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Cadwalader, Wickersham & Taft’s Jan. 10 decision to dump 35 attorneys from its capital markets practice is the latest attorney castoff stemming from the subprime mortgage mess. The 721-attorney law firm based in New York announced that the layoffs would affect “targeted personnel,” including 35 lawyers in its U.S. offices. The firm said in a statement that a downturn in capital markets work also is forcing it to diversify practices and redeploy “certain persons” into other practice areas. The layoffs at Cadwalader signal the most significant fallout at a law firm to date due to the subprime mortgage collapse. In November, McKee Nelson announced that it was cutting about 25 associates through buyouts and “sabbaticals,” it said. The firm grew from 172 attorneys in 2006 to 225 attorneys in 2007 largely from a practice concentrated heavily in asset-backed securitization matters. Clifford Chance sent six associates packing in November from its structured finance group that worked exclusively with Standard & Poor’s, reviewing documentation that the credit-rating agency uses to rate mortgage-backed securities. In addition, New York’s Thacher Proffitt & Wood has offered severance packages to about 24 associates in its real estate and structured finance departments. The firm’s managing partner, Paul Tvetenstrand, said on Jan. 10 that many of those associates already have left and that he expects all of them to depart. About 110 Thacher Proffitt attorneys continue to do structured finance work, he said. Observers are closely watching other firms, including Orrick, Herrington & Sutcliffe and Sidley Austin, to see whether they will slash their attorney ranks in the practice area as well. Cadwalader is ranked fourth in terms of profits per partner among the AmLaw 100 firms, The American Lawyer‘s list of the nation’s highest-grossing law firms. In 2006, its profits per partner equaled $2.9 million, a 13.9% increase from the year before. The American Lawyer is an affiliate of The National Law Journal. The layoffs at law firms in the specific area of asset-backed secured finance could extend to other practice areas as a credit squeeze chokes off mergers and acquisitions work, said David Wilkins, a professor at Harvard Law School whose scholarship focuses on law firm management. “Law firms have grown so rapidly,” Wilkins said. “There are so many more bodies potentially affected.” Wilkins added that, even if foreign lenders step in to fill the credit gap, parties may well turn to firms outside the United States to handle the work. “U.S. firms may not be ones best positioned to do those deals,” he said, adding that London’s Magic Circle firms may snag the work instead. Cadwalader has 463 attorneys in New York; 106 in Charlotte, N.C.; 82 in Washington; 67 in London; and three in Beijing. It is the 50th largest law firm, according to the NLJ 250, The National Law Journal‘s annual survey of the nation’s biggest law firms. Before the Jan. 10 announcement, it had 501 associates and 77 equity partners. In Cadwalader’s statement released through the public relations firm Hill & Knowlton, it said that the layoffs would affect “some talented lawyers who have made significant contributions to the firm.” It added: “The firm’s partners and management committee have put a great deal of effort into mitigating the impact of the business environment on the firm, making today’s announcement even more difficult.”

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