It's a new year, and for Biglaw that usually means it is time for firms to go out and get a loan.

Obviously, this year it might be a little more difficult than usual. The American Lawyer is reporting that the credit crisis is coming to a partnership near you:

Law firms, typically considered good credit risks, are now experiencing the toughest and most expensive lending conditions in years. "Even good borrowers, prime borrowers, are having more restrictions and more difficulties than they used to," says Altman Weil consultant James Cotterman.

Most firms will still be able to get loans to cover their immediate expenses. But to do so they will have to submit to more vigorous financial vetting than they did in the past. And, of course, it's going to be a whole lot more expensive to borrow money:

Meanwhile, firms that didn't secure a credit line early last year, and who went looking for it in recent months, discovered that credit wasn't cheap anymore. "We just took out some lines from several different banks," says the head of one firm, who asked for anonymity to speak frankly. The firm let its credit lines expire in 2003 and relied instead on capital contributions from partners. The banks used to give the firm credit for free. "Now we had to pay for the lines," he says.

Rates have doubled, from below 1 percent in 2007 to 2-3 percent today for the top 50 firms, says Andrew Johnman, head of professional services at Barclays plc. "If they need additional money or if they need an amendment to their credit facility, then we reprice it to current market pricing," he says.

Apparently, banks are worried that additional firms will dissolve like Heller and Thelen. More on that after the jump.

Dear Jones Day threadjackers:

Here is your post about the Jones Day bonus. Now please put the lotion in the basket and give me back my dog.

Okay. Yesterday, Jones Day sent around its individual compensation letters. Traditionally, Jones Day makes bonus decisions on a case-by-case basis. This year is no different, but a tipster reports that the firm has generally decided to follow the Cravath scale.

Jones Day doesn't have a billable hours requirement. But because of the individual nature of the firm's decisions, some associates could be receiving more than people at Cravath, while some could get far less.

We also understand that Jones Day does everything it can to keep associates from knowing what the guy down the hall is taking home. A tipster reports:

All comp is confidential here. So no one knows what anyone else gets, unless you spill the beans, which is strongly discouraged. You just get your personal comp letter with your numbers.

Firm spokespeople could not be reached for comment about their bonus structure.

Our tipsters weigh in after the jump.

Venable is generally not a market leader when it comes to associate bonuses or salary. In fact, they usually don't announce their bonuses until January.

But today at 3:00 p.m. associates have been called in to discuss "the firm's 2008 results and outlook for 2009."

Kirkland had a meeting today to discuss the obvious, and maybe Venable is doing the same thing. But a tipster is at least slightly concerned about the need for today's festivities:

Considering that we don't usually hear anything about bonuses or salaries until January (and we're definitely NOT market), it should be interesting to see what goes down at this meeting.

Our tipster is concerned because of Latham. So far, top firms haven't followed Latham's salary freeze lead. But some firms do seem to be hedging their bets and putting off decisions until January.

By the end of today, we should know where Venable stands.

Earlier: Nationwide Pay Raise Freeze Watch: Latham & Watkins

Kirkland & Ellis is perhaps the biggest bonus shoe left to drop. Will the firm follow Skadden as the firm's prestige and profitability suggests? Or will Kirkland pull a Half-Skadden and settle down with the rest of the market?

We'll know tomorrow. A firm-wide email just gave K&E New York associates a big reason to show up for work the day before Christmas Eve. John Desmarais is holding what we assume will be a very interesting meeting tomorrow:

Subject: Compensation NY Associates:

I'd like to have a brief meeting with you all tomorrow at 10 am on the 50th Floor (50G) to discuss salaries and bonuses for this year and next. At that time, also, I'll say a few words about how the office and the firm are doing in the current economic climate.

jd

This could be good news: why would K&E have a full meeting only to do what Cravath and the rest of the market has already done?

Of course, this could be terrible news: why would they need to "discuss salaries" when raises should be perfunctory,at a financially secure institution?

More on Kirkland's meeting after the jump.

Individualized memos have been issued to Skadden Arps associates to inform them of their 2008 bonuses and 2009 base salaries. The Skadden base salaries reflect the customary annual pay raises -- sorry, Lathamites.

Because Skadden's announced bonuses this year are so much higher than the Cravath-established market level, folks at other firms have wondered: Are the Skadden bonuses for real?

