jump, sources tell us exactly what happens when you get fired from Cravath.

Don't get too close to any Ivory Tower in your town today. The news that Cravath is leaving the class of 2010 out of work for a year has sent monocles flying as students at top law schools learn a powerful lesson about free market capitalism.

Harvard Law School sent out a letter to all of its rising 3Ls in the wake of the Cravath announcement. It essentially warned them that you can't trade in an HLS degree for food and shelter:

Dear Rising 3Ls:

We hope you are getting off to a great start in your summer jobs. We write to alert you about a situation that may require action on your part. As you know, many law firms deferred the start dates of class of 2009 associates from 2009 to 2010. Without clear indication that the economy will turn around by 2010, some firms are planning ahead and already notifying summer associates from the class of 2010 that their start dates are likely to be deferred until 2011 or later. See, e.g., Cravath and Skadden. Generally firms have been generous in providing fellowships or stipends to the class of 2009 given the surprise to that class, but firms may not provide such options to you in the class of 2010 because you have more advance notice about economic conditions. If you are at a law firm this summer and hope to return after graduation, you should ask yourself now what you might do to fill the 2010-2011 year if necessary. [Emphasis in the original.]

What should the class of 2010 do for post-graduate employment, "if necessary"? Stipends look like they are going to be less generous, so people might actually need to earn some money for a year.

So, what can you do with a law degree once Biglaw decides that they don't want you? I hear law firms in Baghdad are booming right now.

Harvard has its own ideas, after the jump.

The venerable firm of Cravath, Swaine & Moore has entered the building, and it's asking up to half of its incoming first-years to take a year off.

Cravath is offering a voluntary deferral option to its incoming associates, according to multiple Above the Law sources (as well as Bloomberg News). If the incoming associates are willing to take a year off, they will receive an $80,000 deferral stipend, health care coverage, and $1,000 a month in loan repayment assistance. This appears to be the top of the deferral stipend market, more generous than both Weil and Latham.

A tipster reports that there are no strings attached to this deal:

[T]hey don't have to do anything but sit on their ass. No public interest, nothing. And they are assured a job in fall 2010.

But wait, weren't the current summers at Cravath right now -- the class of 2010 -- supposed to start in fall 2010?

We detail their fate after the jump.

We were dying to write about this wedding announcement, featuring a slutty Strawberry Shortcake costume (WTF?) and a wacky/tacky proposal story. But alas, commenters would have crucified us for elevating comedic potential over excellence.

So behold, this week's finalists. They include five Harvard degrees, five Yale degrees, and OMGOMGOMG the best Article III officiant ever. Enjoy.

1. Jessica Richman and Matthew Smith

2. Jessica Hertz and Christopher Angell

3. Ashley Lynn and Kenneth Leonczyk Jr.

The scoop on these legal-eagle weddings, after the jump.

There's a pretty interesting glitch happening right now over at NALP (here at ATL, we know something about "technical difficulties" -- we're working on ours). Even though the new numbers haven't been made public yet, if you know what you're doing you can get a sneak peak at the 2009 NALP numbers.

We're not going to tell you how to do it, but we've done it and we've obtained some pretty interesting numbers to report about the New York summer programs at the top 20 firms as ranked by Vault. We'll give you some numbers about the V10 today. Tomorrow we'll expand our look to the Vault 20.

Getting an offer at one of the top nine firms in the land (the NALP glitch didn't work for S&C) was considerably more difficult this year than last year. We compares the number of summer associate offers extended to 2Ls in 2007, with the expected numbers for that same group in 2008. Overall 2Ls offers were down a whopping 20% at the top 10 firms. And you have to wonder what percentage of those summer jobs are going to turn into full-time offers for employment.

For 1Ls, it gets even worse. We explain that and some other highlights, after the jump.

It's not unusual for Biglaw partners to find themselves on opposite sides of the ring when they face off on behalf of clients in litigation. But Cravath, Swaine & Moore's Evan Chesler and K&L Gates's Peter Kalis are staring each other down for a different reason: their opinions on law firm billing structures. Not as sexy as fighting over Lady Justice, but we'll take what we can get.

UK-based legal publication The Lawyer is hyping the fierce match between the two Biglaw heavyweights to promote an upcoming issue of the magazine that will explore "whether the current economic downturn represent[s] a paradigm shift for the world's leading firms."

In one corner, we have Cravath presiding partner Evan Chesler, an NYU Law grad ('75) and a "Leading Litigator" per the Lawdragon. In the other corner, we have K&L chairman Peter J. Kalis, a Yale Law grad ('78) who has also been recognized by the Lawdragon but is, more importantly, a member of the Elect (clerked for Justice Byron White).

See the fight unfurl, after the jump.

