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The question is on every associate’s lips: Are firms laying people off as last year’s flood of transactional work tapers to a slow-moving stream? The answer is not as simple as counting the fallen bodies. While performance reviews of associates have gotten tougher and a few firms acknowledge asking people to move on, there has been no massive scaling back, as there was about a decade ago. In fact, memories of those days are driving firms to become creative in an effort to avoid cutbacks, even though associate salaries now cost firms much more than they did a few years back. Fearing hits to their reputations and the loss of the investment made in training young lawyers, firms have created a new animal: the shifting practice group. Rather than cut junior-level lawyers loose, some firms are attempting to teach transactional associates a new trade, rerouting them from the corporate side to increasingly active groups such as litigation and bankruptcy. Meanwhile, other top partners maintain that despite the carnage in the telecom industry and the general downturn in the technology world, their bottom lines remain healthy. At Washington, D.C.-based Swidler Berlin Shereff Friedman, which is noted for its telecom practice, Chairman Edward Berlin says no one has been asked to leave. But, he says, “there have been people who over the last several months have left, but those were people who came on fixed-term contracts.” For the firm’s permanent associates, Swidler is “working to redeploy resources,” he says, by moving them to “areas where there is a pressing need.” Though Swidler Vice Chair Andrew Lipman says that realigning associates is something the firm might do in any year, such tactics are clearly increasing at law firms in D.C. and around the country. “We’ve been seeing what people can bring to other practice groups,” says Nancy Spangler, managing partner of D.C.-based Piper Marbury Rudnick & Wolfe’s Reston, Va., office, which worked on its share of IPOs in recent times. She explains that lawyers who were doing only transactional work are now pitching in with litigation. “In general, we’re trying to keep them doing both things. I don’t think anybody is 100 percent off to another group.” Piper released eight D.C. associates during its performance review process at the start of this year, and several other associates were given poor reviews. Piper Chief Operating Officer Jeffrey Liss and other firmwide leaders did not return calls seeking comment on whether any associates have been let go more recently. But Spangler says there is a reluctance to let people go. “You spent a lot of money getting these people in the door and training them. You want to keep those resources employed.” Regardless, firms that picked up a lot of manpower in the heyday of the tech boom are having trouble avoiding some cost-saving measures. Telecom-oriented Dow, Lohnes & Albertson counted 71 associates in its D.C. office at the end of June, compared with 78 two months earlier. Managing partner B. Dwight Perry says none of the departures was based on the economy, and while some were generated by negative performance reviews, others were completely voluntary. “There are only two things I see that are fundamentally different: The business of law firms generally isn’t growing like it has [for the past two years, and] expenses, particularly lawyers’ salaries, are up,” Perry says, adding that “if you didn’t build that into your planning, you feel the pinch.” The firm most obviously feeling the pinch is San Francisco-based Brobeck, Phleger & Harrison. Known for its high-tech practice, Brobeck has shifted about 30 associates from its corporate department — including two in D.C. — to areas such as securities litigation and bankruptcy. Additionally, 10 associates at Brobeck have moved into knowledge management, a nonbillable administrative area where associates work on internal projects. And, says Brobeck Chairman Tower Snow Jr., expect to see more associates make moves — even into knowledge management — as he grapples with his public promise that he would resign his post as chairman if he laid off any associates. “Some firms have decided to tough it out, knowing it will affect their profitability,” says Snow. “We’re protecting our people. We clearly will take a hit to our profits this year.” Most recently, the firm announced a voluntary time-off program, allowing attorneys to take unpaid sabbaticals of up to three months this year, or to work part-time. REALIGNING AND REASSIGNING Indeed, massive law firm layoffs done in one fell swoop are hard to find so far in 2001. Associates, even after a negative performance review, tend to trickle away, often because they are given months to find a new job. And the reductions to date may not tell the whole story, since some firms schedule their annual reviews for the fall. Even when the home office of Boston’s Mintz, Levin, Cohn, Ferris, Glovsky and Popeo released more than a dozen lawyers, mainly from its business and finance group, a few months ago, it did not diminish the total number of associates there. Saying the reductions coincided with the firm’s normal