Thelen Reid Brown Raysman & Steiner laid off 26 associates and 85 staff on Wednesday afternoon, the most dramatic step in a package of moves reacting to tough economic times.

The firm is also trimming its summer associate program from 11 to eight weeks and is pushing the start date for first-years from September to January. Co-chairman Stephen O’Neal characterized the decisions as a smart response to an unforgiving economy.

“It’s no secret that businesses generally and law firms in particular around the country are feeling recessionary pressures and dealing with them, and we have been giving consideration to how best we should [do so],” he said Wednesday.

“We’re being proactive,” he said. “Many other firms have engaged in cost-cutting measures.”

Last year was the firm’s first full year following the 2006 merger of San Francisco-based Thelen Reid & Priest with New York-based Brown Raysman Millstein Felder & Steiner. The merged firm posted a nearly 50 percent increase in both headcount and revenue when compared to its predecessor Thelen Reid & Priest. 2007′s figures showed the firm raked in $345 million in revenue, with profits per partner dropping 4 percent to $805,000.
Thelen’s reaction to “recessionary pressures” includes:
  • Layoffs of 26 junior and senior associates
  • Layoffs of 85 staff members
  • The start date for first-years has been moved from September to January
  • Cutting three weeks from the summer associate program

Thelen may be the first major West Coast firm to announce layoffs, but lawyers have been laid off from two New York firms � Cadwalader, Wickersham & Taft and Thacher Proffitt � and national firm Dechert over the past six months.

O’Neal said the current cost-cutting package did not include partner layoffs, though he was vague about whether any partners have been pushed out this year.

“There were no changes in the partnership announced today,” he said. “Every year there are changes made to the partnership as part of our compensation cycle and that sometimes results in people leaving the firm as part of decisions made by the firm.”

While Thelen is the first major Bay Area firm to announce such layoffs, it likely won’t be the last.

“There’s no question about it � you’re going to see other layoffs,” said Peter Zeughauser, a consultant with the Newport Beach-based Zeughauser Group.

He said Thelen’s move might embolden other firms that had been hesitating for fear of the public relations hit.

“I know with other firms it’s already on the table,” he said. “You’re going to see � partner losses.”

O’Neal said at least one associate was laid off in each of the 550-lawyer firm’s nine offices. He declined to describe the layoff packages given to those attorneys, but he said they were “what we understand to be market.”

While he acknowledged that the associate layoffs were directly related to the ongoing economic troubles, he said some of the staff cuts were the result of consolidating following the merger.

The layoffs of associates, both junior and senior, mostly came in the business and finance, litigation and construction practices, O’Neal said. The firm said the layoffs are no different from those enacted by other firms in years past such as the 86-associate Cooley Godward layoff in 2001.

“We remember them,” O’Neal said. “And Cooley was very straightforward that they were doing it to ensure the strength of the firm, and we’re doing the same thing.”

“[Cooley] needed to do it and they admitted they needed to do it,” Zeughauser agreed, “and I think that candor helped them a lot.”

While Thelen’s capital finance practice has been hit hard by the failing economy, the renewable energy, cross-border M&A, litigation and China practices “are doing very, very well,” O’Neal said. Construction, he said, is the firm’s busiest practice area.

“But you have to look at the overall picture and take steps as business people to make sure you have a continued profitability level that is very strong,” he said.

“2007 was not a year where we were cutting,” he said. “It was a year where we were coordinating, building and understanding what it takes in terms of staffing to run this firm efficiently.”