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Perhaps something really is out of whack when a first-year associate is paid more than the Delaware chief justice. Mega-firm Skadden Arps Slate Meagher & Flom is giving law school graduates $140,000 a year to start in its Wilmington office. Mini-state Delaware is paying Chief Justice E. Norman Veasey $133,000 for the year — although he should get some sort of raise once the new fiscal year begins July 1. It’s enough to make a partner wince. “The chief justice is greatly underpaid. I have long felt the judges on our courts have been seriously underpaid for the work they perform, particularly our Supreme Court,” said Rodman Ward Jr. of Skadden. The problem is that Veasey, Ward and the rest of the legal community involved in Delaware’s high-end corporate practice are up against a law that, for once, they can’t control — the law of supply and demand. The marketplace has taken over. The stark reality is that the top law firms are in a raging competition for a limited supply of associates, while there is only one Delaware chief justice’s post in demand from an untold number of judges and lawyers who can imagine themselves atop the state’s legal pyramid. The result is that Wilmington, Del.’s marquee law practices — while not quite in Skadden’s elite league of associate salaries — are paying their new hires in the range of $90,000 to $105,000 a year. That’s up about $10,000 from last year. “The supply side on work is very strong. That’s what drives all this,” said R.J. Scaggs, the chairman of the recruiting committee at Morris Nichols Arsht & Tunnell in Wilmington. “It is as fluid a situation as I’ve seen in the last seven or eight years.” “I’d love to be a headhunter right now — a headhunter or a first-year associate,” said Jan R. Jurden, the hiring partner at Young Conaway Stargatt & Taylor. “These students aren’t stupid. They know there’s a shortage of lawyers. They’d be foolish not to take advantage of it, even though it makes us cringe.” David S. Swayze, a partner at the Wilmington office of Reed Smith Shaw & McClay, finds himself recalling fondly the days that starting associates were paid $62,500 a year. It was all the way back in 1998. “It seems to me like that was yesterday,” he quipped. It is, in the words of William E. Manning from the Wilmington office of Klett Rooney Lieber & Schorling, a world of “sticker-shock salaries.” SPREAD LIKE A VIRUS Salary creep did not originate here but migrated in like an “ILOVEYOU” e-mail virus. It began in Silicon Valley where law firms engaged in a tug-of-war with dot-com companies for new lawyers and spilled into the customary competition with investment banking houses. Add in the strong market in corporate and commercial work, and suddenly this was a problem that could be solved only by throwing money at it — or else the non-legal rivals were going to win. “They mine the law schools the way they mine the business schools and the technical schools,” Swayze said. Wilmington firms did not have to pay attention as long as the money crunch was focused on the West Coast, New York and Washington, but when it began to show up in Philadelphia earlier this year, they did. Not only does Philadelphia represent prime competition with the Delaware firms for attracting new associates, but there is now a significant presence of Philadelphia firms with Philadelphia salaries operating in Delaware. So much for that intangible “lifestyle” advantage. “The number of out-of-town firms is increasing, so you have to take into account what they’re paying,” said C. Stephen Bigler of Richards Layton & Finger in Wilmington. A close look at the salary numbers shows there may be a bit of a disparity, however. The Delaware firms of Morris Nichols, Richards Layton, Young Conaway and Potter Anderson & Corroon still appear reluctant to crack the six-figure mark, holding at $90,000 — at least for the moment. The imports like Pittsburgh-based Reed Smith and Philadelphia-based Saul Ewing Remick & Saul have gone to $100,000 a year. Fish & Richardson of Boston is paying $105,000 a year for its Wilmington office. Skadden, as usual, is a world unto itself, paying $140,000 a year because it’s the going rate in all of its offices. LOCAL FIRMS ADJUST Still, the home-grown firms aren’t averse to making adjustments if they have to. C.J. Seitz, who serves on the management committee at Connolly Bove Lodge & Hutz, said the firm’s national practice in intellectual property has led it to offer in excess of $100,000 to new associates who also have doctorate degrees in science, like biotechnology. For all the attention the salaries at the top firms are attracting, they are not exactly the norm. The starting range elsewhere typically is $40,000 to $50,000 a year, according to Ian Connor Bifferato, the chairman of the Small Firms and Solo Practitioners Section of the Delaware State Bar Association. “It doesn’t impact us nearly as much. We’re more in tune with the rest of society for professionals,” said Bifferato, who practices at Bifferato Bifferato & Gentilotti in Wilmington. Furthermore, while the small firms don’t have to pay the high-end salaries, they may find a way to benefit from them. At Oberly & Jennings in Wilmington, former Attorney General Charles M. Oberly III said he and partner Kathleen Jennings, his former chief deputy at the state Justice Department, are getting clients who balk at paying the fees charged by the big law firms. “Somebody is going to have to pay for those [higher salaries],” Oberly said. “People can hire Kathy and me, and our rate per hour is not going to be the same as a senior partner at a big firm. More and more we’re seeing the big firms only handling clients who can afford them — corporations with big pockets.” DOWNSTATE DIFFERENCES If smaller firms in Wilmington can ignore the salary spiral for new associates, it is even more so downstate. Dennis L. Schrader, the Georgetown attorney who is president-elect of Delaware State Bar Association, said law firms in Kent and Sussex counties are likely to pay their starting lawyers what the public sector is paying. That would put new hires downstate in the same range of pay as the small firms upstate — because lawyers without experience start at the state Justice Department at $41,076 a year, in the Wilmington City Solicitor’s office at $48,577 a year and at the New Castle County Law Department at $52,287 a year. “There are regional differences in the salaries that are paid to new lawyers. In downstate Delaware, the salary for associates is more likely to be aligned with those paid to government attorneys,” said Schrader, who practices at Wilson Halbrook & Bayard in Georgetown. “That’s reflective of the economics of the law practices in Sussex and Kent counties. We’re more likely to be general practitioners with some areas of interest.” Nor is there likely to be an exodus north by the downstate attorneys, who can be possessive about the time they have for hunting and golfing. “There are lifestyle differences that can’t have dollar signs attached to them,” Schrader said. Only time will tell whether the big firms, endlessly needing to replenish their supply of first-year associates, will continue to have to show them the money. Manning at Klett Rooney wondered whether the incoming law school graduates will find themselves working so hard to justify their salaries that they won’t be able to enjoy their riches. Word could spread. “Who knows?” Manning said. “They may be so miserable, others throttle back.”

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