Daylight savings is on. The weather keeps flirting with the idea of getting warmer. And area stores are starting to put miniskirts on display in their front windows. You know what that means: Summer's a-coming. Law students bound for BigLaw summer associate gigs may already be packing their bags. Except it looks like many will be able to pack less clothing, because this year's summer gigs are going to be a little shorter.

Firms won't comment on this E-mails are pouring in from law students across the land telling us that a 12-week program is just a summer dream now. According to tipsters, Cravath, Swaine & Moore; Gibson, Dunn & Crutcher; and Kirkland & Ellis are shortening their summers to 10 weeks; and Shearman & Sterling has confirmed that it is rolling it back to just nine weeks. Here's what we've heard:

Cravath just called all of their upcoming 2L Summer Associates and informed us that the summer program would be cut to 10 weeks. They asked that we go online and reschedule our dates accordingly. No explanation given. I'm sure that they made calls rather than emails to avoid a paper trail.

We think the explanation is likely a financial one. Firms are cutting back, and they can get to know you just fine in 10 weeks rather than paying to have you stick you around for 12. Gibson-bound 2Ls got calls as well:

I received a call from the Gibson, Dunn & Crutcher summer coordinators today, as did many of my soon-to-be colleagues. The start date moved up to May 18th (instead of the 11th) and the end date moved back to July 24th (instead of the 31st). They tried to sell it as a "good move" for everyone because the recruitment season start so early now (August); they think both the firm administration and the summer associates will appreciate some time to prepare for recruitment season. Is this some sort of signal? Should 2L summers be planning to interview in the fall?

C'mon now. Let's not totally freak out. Or let's, but in the comments. Here's an open thread to discuss which firms are scaling back their summer programs.

Some big news just in, from Am Law Daily:

In one of the sharpest drops in revenue and profitability among Am Law 100 firms, Cravath, Swaine & Moore saw 2008 gross revenue fall 13 percent, while profits per partner tumbled 24 percent to $2.5 million....

The firm signaled last November that 2008 was a tough year, when it announced in an internal memo that it was cutting associate bonuses, and that the firm would not do as well as in 2006 and 2007. In 2007 Cravath's profits per partner had been $3.3 million, according to our Am Law 100 survey, second only to Wachtell, Lipton, Rosen & Katz. In 2006, PPP was $3 million.

This means that Cravath has forfeited its traditional second-place spot on the PPP rankings (second only to Wachtell). It seems that a number of firms -- including the historic #3, Sullivan & Cromwell -- will surpass Cravath in profitability for 2008.

According to the American Lawyer's reporting, S&C boasted 2008 profits per partner of $2.94 million. This will probably be good for third place in the next PPP ranking, since Wachtell apparently had a rather good year too (at least based on the relatively robust bonuses it paid its associates, plus all the crisis-related M&A work performed by Ed Herlihy & Co.).

Second place will likely go to Quinn Emanuel, with eye-popping PPP of $3.3 million. Also besting Cravath is Paul Weiss, with PPP of $2.65 million last year.

Now we know why the Cravath bonuses were so anemic. And it had nothing to do with the hookers -- er, client entertainment expenditures.

Will disappointing bonuses and declining profits affect the institutional prestige of Cravath? Will the firm fall from its traditional #2 spot on the Vault 100? Stay tuned.

THE AM LAW 100: Cravath Profits Falls 24 Percent [Am Law Daily]

[Ed. note: We mentioned this briefly in Morning Docket. But any story involving the words "Cravath partner" and "hookers" deserves its own post.]

The late Deborah Jeane Palfrey, aka the "D.C. Madam," has a New York counterpart. From ABC News (via our sibling site, DealBreaker):

Wall street lawyers, investment bankers, CEOs and media executives often used corporate credit cards to pay for $2,000 an hour prostitutes, according to the madam who ran one of New York's biggest and most expensive escort services until it was busted last year.

But prosecutors in the Manhattan District Attorney's office chose not to pursue any of the corporate titans, says Kristin Davis, who pleaded guilty last year to charges of running a prostitution business that used more than a hundred women.

Presumably no relation to actress Kristin Davis, who played squeaky-clean Charlotte York on Sex and the City. The actress is a brunette; the madam is a blonde (of course).

Among the names ABC News was able to confirm on [Davis's client] list:

* a partner at the Wall Street law firm of Cravath Swaine Moore, "looking for a party girl to come fully equipped," [who] spent a total of $20,000.

Finally -- a plausible explanation for those disappointing Cravath bonuses. The money went to a different set of hourly billers.

We appreciate the CSM partner's demand that his high-class escort arrive "fully equipped." Cravath lawyers believe in the importance of preparation. Whether dealing with depositions or dealmaking, their motto is: "Be prepared."