The short answer: yes. To quote the famous Seinfeld episode, "they're real -- and they're spectacular."

We've surveyed Skadden associates from a variety of class years, from 2008 through 2001. The scale we've pieced together looks like this (i.e., like last year's year-end or regular bonus schedule, but without the "special" bonus amounts):

Class of 2008 -- $35,000 (prorated)
Class of 2007 -- $35,000
Class of 2006 -- $40,000
Class of 2005 -- $45,000
Class of 2004 -- $50,000
Class of 2003 -- $55,000
Class of 2002 -- $60,000
Class of 2001 -- $65,000

The bonus schedule is, of course, subject to the 1600-hour minimum. That's not an onerous burden, and pro bono hours count towards the minimum, in unlimited amounts. If you fall short of the 1600-hour minimum, you may still be eligible for a 50 percent bonus -- aka a "half-Skadden" bonus.

After the rest of the New York market settled around the Cravath bonus levels, some wondered: Do the Skadden partners feel like chumps?

Find out, after the jump.

The effects of the global economic crisis continue to trickle through all aspects of the legal industry. Many firms simply aren't willing to share the profits with associates as has been done in years past.

While we tend to focus on the Biglaw view of this crisis, it's important to remember that associates as smaller firms are getting hit just as hard or worse from a dollars-per-hour perspective.

Last year we brought you a series of posts on law firm life outside of the top teir. One of the firms we highlighted was Kaufman Borgeest Ryan, a boutique insurance coverage firm with offices in New York, New Jersey, and California. Starting salaries there are about $90K while senior associates make just under what Biglaw first-years pull down.

In the past, associates have been eligible to receive around a $10K bonus, if they meet the minimum billable hours requirement of 2100.

Imagine being a lawyer, living in New York City, billing over 2000 hours a year, and making less than six-figures. Calgon take me away.

This year, associates at Kaufman should still receive their bonus, but it's complicated. More after the jump.

Update (3:30 PM): Please note that this post has been revised in various respects since its original publication. The situation is fluid and we are investigating further. Thanks.

It's moving day. Time for the elite firms to separate themselves from everybody else.

Multiple tipsters inform us that O'Melveny & Myers associates, in California and in Washington, DC, received voicemails today confirming that first year associate bonuses would be... $27,500. The bonus scale for OMM, in CA and DC, is believed to look like this:

2007 - 27,500
2006 - 30,000
2005 - 32,500
2004 - 35,000
2003 - 37,500
2002 - 40,000
2001 and 2000 - 45,000

A tipster adds, "Everyone is also eligible for additional bonus amounts on top of that based on hours and performance."

We understand that OMM traditionally makes these announcements over voicemail. Bonuses will be paid on December 31st, with an official memo following in January. Oh, and just for good measure, class appropriate pay raises will proceed as planned. Eat your heart out, Latham.

Update (3:30 PM): It appears that these California and D.C. bonus levels are subject to a minimum hours requirement of 1950. In addition, it seems that O'Melveny's New York office is on the Cravath scale.

Update (3:45 PM): Associate editor Kashmir Hill just spoke by phone with an O'Melveny spokesperson. The spokesperson confirmed that OMM's California and DC offices are paying bonuses to associates that are higher than OMM in New York.

"For some time, we have set bonus levels at a competitive rate for local markets," she said. And as ATL readers know, this year the local market in New York is weak in terms of bonuses. The OMM rep pointed out that last year New York bonuses were higher than non-NYC bonuses.

In addition, the spokesperson added, the California and DC bonus scales are subject to a minimum hours requirement of 1950. Bonuses in New York are not subject to such a minimum (although "hours and merit are taken into account," according to OMM).

More after the jump.

While the Latham & Watkins salary freeze came as a shock to most in the Biglaw community, Reed Smith associates have known for days that their salaries would remain frozen in place.

Reed Smith laid off 115 people two weeks ago. Individual salary memos started going out to the remaining Reed Smith associates last week (Reed Smith makes salary decisions known on a person-to-person basis). Not surprisingly, most people are not getting 2009 raises.