performance review process, firmwide managing partner Irwin Heller calls the moves nothing more than a “realignment.” He points out that the firm turned right around and added the same number to the litigation, real estate, and commercial practices, along with shifting other members from the business and finance group. “Right now, litigation and intellectual property and real estate and commercial are booming, and we don’t have enough people,” says Heller. Meanwhile, Mintz Levin’s approximately 30-member Reston outpost is just fine, says office managing partner Mark Wishner. “We didn’t staff up … in part because we couldn’t find the people. A lot of firms that staffed up were very aggressive in their client arrangements,” Wishner says, accepting reduced fees and agreements for payment that were contingent on obtaining financing. “We wouldn’t take that kind of representation. In hindsight, we feel pretty smart.” There are many who say the talk of layoffs is overblown. “I don’t think that the law business generally is in a tremendous slump right now,” says Dow Lohnes’ Perry. “It’s just not growing like it used to.” He adds that his firm’s billable hours, as well as revenue, are close to last year’s numbers. George Mayo Jr., managing partner of operations at D.C.’s Hogan & Hartson, agrees that work is still out there, and says Hogan has not had to lay off any associates. “Our corporate group is busy. They’re just not busy like they were a year and a half ago,” he says. “We don’t have any area that’s completely dead.” Senior partners at the D.C. offices of firms such as Latham & Watkins; Shaw Pittman; Patton Boggs; and Howrey Simon Arnold & White echo the sentiment, all of them declaring that they have not had to worry about laying anyone off. Associates at firms sheltered from the weakest sectors of the economy have been able to remain in their practice groups, but the focus of the corporate work has changed. Harry Glazer, managing partner of Greenberg Traurig’s Northern Virginia office, says that keeping a hand in many areas of the law — a strategy seen as unfashionable as recently as last year — helps keep the firm afloat in good and bad times. “If you were an office that just did venture capital and securities work, you definitely would be hurting,” says Glazer, who claims that office revenues so far this year are up 10 percent over the pace of 2000 and that he faces no layoffs. “We don’t get the highs that some firms get in the market. We also don’t get the lows.” Benton Burroughs Jr., managing partner for the Virginia offices of Reed Smith Hazel & Thomas, similarly says that the firm is ahead of budget for 2001, a feat he says is due to its “full-service” nature. “When you’re very heavy in one particular area, you leave yourself vulnerable. We haven’t seen that as a problem here,” he says. “We continue to have a fairly large transactional practice.” Acknowledging that Reed Smith doesn’t “have a lot of people worrying about IPOs” today, he says associates are engaged with a continuing stream of mergers and acquisitions work. Greenberg’s Glazer contends that the corporate associates in the Tysons Corner, Va., office have already billed an average of more than 1,200 hours as of June 30, putting them on track to bill more than 2,000 hours by the year’s end. Like Reed Smith, what the associates are doing to bill that amount has changed since last summer. “They’re not doing venture capital,” Glazer says. “They’re working on bigger deals” for more established companies. RISKS OF DISPLACEMENT For those firms that have had to move associates to new practice areas, the shifts are not without controversy. Some law firm leaders say the jumps into different departments will be felt in the firms’ pockets as the displaced associates try to keep up with the learning curve, and may even cost the firms the associates if they become unhappy in their new posts. “In my 10 years as managing partner, I can only remember a couple of instances where we asked people to make a move,” says Dow Lohnes’ Perry. “Generally, it’s not that successful. “The skills you have as a transactional lawyer are quite different” than the skills you need as a litigator, says Perry. Similarly, “you can’t take a regular lawyer who doesn’t have any transactional experience and have them have too much use … in a complicated transaction.” And Patton Boggs’ Stuart Pape notes that while all firms move associates occasionally, he is wary of forcing more experienced associates to change practice groups. “The more senior the associate, the harder it is,” he says. “A fifth-year transactional associate is not going to be immediately useful as a litigator.” Mintz Levin’s Heller is heeding that warning, saying that any moves the firm has made have been “exclusively [with] young lawyers” in the first-year through third-year range. “They are still early enough in their careers that they don’t have so much invested,” he says. For all of the warnings, there is one simple fact that associates are hard-pressed to ignore when asked to make a departmental change, says Brobeck’s Snow: “We protect your job and your income.”

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