The slowing economy has hit home at Dechert, which has just issued layoff notices to 13 associates strictly in its finance and real estate practice, according to a source inside the firm.
Shortly after the firm confirmed the planned layoffs, the source said Chairman Barton J. Winokur issued a statement that the firm would then offer the 13 associates positions in other practice groups.
"Due to the major shift in market conditions affecting client demands in our finance and real estate practice area, we currently do not have sufficient work for all the associates in FRE," Winokur said in the statement. "As a consequence, we have told 13 associates in the U.S. FRE group that we see no demand for them in that group in the foreseeable future. However, due to increased and substantial demand in other practice areas, we will be offering those lawyers the opportunity to work in those other groups."
There was no word as to whether those associates, who had been given severance packages, accepted the revised offer to switch practices.
It was back in August that The Legal Intelligencer highlighted concerns among industry leaders about possible associate layoffs. Since that time, pink slips and "voluntary" departures have only been seen at some of the largest structured finance and real estate shops in the country.
Dechert was the first Philadelphia firm to feel the pinch, originally giving the 13 associates until the close of business Tuesday to leave. No one was asked to leave Friday, the source said.
The firm has not disclosed the market breakdown in terms of which offices were affected by the announced layoffs or how many, if any, were laid off in Philadelphia, but only said that it was "U.S.-wide."
There were no layoffs prior to Friday's announcement, but some attorneys were shifted into other practice areas, the firm source said. The announced layoffs comprise less than 10 percent of the 167 attorneys listed in Dechert's finance and real estate practice, which includes mortgage finance, structured finance and securitization, investment, and mergers and acquisitions.
The attorneys who were originally asked to leave were offered three months severance, six months of paid medical benefits and transition placement support, the source said.
The possible departures come amid a record financial year for the firm with $836 million in gross revenue and more than $2.3 million in profits per equity partner.
Some in the industry pointed out that the 13 potential layoffs are relatively small in comparison with the size of the firm and said this doesn't speak to any broader problems at the firm.
Legal blog "Above the Law" has reported extensively on associate and staff layoffs across the country. The reports included associate layoffs at Thacher Proffitt, Cadwalader Wickersham & Taft and Clifford Chance, mainly in the structured finance, real estate and capital markets practices of those firms.Friday, "Above the Law" reported on rumors of low morale at Dechert, questioning whether layoffs were imminent.
Dechert's news would put the U.S. legal scene over the 100-attorney mark in terms of attorney layoffs and offered buyouts this economic cycle, if at least eight of the 13 announced Dechert layoffs take place. According to data collected by The American Lawyer, a sister publication of The Legal Intelligencer, 35 attorneys were laid off at Cadwalader Wickersham, 24 Thacher Proffitt mid-levels took buyouts plus an additional five first-years who took optional buyouts, six Clifford Chance associates were laid off and 23 associates at McKee Nelson took buyouts.
In response to the news about Dechert, most legal consultants didn't seem surprised simply because of the size and profitability model of the firm.
Cathy Abelson of Abelson Legal Search said she doesn't anticipate seeing layoffs trickle into the rest of the Philadelphia legal market because most local firms don't do much of that type of work.
"Dechert is one of the closest firms in Philadelphia to a 'New York firm' and this has been happening in New York where these structured finance and securitization attorneys have not had enough to do," she said.
As early as November, according to Abelson and her colleague Joyce Feinstein, Abelson Legal Search has had inquiries from Dechert attorneys in the finance and real estate practice who had concerns about the "viability of work in this practice area."
Abelson said she doesn't think it's at all a shock to the affected attorneys that they were given layoff notices.
Sheldon Bonovitz, chairman emeritus of Duane Morris, had first predicted the possibility of layoffs when he spoke to The Legal Intelligencer in August.
"Future layoffs are a realistic possibility and they would come in the areas of corporate finance and real estate," Bonovitz said in August. "This is by reason of the turmoil in the debt markets which has made finance of many transactions in the pipeline problematic or not feasible."
He said in an interview Friday that he wasn't surprised to hear of Dechert's announced layoffs because of similar news from New York firms handling a lot of securitizations and other financings.
Bonovitz said he doesn't think this is the last the market will see of layoff notices but said most of the other Philadelphia firms are fairly well-insulated from the market conditions driving most of the firings.
He also pointed out that the number of attorneys Dechert sent layoff notices to is not a big group for a firm of its size. Just because attorneys have been told they will be let go doesn't mean there is something "amiss" at Dechert, which Bonovitz said is a great firm.
Duane Morris, he said, has not shed several of the practice areas other firms have done away with, making the firm more diversified and better able to handle a down economy. The firm has actually been hiring corporate associates, Bonovitz said. That was difficult to do a few months ago, but it's now "a great time to recruit corporate lawyers," he said.
Abelson said Dechert attorneys are highly credentialed and will have no trouble finding work in this market.