Just like the Boy Scouts. If Boy Scouts blew twenty grand on whores.

Given the prestige (and profitability) of Cravath, some might find this news shocking. But those in the know realize that the white-shoe law firm has a long and august history.... of sexual deviance and prostitute patronizing.

Some historical context, after the jump.

Evan Chesler, presiding partner at Cravath, is the latest to raise his voice against the billable hour. In an op-ed piece he penned for Forbes magazine, Chesler says:

I'm a trial lawyer. I bill by the hour. So do the associates who work for me. I have lots of clients, so I can pretty much work, and bill, as much as I want. This needs to be fixed. Yes, you read that correctly.

Of course, partners and clients and even journalists have been calling for or predicting the death of the billable hour for years. As Chesler himself contends in his piece, nobody really likes the billable hour:

The billable hour makes no sense, not even for lawyers. If you are successful and win a case early on, you put yourself out of work. If you get bogged down in a land war in Asia, you make more money. That is frankly nuts.

Of course, there is a reason that the billable hour won't die. More on that after the jump.

Based on the anemic associate bonuses recently announced by Cravath, one might think that the firm is hurting. We hear that work at CSM is a little slow -- and that there may be some anxiety over the staggering cost of the firm's $900 million lease at Worldwide Plaza.

But don't shed tears for Cravath just yet. The firm is still getting some high-profile engagements. From the New York Observer:

When agent Richard Leibner's phone was ringing off the hook one night last week, everyone was asking him the same thing: Was his longtime client David Gregory the next host of Meet the Press, or wasn't he? He called back, telling reporters he could neither confirm nor deny the report that first appeared on the Huffington Post.

Perhaps this was because his agency, N. S. Bienstock, wasn't representing Mr. Gregory on the deal. So who exactly was aiding the ambitions of NBC's robo-newsman? ....

On Monday morning, with the deal finally made public, white-shoe New York law firm Cravath, Swaine, & Moore posted a brief item on its Web site, crediting two of its partners -- Eric Hilfers and Robert Joffe -- for handling the negotiations.

This engagement probably didn't generate the seven- or eight-figure fees that billion-dollar M&A deals generate. But it's still a cool and interesting gig, the kind that stands out to 2Ls going through fall recruiting.

More after the jump.

Last year, we reported on a nice perk for Cravath associates abroad: a hefty cost of living allowance, which had junior associates in London making over $300,000.

It looks like the half-Skadden mentality has made its way across the Atlantic. From a tipster:

Cravath Swaine & Moore cuts its COLA in the London office from $110,000 to $60,000 as of January 1, 2009. [A]ll the associates, one after one, where called into the office of a partner, Philip Boeckman, to receive the news. The reason mentioned for the cut is the evolution of the dollar-pound exchange rate. The COLA is the same for all associates in London regardless of the level of seniority. The COLA gets paid together with the base salary on a bi-weekly basis.

That's a big cut for the 20 associates in the London office. Before the COLA was raised to $110,000 last year, it was at $85,000.

RollOnFriday is not overly sympathetic:

Clearly the firm's partners have now got wise. This week associates were hauled in one by one and told that the COLA would be reduced by $50k from 1st January, in response to weakness of Sterling. One associate complained to RollOnFriday that this comes on top of bonuses being halved and the ski weekend being cancelled, and says that these measures "pretty badly affect associate morale". OK, no one likes to get less wedge - but low morale because of only getting £40k to live in London, when everyone else is being made redundant? Bring out the violins.

The other side of the pond just got a lot less attractive.

Earlier: Biglaw Perk Watch: Working Abroad

Cravath London associates lose £34k bonus [RollOnFriday]

As many people have pointed out, being angry over "only" a $20,000 bonus is something that most of the working world finds appalling. We get it: "spoiled whiners," "real people are losing their jobs," "nobody should complain about a six-figure salary," yada, yada, yada.

But other people have pointed out that most of the working world doesn't have $150,000 plus in educational debt to pay off before Biglaw lets you out of white-collar indentured servitude. Most associates don't blow their bonuses on hookers and coke. (Fools!) Sadly, paying off debt is the final destination for most of the bonus cash.

So, in a way, law schools always take your bonus -- at least a significant chunk of it. But maybe this year those schools got an additional tap into your bonus cash. Last week Harvard Law school released its 2007-2008 Report of Gifts. According to a tipster (I didn't receive the report personally because I try to stay off the HLS grid; it has a lot to do with my hooker/coke/debt decisions), Half-Skadden and Skadden-Mart donated quite a lot to HLS. The report lists those two firms in the $1 million to $3 million range.

Putting some figures together, after the jump.

As 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.

How do you make really good news come off as really bad news? When a major independent study puts you at the top of the list for litigation profits per partner two business days after you announce half the bonuses of a peer law firm.

