We’ve waited a long time to type these words. A major law firm just raised starting salaries for first-year associates.
Before you start chanting “NY to 190,” however, there are some things you should know. The raise relates to associates in what some might call a “secondary” legal market; we’re not talking about New York, or Washington, or Los Angeles. Associates at this firm, even post-raise, won’t be making the magic number of $160,000 a year.
That said, the legal market in question is rather large, and the law firm in question is a national and even international player. So the move could have ramifications beyond just the affected associates….
One firm just started pocketing 20 percent of partner pay.
Many lessons can be drawn from the collapse of Dewey & LeBoeuf. We’ve learned, for example, that it’s dangerous to have a law firm name that’s highly susceptible to puns. (Dewey know why that is? Howrey going to find out? Heller if I know.)
Another lesson: avoid excessive dependence upon bank financing. When a firm starts to spiral downwards, that spiraling can be accelerated by a bank calling a loan, not renewing a credit facility, or otherwise taking steps to protect itself that, while reasonable for the bank, can be damaging to the firm.
The current CEO of Greenberg Traurig, Richard Rosenbaum, recently gave an interview to the Daily Business Review in which he discussed the firm’s recent capital call (among other subjects). We mentioned the interview in Morning Docket, but because it contains a lot of grist for the mill, it merits a second look.
The subtext of the interview — and, at one point, the explicit text of the interview — could be summarized as, “Look, we are not like Dewey!” The bad news is that such statements should even be necessary. The good news is that they seem to be true (at least based on the information currently available).
As businesses go, the business of law isn’t extremely capital intensive. Most of the capital in Biglaw is really human capital. As one bankruptcy lawyer put it, “It’s incredible how fragile law firms are. Unlike a company, the principal assets walk out the door every night.”
But law firms do need some capital. Those fabulous offices — and fabulous associates, at $160,000 and up — don’t come cheap.
Firms can obtain the capital they need to operate through borrowing; but credit needs to be used judiciously, lest a firm go the way of Dewey & LeBoeuf. And partners make capital contributions to the firm, most notably when they buy into the partnership.
But sometimes that capital isn’t enough. So firms issue capital calls to their partners, which brings us to today’s topic….
As we mentioned yesterday in Morning Docket, Judge Marcia Gail Cooke (S.D. Fla.) recently issued an omnibus order on multiple motions for sanctions in the high-profile case of Coquina Investments v. TD Bank. The plaintiff, Coquina Investments, moved for sanctions related to various alleged discovery violations.
At a contempt hearing held back in May, Judge Cooke heard testimony from employees of TD Bank and current and former lawyers from Greenberg Traurig, which previously represented the bank. She took the matter under advisement — but not before saying things like, “It is hard for me to describe in words the difficulty throughout this trial related to documents and discovery.”
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