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Corporate law departments in the Washington, D.C., metropolitan area are holding their own in the souring economy. A survey of the 25 largest in-house shops shows little change in their size between 2000 and 2001. “Even when times are good, in-house legal staffs are not a profit center, and they grow only as the need arises,” says Stephen Nelson, a managing consultant at the McCormick Group in Arlington, Va. McCormick conducted the survey early this year with the accounting firm Deloitte & Touche. The survey shows that many of the area’s biggest in-house departments are the same size this year as last. For example, Freddie Mac, the second biggest, still had nearly 80 lawyers companywide at the start of the year. Marriott International, No. 5, also stayed the same size: 82 lawyers, 60 of them at the company’s Bethesda headquarters. The results are consistent with other parts of the country, says Frederick Krebs, chairman of the 12,500-member American Corporate Counsel Association, based in D.C. “Law departments tend to reflect the rest of the economy, sometimes as a leading indicator and sometimes as a trailing one,” Krebs says. “We haven’t seen any big contractions yet or heard of any mass layoffs or departments disappearing.” And despite the relatively flat level of growth in the District, ACCA’s D.C. chapter has seen its membership boom in recent years. With 750 members, Washington has become the second-largest chapter in the country after New York, says WMCCA President Robert Lavet. “A lot of our growth is fueled by the growth of tech companies in Northern Virginia,” says Lavet, senior vice president and general counsel at Sallie Mae in Reston. Another factor, he adds, is that the local chapter has expanded its programs and contacts with law firms. COMMUNICATIONS GREW The handful of area law departments that showed sizable growth tended to be in still-hot sectors of the new economy, such as communications. For example, AOL Time Warner Inc. has 60 lawyers at its Dulles, Va., office, up from 50 a year ago, according to the survey. Verizon Communications has 50 lawyers in its D.C. office, up from 34 last year. But the communications sector was not all rosy. Two of the top 25 companies filed for bankruptcy protection after the survey was completed. PSINet Inc. and e.spire Communications Inc., both in Virginia, say that the filings did not affect the size of their law departments. In fact, e.spire’s general counsel, Juliette Pryor, says that bankruptcy has only piled more work onto her 12-lawyer staff. “The filing has increased significantly our workload,” Pryor says. She would like to add lawyers, but acknowledges there is little prospect of that at the moment. “Possibly, we will hire a paralegal or two,” she says. The Exxon Mobil Corp. cut way back on lawyers at Mobil’s former headquarters in Fairfax, Va., after the two oil giants merged and moved their combined headquarters to Exxon’s home in Irving, Texas. The local legal staff now numbers 62, down from 109. Ranked first this year is MCI WorldCom’s in-house shop — up from fourth place last year — with an estimated 92 lawyers companywide, 86 of them in the District. The survey estimates the size of the MCI WorldCom legal staff because the company declines to provide numbers. Last year, the surveyors estimated that MCI WorldCom had 73 lawyers companywide, which Nelson now says was probably far too low. One of the most obvious casualties of a slowing economy is the hospitality industry. Marriott’s GC, Joseph Ryan, had hoped to add about five lawyers, but those plans are on hold. “The economy really impacts us,” Ryan says. “One of the things people cut first is business-related travel.” To cut his own costs, Ryan sought concessions from the seven law firms that handle most of Marriott’s outside work, among them D.C.’s Williams & Connolly, Piper Marbury Rudnick & Wolfe, and Arent Fox Kintner Plotkin & Kahn. Of the roughly $20 million a year spent on outside counsel, Ryan estimates a savings of $2 million to $4 million this year, thanks to price breaks. “The firms have been phenomenally responsive,” Ryan says. Among the concessions are discounted rates, rate freezes, and more sparing use of senior lawyers on matters that could be handled by less expensive counsel. In return, Ryan says, when the economy improves, Marriott will be receptive to “reasonable” rate increases, or premiums for “spectacular” work. At Freddie Mac, it’s business as usual, says Senior Deputy GC Alan Hausman. Since the real estate recession 10 years ago, he says, “We’ve been pretty stable for the last five or six years.” Hausman says he has noticed even keener interest in the few jobs that do open up: “The economy doesn’t impact the quantity, but it does impact the quality” of the candidates for job openings. That trend is apparent to headhunters like Stuart TenHoor at D.C.’s TenHoor & Helffrich. The contraction of the dot-com sector has thrown a lot of high-quality legal talent into the job market, he notes. While there are fewer in-house openings now than there were a year ago, TenHoor says that the number of corporate legal jobs in this market has grown considerably in the last five years. And the fact that some lawyers got axed in the dot-com meltdown has not slackened interest in corporate work. “Almost any associate would say, ‘Don’t tell me about law firms. Tell me about in-house.’ “ Adds Nelson of the McCormick Group: “Now they want something safe and in-house.”

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