That is what happened to Cravath, Swaine & Moore today. On Thursday, we reported that Cravath will be paying out half the associate bonus announced by Skadden. Today, The Lawyer reports that Cravath's litigation practice was the top earner in terms of PPP:

In what is arguably a more revealing yardstick than total revenue, Skadden's revenue per lawyer (RPL) was $1.33m (£665,000), a figure that sees its ranking drop to the number five spot. In contrast, New York elite firm Cravath Swaine & Moore snared the top spot both for RPL and revenue per partner (RPP), posting $1.69m (£845,000) and $8.45m (£4.22m) respectively.

It seems that there are two ways to interpret the latest news about Half-Skadden: A) Cravath is cheap, B) Cravath corporate is in the toilet.

Which option do you believe?

How murderously angry do you think Cravath litigation associates are right now? The "revenue per lawyer" metric is particularly interesting. Cravath is generating $1.3 million per litigation attorney, but associates are getting a bonuses that would make a (less profitable) Skadden first year laugh.

As one friend who doesn't even work at Cravath anymore told me over the weekend (The Lawyer's story was available to media types on Friday):

I've been spending a lot of time apologizing to people who went to Cravath on my recommendation. The bonus announcement was embarrassing, maybe this will make them change course?

More tidbits from The Lawyer after the jump.

In the two weeks since our ATL / Lateral Link survey on bonuses, we've talked about when bonuses were and will (or won't) be paid, how your billable hours look this year, and what you expect bonuses to be for 2008.

Or, at least, what you expected them to be before the Skadden and half-Skadden bonus announcements late last week.

But we haven't yet reported on your answer to the following question: "If getting a lower bonus this year meant that your firm could completely avoid layoffs, what's the minimum bonus that you would consider fair?"

Some initial comments were a bit dismissive of the question, and were more than happy to dismiss a few associates, too:

Don't care about layoffs, and so wouldn't sacrifice a nickel in bonus to avoid them. Layoffs, if any at my firm, won't reach my class (2004). If they do, they won't reach my practice area (litigation). If they do, they won't reach me.

lay off the lazy a-holes. I billed 3000 this year.

Would prefer higher bonus with layoffs

But as a severe rash of layoffs followed, hearts began to soften, much like the market for structured finance associates:

  * Almost one fourth of practicing respondents would accept a bonus of zero this year to avoid layoffs.

  * More than half would accept a bonus of $20K or less.

  * Only about 5% still insist on bonuses of at least $75K.

Results: What were your hours and bonus in 2007, and what do you expect for 2008?

See breakdowns of morale by seniority, market and practice, as well as a Cravath vs. Skadden comparison, after the jump.

If 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:

Class 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.

We'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

Today, 50,000 Citigroup employees learned that their services would no longer be needed. I spent the weekend at the gun range working on the skills that will matter in the "new economy," but law firms partners spent the time jockeying for business. Apparently, not everybody has accepted the post-apocalyptic reality staring us all in the face.

But let's play their game; let's assume that there will be "money" in the future that can still be traded for goods and services. Which law firms are positioned to pitch in with new Citigroup work?

Because it's not going to be Wachtell. AmLaw Daily reminds us that Wachtell is representing Wells Fargo in litigation against Citi. And Sullivan & Cromwell is representing the Wachovia side of that Citi-Wachovia-Wells ménage à screwed.

Given today's news, it's not surprising that Citi's board spent most of the weekend trying to pick a top law firm to cover their backside:

Citi's board is apparently fighting over which Am Law 100 firm free of conflicts it should retain as counsel.

Quoting an anonymous "person close to the situation," the Times reports that "Citigroup's board has been bickering over seemingly small issues, including which white-shoe law firm will represent it. ..."

The contenders, after the jump.

A year ago tomorrow (Wednesday), Cravath kicked off the 2007 bonus season by announcing bonuses which ranged from $35K to $60K and "special" bonuses that ranged between $10K and $50K.

Don't expect Cravath to come out of the gate early this year. We asked Cravath whether they would be bonus leaders this year, but they declined to comment, citing their longstanding policy of not talking about associate compensation issues.

But remember how surprisingly early last year's bonus announcement was for Cravath. In 2007 they announced on October 29th, but in 2006 they didn't announce until December 11th. In '06, Milbank came out with the first bonus announcement, but they waited until December 8th to announce.

From what we are hearing, bonus announcements could come even later in 2008 than they did in 2006. Sources are telling us that their firms are trying to wait until the last possible minute to announce bonuses. Managing partners are still trying to lock down their fee collections, which are lagging given the economic difficulties.

In addition, some firms are still trying to figure out which clients will exist going forward.

With all the uncertainty, late bonus announcements seem likely.

More bonus speculation after the jump.