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Gunderson Dettmer Stough Villeneuve Franklin & Hachigian laid off 16 associates and 28 staff Thursday, becoming the fourth Silicon Valley firm to shed workers as the economy continues to spiral. Like the other law firms that have resorted to a layoff, the 164-lawyer Gunderson blamed the cuts on a shortage of work and not on dwindling firm profits. “It wasn’t so driven by the financial picture: It will be a pretty strong year,” said Steven Franklin, a Gunderson partner who oversees most of the firm’s daily management. “You have folks who don’t have as much to do as they want and in addition, we have a relatively large entering class coming.” The firm’s 20 first-year associates, half of whom arrive later this month, will not be affected by the layoff, Franklin said. The cuts — which represent almost 12 percent of the firm’s 138 associates and 18 percent of its 152-member staff — are in Gunderson’s Menlo Park, Calif., and Austin, Texas, offices. Its New York and Boston outposts were spared. The firm paid the associates a three-month severance package and hired Major, Hagen & Africa, a lawyer search firm, to help them find new jobs. Gunderson won national attention when it sparked an industrywide salary war by hiking associate salaries by some 30 percent in late 1999. And last year, the firm cracked the AmLaw 200, the list of top-grossing law firms compiled by The American Lawyer, an affiliate of The Recorder and law.com. The firm generated $70 million in revenue and logged $900,000 in profits per partner. By doing a layoff, the Menlo Park boutique risked earning less welcome celebrity for frivolous management. However, lawyers at firms that raised salaries to compete with Gunderson aren’t using the boutique’s layoff decision as an opportunity to gloat. “There’s an irony to it on some level, but I don’t think the increase in salaries is what drove the work away,” said Mark Pitchford, chief operating officer at Cooley Godward. Cooley was the first Silicon Valley firm to match Gunderson’s raise and the first to do a layoff this year because of the downturn. Had there been no raises, Pitchford said, “Sure, there’d be less expense pressure and maybe a [lawyer] position is spared, but you’re talking about an industrywide, national economywide pullback,” Pitchford said. Cooley cut 86 associates in August. It was followed two weeks later by Fenwick & West, which laid off 32 associates. Last week, San Jose’s Skjerven Morrill MacPherson cut 11 associates and this week, Oakland’s Crosby, Heafey, Roach & May laid off 13 associates. Other Silicon Valley firms have used stricter performance standards to thin their ranks of associates without laying off en masse. Venture Law Group, which, like Gunderson, depends heavily on venture capital activity, moved into what so far has been no man’s land — the firm told its first-year associates not to come. VLG had already pushed back the start date to January for its 10 first-year associates. Last week, the firm pushed the start date back indefinitely, although it did not rescind the offers. Instead, VLG gave them the option of waiting indefinitely for work to pick up, taking a two-month severance package or taking a temporary job at a public service agency, which VLG would subsidize. “It’s painful to have to do this, for us and for them,” said VLG partner Michael Morrissey. “The reality is we just don’t need these folks in January.” Oddly, the moves haven’t sullied the allure of Silicon Valley firms on campuses like Harvard Law School. “If the associates believe they’re being treated fairly, I really don’t think it’s going to haunt these firms in the long run,” said Mark Weber, director of career services at Harvard. “VLG is not the bad guy,” Weber said. “Everybody knows this is economic, you just don’t want it to happen to you.” One Gunderson associate, who spoke on the condition of anonymity, said he’s saddened by the cuts but he saw them as a difficult choice the partners had to make in tough times. “They need to do what’s best for the firm,” he said. In a memo to the firm’s employees, Gunderson co-founder Robert Gunderson Jr. wrote that last month’s terrorist attacks have darkened the economic outlook and hastened the need for a layoff. “The events of September 11th have changed the short- to mid-term outlook significantly, extinguishing the post-Labor Day uptick that seemed to be developing,” Gunderson wrote. “Over the past month, the demands to right size the organization became overwhelming. Reluctantly, we have come to believe that it would be worse to continue at current levels of activity than to endure the pain of right-sizing the organization,” Gunderson wrote.

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