Law Shucks

Last Week in Biglaw: 04.12.10

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Ed. note: Law Shucks focuses on life in, and after, BigLaw, including by tracking layoffs, bonuses, and laterals. Above the Law is pleased to bring you this weekly column, which analyzes news at the world’s top law firms.

Law-firm layoffs have fallen from a peak of 3,682 in March ’09 to 164 in March ’10. Although firms continue to lay people off, firms are increasingly looking for alternative ways to manage their finances. The Law Shucks “This Week in Layoffs” column had evolved to include those alternatives.

Now, we’re taking the next step and expanding the scope further in this new column. We’ll continue with recaps of layoffs and the related economic events (salaries, start dates, PPP, etc), but will also cover a broader range of events in BigLaw.

BigLaw is slow to change, though. After the jump, we kick off the new column with the old stalwart: layoffs.

Even though the pace has dropped off dramatically, layoffs are still one of many tools firms are using to fix their businesses.

Sometimes you’re the hammer and sometimes you’re the nail.

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That’s what happening in Chicago. Just two months ago, we wrote about Sidley associates’ jealousy over higher bonuses at Kirkland and Latham.

Turns out, they’re the lucky ones, compared to the 75 people (28 lawyers, 47 staff) Mayer Brown just let go. At least Mayer Brown had the decency to be forthcoming about the layoffs. The landscape continues to be blighted by stealth layoffs.

Ho-Love is also putting people out on the Chicago streets – as many as 69 people (22 lawyers, 47 staff) may be put out on the street when the newly merged firm shutters that office. We suspect some other firm will pick up most of the people, though, or some enterprising lawyers will set up their own shop, which seems to be the fad of the day.

As vile as we think stealth layoffs are, Goodwin Procter may have stumbled upon something worse: shunning its own laid-off associates. In fairness, this behavior was rumored as far back as October, with London firms (and London offices of UK firms) reportedly refusing to consider attorneys who had been laid off from other firms.

The PR hit is bad enough, but if you really want to scratch your head, consider the math. According to the Law Shucks Layoff Tracker (remember, you can filter the raw data by firm) Goodwin Procter has had two rounds of layoffs: 74 last February (38 attorneys, 36 staff) and, most recently, 55 in November (21 attorneys, 34 staff). Let’s focus on them. Here’s what the firm said five long months ago:

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The associates affected are current second years within the Business Law Department and most are based in our Boston office. As many of you are aware, this group of associates was not included in our February reduction in force because they were first years at the time and we were hopeful that the economy would improve sufficiently so that we would not have to make this difficult decision.

…and here’s the headscratcher. The firm’s recent job posting:

The Boston, MA, office of this international firm is seeking an associate with 2-3 years of experience with the following: private equity, corporate transactions, including drafting venture capital, merger and other transaction documents; familiarity with SEC reporting rules, private placement rules and offering requirements; experience conducting corporate due diligence, with at least one year of experience with sophisticated corporate transactional matters for public and private clients; the Securities Act of 1933; the Securities and Exchange Act of 1934; Investment Advisers Act of 1940; and related SEC regulations.

They’re looking for the exact same people they let go. Well, not exactly, they want people who spent those five months doing substantive work.

Assume Goodwin gave a standard three months’ severance. They’re also paying about that much to the headhunter. We won’t even try to quantify the onboarding costs (both real and opportunity).

At best, the firm will have spent exactly as much in severance and placement fees as it would have spent in salary.

AND they get the double whammy of bad press for the layoffs and worse press for not re-hiring their own.

Talk about poor planning.

Goodwin Procter should have done what Chadbourne & Parke did.

All Chadbourne did was go out recruiting a new batch of summers after it had rescinded offers. That’s better for a whole bunch of reasons. The firm didn’t pay severance, rescinded offers don’t count as deferrals, etc. The firm basically admitted that it was throwing those people under the bus in order to preserve relationships with the schools. You have to have a pretty cynical view of law schools to think they’d be complicit in selling out their graduates in favor of their current and prospective students.

Really what the firms are doing is scambling to adjust to clients’ realization that they can exert some control over their firms. Lawyers’ belief that they’re the only people who can shepherd through some incomprehensible labyrinth has been getting worn away at for years. There are too many firms that are too similar, which led clients to realize that they can go elsewhere.

Further, those clients who stuck with their favorite firms (who weren’t exactly exercising much restraint on the annual rate adjustments) for too long finally got slapped on the wrist by CFOs who tightened GCs’ pursestrings.

The result? Inhouse counsel like UTC’s Chester Paul Beach who “want to destroy the large pyramidal law firm structure.”

Goodwin isn’t the only firm insensitive to its former associates (or Chadbourne to its rescindees). Latham’s Bob Dell tripped over his own in an effort to impress clients like Beach. He added insult to injury in an interview with the WSJ Law Blog by saying not only had the firm retained more associates than work required (meaning that they only let the real slackers go?), but that those retained still weren’t fully occupied (much to the chagrin of those who are complaining that they’re overworked as a result of too-deep cuts).

Damned if you, damned if you don’t.

And he certainly has to, with clients increasingly taking away the routine work that forms the base of the pyramid.

That’s why firms are hustling – like Freshfields’ new plan to use alumni as an ondemand workforce when extra capacity is needed.

For all its faults, BigLaw is certainly stocked with interesting (and smart) people.

We’ll be writing more about them, and the work they do, in future installments.

In the conclusion of the article on Law Shucks, we have the running tallies on layoffs.

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