Almost 800 associates and legal staff nationwide returned home jobless Thursday after eight firms conducted mass layoffs, citing an unprecedented downturn in demand.
And the bloodletting is likely to continue.
“There will be more,” said consultant Peter Zeughauser. “Materially more. I’m aware of some big ones coming up.”
California was not left unscathed by Thursday’s cuts, although it’s unclear how many people in the state were hit. The cuts targeted finance and real estate practices, demand for which has almost completely dried up since the financial crises hit last fall.
“It is now apparent that this downturn will be deeper and broader than past recessions, and all business sectors will be adversely affected in some way,” Goodwin Procter Chairwoman Regina Pisa wrote in a memo announcing that the firm would lay off 38 associates and 36 staff, about a 4 percent reduction. In California, four associates and three staff were let go.
Other firms did not say how many people in California were let go, but acknowledged there were cuts in the state.
DLA Piper cut 80 associates, or 5 percent of its U.S.-based lawyers. Aside from 28 associates in New York and Chicago, the reductions are primarily on the West Coast, Chairman Francis Burch Jr. told Recorder affiliate The National Law Journal. DLA’s spokesman declined to say how many attorneys were laid off in California.
DLA also let go of 100 staff members across the firm’s 26 U.S. offices. Before the cuts, DLA Piper had about 1,500 attorneys in the United States and 3,800 attorneys worldwide.
“It’s not healthy to have lawyers sitting around not having work to do,” said Lawrence Watanabe, a legal recruiter based in Los Angeles, who added that layoffs are a positive signal of a firm’s being responsible toward its bottom line.
“The very assets of these law firms are the partners that generate business, and they cannot afford to have those partners unhappy with the financial performance of their law firms,” Watanabe said.
Florida-based Holland & Knight cut 70 lawyers — or 7 percent of its 1,030-lawyer workforce — and 173 support staff across 21 offices. Philadelphia-based Dechert laid off 19 attorneys, or 2 percent, across all its offices in the United States. Philadelphia-based Cozen O’Connor laid off 61 support staff, including “a couple” in California, according to President and CEO Thomas Decker.
St. Louis-based Bryan Cave cut 58 attorneys, or 5 percent, and 76 staff, or 6 percent.
Already this month, Nixon Peabody; McDermott, Will & Emery; Clifford Chance; and Linklaters laid off attorneys and staff. The cuts come after a nationwide round of massive layoffs two weeks ago that sent more than 1,000 lawyers and staff packing. That week, Morrison & Foerster laid off 201 people. Wilson Sonsini Goodrich & Rosati and Cooley Godward Kronish each laid off more than 100 people, and Fenwick & West laid off 36 staff and said it was freezing associate salaries for the upcoming year. Orrick, Herrington & Sutcliffe was one of the first firms to conduct layoffs, cutting 75 last fall. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian cut half of its first-year class in January. San Diego-based Luce, Forward, Hamilton & Scripps said earlier this week it will lay off 27 people. It confirmed on Thursday it will also rescind its offers to incoming associates and cancel its summer program.
Zeughauser said firms hired ambitiously over the past 10 years and are now retrenching.
“Attrition rates were high because of a talent shortage. And everything hit a wall in the last quarter of 2008,” he said. “Now firms are retrenching. Firms are full. They gorged on associates and now are told they need a quintuple bypass. Nobody saw this coming.”
In November, DLA asked nonequity partners to kick in extra capital in exchange for a limited stake in firm profits and losses as a way to reduce the firm’s credit exposure. The firm froze associate salaries at the beginning of 2009. U.S. managing partner J. Terence O’Malley said last week only a handful of partners did not participate, and opted to take on a different job description, such as senior counsel.
Earlier this week, DLA’s United Kingdom operation announced a plan to lay off up to 30 lawyers and 110 staff members.
IT’S THE ECONOMY
Like the other firms, Goodwin Procter pegged the cuts to the economy. “While Goodwin Procter is fundamentally strong and healthy, we — like most law firms — are not immune to the effects of this recession,” reads a statement from the firm. “Our transactional practices, in particular, have seen a decline in demand for legal services that unfortunately does not show signs of improving in the near term.”
The statements said that the uncertain length of the downturn was a factor in its decision to eliminate jobs.
A Dechert statement said the layoffs were “primarily due to a reduction in demand that has affected most, if not all, of the legal industry.”
“We are in a rapidly changing economic environment and it is impossible to predict the future. We will deal with the world as it changes,” the statement continued. “The lawyers who are being terminated will receive a severance package consistent with what we have done in the past.”
In mid-December, the firm announced it laid off 72 administrative staff in its U.S. offices, which accounted for about 12.6 percent of the firm’s 570 U.S. support staff members.
DLA Piper announced its layoffs in an e-mail around 1:30 p.m., which stated firm leaders “worked hard to consider and employ every reasonable measure to avoid lawyer and staff reductions.” Firm leaders also met with those who were being let go.
Ann Ford, a member of DLA Piper’s executive committee based in Washington, told Recorder affiliate Legal Times that this is the first time the firm has had a nationwide reduction in its work force. “It was a very difficult and sad decision for the firm, because these people are an important part of the firm.”
DLA’s Burch told The National Law Journal that associates who are laid off will be given 12 weeks of severance in addition to outplacement assistance. The majority of DLA Piper’s associates being cut are in its corporate finance and real estate practices, Burch said. While Ford said the layoffs will not focus on any particular practice areas, she added: “We could be overstaffed on the transactional side.”
Epstein Becker & Green, a health care-focused East Coast firm, laid off 23 attorneys and 30 staff members. A statement from the firm cited the economy as the reason for the reduction, but it said it is on “solid financial footing,” and that no further layoffs are planned. A spokesman contacted by The National Law Journal declined to specify the offices or practice areas most affected by the cuts.
Holland & Knight’s cuts, coming after it posted another year of disappointing financial results, were announced to the firm late Thursday evening in an e-mail from managing partner Steven Sonberg.
In the e-mail, Sonberg said management had been working for months to analyze the firm’s operations and revise its 2009 budget based on the “adverse effects of the current economic downturn.”
“The firm is taking additional steps to address market conditions,” Sonberg wrote. “We are looking at all aspects of our firm’s operations as part of our plan to improve efficiency.”
The layoffs of lawyers and 173 staff members were spread across Holland’s 21 offices.
“The decisions were very difficult, but we felt that they were necessary to meet our clients’ changing needs and expectations,” Sonberg said in an e-mail responding to questions from Florida’s Daily Business Review, a Recorder affiliate, about the firm’s financial performance.
Employees being laid off will be given severance pay, continued health care benefits and placement services, he said. Other elements of the plan include attorney reassignments to higher-demand practice areas, a reorganization of staff functions, and undisclosed modifications to partner, associate and staff compensation systems.
Jerry Kowalski, a legal consultant and name partner at Kowalski & Associates in New York, said Thursday’s flood of layoffs could mark an effort by law firms to get lost among the crowd when letting people go. “In past years, law firms lost a lot of their reputation when they announced layoffs. Now, because all of the expectations for 2009 are so bad, it’s no big deal,” he said. “You want to get buried in the tsunami of layoffs.”
Reports from Recorder affiliates Legal Times, The National Law Journal, The Legal Intelligencer and The Daily Business Review contributed to this story.
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