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In Salary Twist, Firm Pays More -- and LessDuval & Stachenfeld starts first-years at $60K, figuring half will burn out. Third-years earn as much as they would at Cravath
There are really just two kinds of law firms these days: Those that pay their associates at "market," and those that don't get anywhere near it. Duval & Stachenfeld is doing both. The 50-lawyer firm starts first-year associates at $60,000 -- or $100,000 below the starting salary at many Am Law 100 firms. Mid-year and senior associates, however, are promised the same total pay -- or more -- that they'd earn at Latham & Watkins or Skadden Arps. Recruiters call it a novel approach.
The Recorder2007-09-25 12:00:00 AM
There are really just two kinds of law firms these days: Those that pay their associates at "market," and those that don't get anywhere near it.
Duval & Stachenfeld is doing both. The 50-lawyer firm, based in New York but with a small L.A. office, starts first-year associates at $60,000 -- or $100,000 below the starting salary at many Am Law 100 firms.
Mid-year and senior associates, however, are promised the same total pay -- or more -- that they'd earn at Latham & Watkins or Skadden, Arps, Slate, Meagher & Flom.
For third-years on up, the firm says it checks what top New York firms like Cravath, Swaine & Moore are paying in base salary and bonuses, and matches that. Last year, the firm added a $10,000 sweetener.
The idea is that it will attract first-years from second-tier schools or less-competitive students at the top schools. Within two years, about half of those junior associates will prove themselves and hop on the gravy train of the top scale. Meanwhile, the hefty pay for mid-level and senior associates makes Duval & Stachenfeld an attractive option for unsatisfied laterals from top firms.
"There's a growing client distaste for the fact that junior lawyers cost a fortune, and are billing higher even if they're not that useful," said founding partner Bruce Stachenfeld. "We thought, 'Gee does it make sense to pay that much?'"
It was difficult to compete with the Skaddens and the Lathams of the legal world for top law school hires, anyway, he said. But the battle they could win was for disgruntled third-, fourth- and fifth-year associates facing a long and uncertain slog to partnership at a megafirm.
"We pay the same or more, and we say that the partnership is yours to lose," Stachenfeld said.
Stachenfeld and Patrick Duval, both former Latham & Watkins attorneys, founded the firm about 10 years ago. The firm is known for its real estate expertise but also works in practices such as corporate, litigation, entertainment and bankruptcy. Billing rates are about 70 percent of big-firm rates, around the $500-per-hour range, and their client list includes Angelo, Gordon & Co.; Sears Holdings Corp.; Credit Suisse and Prada USA Corp.
Duval & Stachenfeld doesn't market itself as a lifestyle firm. Associates generally bill 2,000 hours a year, and while Stachenfeld said he and his partners don't want attorneys living in the office, "We do live for cool deals."
The firm's associate salary model is rare in the marketplace, said Los Angeles recruiter Madeleine Seltzer of Seltzer Fontaine Beckwith. She's heard of other firms where associates might be paid under the market, but get compensated for bringing in business, or get large bonuses if the firm scores a lucrative win.
"But the way this is explicitly laid out, it does sounds unique," she said. "Attracting junior associates would be tough, but, at the senior level, that's very attractive."
For first-years starting at $60,000, pay goes up each quarter, maxing out about $100,000 by the end of the second year. By then, those junior associates are either promoted to the higher scale -- or not. About half are weeded out in the process, Stachenfeld said. But those that make it that far are happy -- only one of them has left.
"Since we're not paying as much, we can hire more associates -- some turn out to be astonishingly good, and sometimes people aren't that good," Stachenfeld said.
Fifth-year associate Joseph Galvano, who started at the firm straight out of Hofstra University School of Law, said he was attracted to the opportunity to work on "cool deals" and decided to suck up the downside of a lower salary.
"Initially you're making a sacrifice but getting really good experience," he said. "And, before you know it, if you're doing great, you get promoted. Now I'm making above what people my year are making. There's a reward at the end."
Firm leaders say the model is working, allowing them to attract laterals from top New York firms, including at least one from Cravath and one from Fried, Frank, Harris, Shriver & Jacobson. In its 10 years, the firm has had just one bad year, and the partners say they chose to dip into partner profits rather than go below market on associate pay.
Peter Ocko, an L.A.-based recruiter with Major, Lindsey & Africa, agreed that it's a novel approach, especially in a climate where clients increasingly don't want to pay for first-years to work on their matters.
But recruiting two different types of associates could lead to problems, he said.
"Are you going to have a conflict of culture or pedigree if the firm is attracting a certain kind of associate because of the salary the first two years then attempting to attract laterals from a different realm?" Ocko said.
Stachenfeld said it was a good question, but so far there haven't been any problems.
The firm opened its California office 18 months ago, following its biggest client, Angelo, Gordon, an investment fund that also opened an office in Los Angeles. The four-lawyer office is helping other California clients, like Westcore Industrial Properties, a Southern California-based developer.
"It's not that we're looking specifically at the L.A. market, but it's a hub for everything on the West Coast, Pacific and Asia," said partner Mark Hulbert, the head of the office here. "And, a lot of our clients might have a California issue and come to us for California help."
The firm is hoping those clients will also be impressed with its stand on associate salaries.
"We don't fight with the big firms in this price war that keeps escalating," Stachenfeld said. "Big firms lock themselves into the battle, but we've elected not to play."