Because of the individualized nature of the salary information, we can't say that nobody at Reed Smith will be receiving a raise. We can say that nobody we've talked to has received a full raise, expects a full raise, or is hoping for anything other than having a job when the calendar flips over. A couple of people we talked to will be getting a small salary bump, but nothing at the normal level for their class.

Did somebody say something about bonuses? Our Reed Smith sources don't expect to get that either. There hasn't been any official announcement, but the rumblings around the firm all point towards the "special bonus" of $0. Though, one tipster points out that there are enough bonus complications that the firm might be able to avoid the negative press associated with a $0 bonus:

RS doesn't give end-of-year bonuses. All of our bonuses are dependent on hours or performance or are related to profit sharing. Everything is discretionary, except profit sharing, which is based on the firms performance, and well, we know where that is.

The lesson, as always, if your firm recently picked up a bunch of Thelen attorneys, or a bunch of Heller attorneys, things are not going well.

Earlier: Nationwide Layoff Watch: Reed Smith Cans Staff, Associates, 'And Your Little Dog Too'
Howrey and Reed Smith: Latest Beneficiaries of Thelen's Shutdown

If you liked your 2008 salary, you're going to love your 2009 salary. Latham & Watkins just sent around this email about 2009 associate compensation:

The world economy is experiencing unforeseen and unprecedented dislocations. Our clients are feeling those impacts and the legal community is not immune. The Executive Committee has spent the last few weeks discussing these critical issues in the context of planning for 2009. While we anticipate that the diversity of our practices and global reach will serve us well in the year to come, it seems clear that the global economy will continue to be challenged at least through 2009. As a result, we are modifying associate compensation as part of a prudent business strategy.

Effective January 1, 2009, associates moving to the next class year will continue to receive the same base compensation as they received in 2008. Please do not hesitate to contact your local Associates Committee members if you have any questions about the resulting salary scales.

We expect as a general matter to continue to reward outstanding performances through our merit-based bonus pool. As in previous years, we will announce bonuses in late January.

We are confident that by continuing to work together we will be well positioned to succeed in the face of the economic challenges that lie ahead. We thank each of you for your many contributions to the firm.

Freezing salaries is now part of the "market." The latest associate pay raise is effectively being undone.

After the jump, what was that about bonuses?

The memo below was sent to us by a tipster, with this prefatory comment: "No one really knows what the f*** the second half of the first sentence of the memo means."

So, dear readers: What does this language mean? The most literal interpretation is that Squire Sanders will resist associate pay raises in 2009 -- e.g., it won't go along with any "NY to 190" movement started by another firm. The overall associate pay schedule will remain unchanged, at least at SSD.

But that's a bit obvious. Given the dire economic conditions, reflected in Squire's decision to lay off 30 employees last month, it makes more sense to view this language as a poorly worded attempt to announce a year-long salary freeze (i.e., not giving associates the customary January increases in base salary to reflect their greater seniority).

If it's a pay freeze announcement, SSD isn't the first firm to travel down this path (although they are going the farthest). McDermott Will & Emery is freezing salaries until March (at least); Bryan Cave is freezing them until April. Womble Carlyle is freezing salaries for the first half of 2009 (at least).

We have an inquiry in to Squire Sanders partner Timothy Sheeran, who sent the memo. In the meantime, your attempts to parse this language are welcome in the comments.

P.S. Presumably all the bailout-related work the firm is getting isn't making up for lost work in other practice areas.

Earlier: Prior ATL coverage of salary freezes

While Southeastern United States Senators are busy making the world safe for Toyota, Southeastern law firms are busy just trying to survive.

The latest bad news comes the 132-year-old law firm Womble Carlyle. The North Carolina based firm has decided to freeze salary increases for all attorneys through the first half of 2009 at least:

In these times, prudent management requires that we minimize our expenses in order to retain the flexibility that is necessary to deal with unforeseen developments. Accordingly, in addition to a variety of expense cuts that are included in the budget, we have decided not to increase base salaries for salaried attorneys and staff at the beginning of 2009. As we approach the midpoint of the year, we will review the situation and decide whether to provide any increases for the balance of the year. The only exceptions are those attorneys who become salaried members or of counsel on January 1, 2009.

I imagine that if you are a lawyer that relies heavily on the disaster area of the Charlotte banking market, just having a job is reward enough. You don't want to be laid off in North Carolina right now. Womble Carlyle hopes to avoid that worst case scenario after the jump.

