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Dewey Ballantine has announced that it is laying off between 10 and 15 associates in its Manhattan office, raising the question of whether New York firms are beginning to prepare for a significant downturn in the economy. The associates, who come from a variety of departments and class years, were informed in meetings last week that they had been, in the firm’s word, “outplaced.” Dewey Ballantine’s package for the affected lawyers includes a paid transition period of at least three months and the use of an outplacement firm to assist with networking and career planning. Kathleen Isaacs, the director of human resources at Dewey, said that the layoffs were based on performance issues and that the sluggish economy was not a factor in the firm’s decision. Rather, she explained, the firm’s associate attrition rate has slowed much more than expected in recent months, and Dewey was left with more bodies than it had budgeted for. The firm has about 220 associates in New York. One of the laid-off lawyers said that Dewey’s decision to trim the ranks caught the firm’s associates completely off-guard. “The outplacement was very unexpected,” the lawyer said. “It just sort of hit out of the blue.” But Isaacs said that the announcements were essentially the normal conclusion to the firm’s annual review process, which began late last fall. “I think the best answer is that we were at a point where we would normally review performance and we were a little more aggressive this time,” she said. Dewey’s decisions about performance included a number of elements, including billable hours, Isaacs said, and some of the outplaced attorneys had amassed high billable hour totals. Junior associates were largely unaffected by the layoffs because the firm felt it was too early to make performance judgments on younger lawyers, she said. Dewey’s move follows similar decisions by at least two other New York firms. Weil, Gotshal & Manges parted ways with a “handful” of associates at year’s end as part its biannual review process, according to Norman W. LaCroix, the firm’s chief financial officer. LaCroix characterized that action as a normal, year-end weeding-out process, and said that Weil Gotshal had no plans for any other type of downsizing. In fact, he said, while the softening of the deal market has slowed the flow of corporate work, the firm’s bankruptcy department is busy enough that it is drafting lawyers from other areas of the firm. And he said that the litigation, intellectual property and antitrust areas continue to be active. Weil Gotshal will bring in a summer associate class of about 70 people, up from 64 last year. LaCroix said that barring a dramatic change in the economy, the firm had no plans to change its hiring approach. He added that his impression is that New York firms seem to be taking a wait-and-see approach on the issue of a potential downturn. “In talking to the people I talk to, I don’t have the sense that firms are planning anything draconian,” he said. At Stroock & Stroock & Lavan, four lawyers were laid off during the annual review process in December. But Diane Cohen, the firm’s director of legal personnel, said that the firm still plans to expand. “The firm continues to be busy,” she said. “We currently have 15 lateral associate searches going and numerous partner searches.” FIRMS MORE CAUTIOUS Jon Lindsey, of the New York office of the legal search firm, said that law firms have become a bit more cautious in their lateral searches. Firm that came looking for a dozen attorneys last year are now looking for two or three, he said. But he added that demand is still strong, particularly in bankruptcy and litigation. Lindsey noted that the salary and bonus wars of the last year have also had the consequence of making firms less patient with their associates. “I think they’re being more rigorous in their reviews,” he said. “I think that’s as much a function of the salary increases as the economy.” LaCroix, of Weil Gotshal, agreed that the higher cost of compensation has led to more detailed reviews of associates. “Firms did go through a whole evaluation process based on year-end bonuses, and a lot of firms looked at performance well beyond the subject of billable hours,” he said. “The result has been some weeding out of people who were not the high performers. That could tend to give the illusion of substantive and substantial downsizing.”

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