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This time, angry area managing partners and general counsel can blame Hogan & Hartson. The firm placed the District at the heart of the latest round of the salary wars when it announced last week that it was raising its pay for first-year associates to $160,000 in its D.C.-area and West Coast offices. The increase came in the wake of pay hikes in the first week of May by California-origin firms, which raised salaries to $160,000 on the West Coast, in D.C., and in some cases across their domestic offices. Firms also gave their other associate classes corresponding raises. “We are committed to compensating our associates fairly and competitively,” says Hogan Chairman J. Warren Gorrell, who says the firm made the decision in light of other national firms’ pay raises. Although more than 20 New York-based and national firms had already hiked to $160,000 in the nation’s capital, Hogan was the first Washington stalwart to do so. Akin Gump Strauss Hauer & Feld matched within a day. No other D.C.-based firm has moved pay up. Hogan was also one of the first firms to boost first-year pay to $145,000 in D.C. during the first round of the salary wars this January and February. On May 3, San Francisco’s Orrick, Herrington & Sutcliffe announced first-year associates in the firm’s California offices would also be paid $160,000. Orrick was already up to $160,000 in its D.C. office, but the California-origin firms that matched Orrick in California weren’t. O’Melveny & Myers caught up with Orrick within hours and bumped its D.C. associates to $160,000, too. Morrison & Foerster; Paul, Hastings, Janofsky & Walker; Latham & Watkins; and Gibson, Dunn & Crutcher did the same within a few days. And then came Hogan. It’s only a matter of time until other D.C. mainstays such as WilmerHale, Covington & Burling, and Arnold & Porter make the leap, industry insiders say. “We plan to be competitive in the markets in which we operate,” says Arnold & Porter Chairman Thomas Milch, who says the firm will continue to monitor the market and discuss what to do in the coming days, a sentiment echoed by managing partners of several D.C. firms. “The war for talent is so fierce,” says Stephen Nelson, an Arlington, Va.-based recruiter. “Firms don’t have much of a choice.” But clients aren’t so convinced. While associates consider what they’ll do with the new influx of cash, corporate counsel are worried that they will end up footing the bill through rate increases. According to a new Altman Weil Flash survey, 58 percent of general counsel surveyed in April (note, this was before $160,000 mania hit the West Coast and D.C.) thought the recent increase in is “outrageous,” while only 16 percent felt it was “the cost of doing business.” General counsel aren’t just pontificating about the salary increase. Susan Hackett, the senior vice president of the Association of Corporate Counsel, says more legal departments are putting restrictions on the use of first- and second-year associates in their retention letters. According to the Altman Weil survey, 13 percent of respondents changed their policy regarding the use of first- and second-year associates as a result of the recent salary hikes. Clients are likely to retain their big-name firms, but send an increasing amount of their more routine matters to second- and third-tier firms with lower rates, Hackett says. “Law firms are presently riding high on high utilization rates,” one respondent to the Altman survey wrote. “It will not always be this way. In economic terms, law firms are creating demand destruction.” Firms should stop throwing money around chasing after the same top students from the top 10 law schools, Hackett says. Being on law review isn’t the best predictor of a successful legal career, she notes. “Partners should invest money in training, supervising, and cultivating young associates,” she says, rather than not having any time to mentor them because they need to bill another 200 hours to pay for their raises.
Alexia Garamfalvi can be contacted at [email protected].

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