It's December, and the bills are due. But many firms are finding clients reluctant to pay up. The American Lawyer reports that firms are having a tough time recovering any money from the graveyard of busted 2008 deals:

Firms that were working on one of the many deals or financings that have been postponed or terminated may never get paid for the significant hours they did log. That's because in most instances, law firms don't get paid until a deal closes....

When a deal fails, the law firms generally don't have a contractual right to any money. And that can make for messy negotiations. These days most firms don't want to drive too hard a bargain with clients they want to hold on to.

"If it's an ongoing client we may be a bit more generous," says one partner. "We'll ask them to pay us a fraction of the fees, but there's an understanding that when the market turns around they owe us."

While the broken-deal fee will always be subject the dance between rainmakers and their clients, fees for litigation and general corporate work should be freely flowing. Right?

For matters billed on a regular basis, like standard corporate work and litigation, firms stand on firmer ground, although payment isn't assured this year. September was particularly scary, says Jay Zimmerman, the chairman of Bingham McCutchen.

"Even the best clients were holding payment," he says. "Everybody was sitting on cash and we had a build-up in receivables." Since then, he says, the money has been flowing in fairly normally. "The September bills did get paid. October turned out to be very good and November is looking very good."

The "stuff" flows downhill. Clients stiff firms, management stiffs associates, associates stiff... law school loan officers? Why not? We can't be that far away from the "Fight Club scenario," in which everybody gets their credit rating set back to zero.

Whoops. I'm not supposed to talk about Project Mayhem.

Collecting, but Hardly Calm and Cool [American Lawyer via Law.com]

Debevoise & Plimpton has been very busy and very profitable. They recently sent around a positive internal email about the firm's business during the downturn. And we know that the Siemens case has treated them well.

But in 2008, public protestations of solid business mean nothing when it comes to associate compensation. Debevoise announced that they were paying half of what Skadden is offering:

2008: $17,500 (pro-rated)
2007: $17,500

2006: $20,000

2005: $22,500

2004: $25,000

2003: $27,500

2002: $30,000

2001 (and senior): $32,500

The numbers -- while annoying -- are not really that surprising. Schulte Roth, housed in the same building, earlier today announced the same scale (although subject to an hours requirement). Even our Debevoise sources anticipated that, with Siemens winding down, the firm would be more forward-looking with this round of bonuses.

What is surprising is the timing of this bonus announcement. The email went out from managing partner Rick Evans at 6:54 p.m. WTF ("Sacré bleu" in Debevoise-speak)? Was management hoping to dodge the news cycle with an after-hours announcement? Somebody should let them know that the internets are on 24/7.

Our hearts go out to the Debevoise associates that were still working when this announcement crashed into their inboxes. Professionalism is its own reward. All Skadden associates are getting this Christmas is twice the money.

Read the full memo after the jump.

McDermott Will & Emery has already announced that associates will be eligible for their bonus "advances" that they were already promised. We reported that MWE associates can expect $10K to $20K now, while the final numbers will be released in March. At the time we said:

The other wrinkle here is that MWE is leaving the door open on what their "final" bonus package will look like. They could match last year's market, or not. There is a lot of time to read the market between now and March.

Having already announced this good news, it was a little weird yesterday when McDermott announced the same news again. The same numbers, the same plan, the same "final decision in March" language. Did MWE management simply forget that they had said all of this before?

Not quite. Buried in the third paragraph of this "new" announcement was the line:

In addition to the final bonus determinations, Associate base salaries for 2009 will be determined and announced in March at the conclusion of the 2008 compensation process. Until then, current base salaries will remain in effect

No raises until March (if at all)? Is MWE really hurting or just really, really cheap?

After the jump, the freezing future.

With the holidays two weeks away, many are starting to think about the frantic search for gifts for loved ones... and loved support staff. A Consumer Reports survey indicates that 76% of Americans will cut back on gift giving this year. Surprise, surprise. But what does it mean for planning your gift for your secretary and/or paralegal?

Writes one ATL reader:

I'm a NYC 4th year and for three years have given my secretary $100 per year I've been at my firm (plus a small -- $25 -- physical gift as well). If I follow that pattern, I'd give her $400 cash in a few weeks.

My secretary is great and I would like to show my appreciation. But this year, with my job hardly safe and my bonus likely to be at Half-Skadden levels (if I even survive long enough to get a bonus), does the $100 per year rule still apply in NYC?

I think we need a full post on this. It's not 2007 anymore.

$400 seems high, even for New York. We thought $150-200 was the going rate.

For the uninitiated, it's customary for associates at large law firms to give a cash gift to their administrative assistants, often along with a card or small gift. Not everyone opts for cold, hard cash-- some do AmEx or Visa gift cards. (If you do choose to go with bills, please make sure they are not of the soiled, dog-eared variety.)

One secretary wrote to us this year to voice opposition to the inter-office gift giving (and she's not the only one):

How should a legal secretary ask her lawyers to not give her gifts? I don't think Christmas has any place at work, and, though I respect and appreciate my lawyers, I don't want them giving me gifts. I find it awkward and embarrassing on many different levels. I've been at my current job 5 years and tried at first simply not reciprocating. But they never got the message. I'm dreading this year's ordeal like the plague. They make a little ceremony of calling me into an office as if I were in trouble. Please ask your readers what I might say that would stop the gifts without offending my guys. Thanks!

So, here's an open thread to discuss your gift-giving plans in the current economic environment. Are you scaling back this year due to a diminished bonus? What's the scale in your town? Does your paralegal get to sit on Santa's lap as well? And if your secretary wants no part in the 12 days of Christmas, how should she let you know?

If the second-most profitable law firm in the nation cuts bonuses by 73%, what do you expect regional firms to do?

Today, the management committee at Epstein Becker & Green made a decision that we will probably be copied at regional firms throughout the country. From the EBG internal memo:

The cautiousness of the Firm's clients regarding their cash position has continued to affect EBG's cash collections through November. We, like all law firms in 2008, are experiencing a slower pace of payments to the Firm from our clients than in prior years. While we are confident that these monies will be collected over time and we are well positioned for 2009, cash available at year end is, as a consequence, more limited than it has been in years when the economy was stronger.

Reflecting this reality, and on our history of conservative but responsible fiscal management that dictates prudence in retaining our cash reserves and not incurring additional debt for non-capital expenses -- thereby protecting the Firm's position as we enter 2009 -- the Compensation Committee has determined that no bonuses will be paid at year end 2008. While we do not make this decision lightly, at a time when many law firms and businesses are engaged in large-scale lay-offs or worse, this decision is, we believe, a moderate response to what are unprecedented circumstances facing our industry.

Remember that a problem many firms are facing right now is that while attorneys keep billing, some clients have stopped paying.

EBG is the first firm that we're aware of that is offering the "special bonus" of zero. But they won't be the last. Don't forget to send us your tips on other mid-sized and regional firms as they make difficult bonus decisions this year.

Read the unabridged statement that EBG attorneys received today, after the jump.

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.

Another law firm informed associates that their hard work was worth half of what it was a year ago. Davis Polk & Wardwell is the latest firm to announce Half-Skadden bonuses.

The official DPW bonus structure is as follows:

Class of 2008: $17,500 (prorated)

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 and senior $32,500

So much for elite law firms paying their associates at the top of the market. Instead, Cravath has succeeded in opening the door to the "thank you sir, may I have another" theory of associate retention and company morale.

It could be worse. These guys are are still getting a bigger bonus than law students who interviewed with Skadden this year. Yay seniority!

What is particularly annoying about the DPW memo is that they act like they are meeting the market with these bonuses, as if Skadden doesn't even exist.

We are pleased to announce that associates in good standing will receive a bonus payment as outlined below. ...

We thank all our associates for their diligent and skillful efforts as we support our clients in this challenging economic environment.

"Pleased to announce." Not "horribly embarrassed that we are slavishly short-changing our associates because Daddy-Cravath said it was okay."

Read the full memo 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.

"Not God Bless America, God-damn America."

We are now able to report that Simpson Thacher & Bartlett has matched bonuses with Half-Skadden:

On behalf of the partners of the Firm, I would like to announce that year-end bonuses for associates in good standing will be 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: $32,500

Class of 2000: $32,500

Cravath has doomed us all.

After the jump, more analysis and the full STB memo.