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Even as Silicon Valley firms lay off associates because of a decline in high-tech business, lawyers at a number of large Texas firms vociferously insist they have no plans to do the same. Managing or hiring partners at nine large Texas firms use remarkably similar responses such as “absolutely no plans for layoffs,” “we have a no-layoff policy,” “not us” and “so far, so good,” when asked if they expect to furlough any associates. That doesn’t mean no one has lost a job at a large Texas firm in recent weeks or months, but nine lawyers in management positions at their firms say there are no plans to cut lawyer staffing for economic reasons. The reasons they offer for the health of their firms are remarkably similar as well. They point to diverse client bases and say their practice offerings are diverse as well, with the currently strong bankruptcy and litigation areas balancing a decline in business in some transactional areas. The strength of the energy business has kept Texas firms busy even as dot-coms tanked and the nation’s economy sputtered, they say. And several suggest that Texas firms learned some tough lessons about loyalty and growth more than a decade ago when an economic downturn forced firms to cut staffing. “If you want to have a truly strong law firm you need to keep your talented people, and you can’t treat them like fungible commodities like other businesses do, because the taint lasts a lot longer,” says Kenneth Menges, the Akin, Gump, Strauss, Hauer & Feld partner in charge in Dallas. “Some of our clients in other industries can lay off 20, 30 percent of their workforce and go right back into the job market and replace. … The Texas law firms realized you can’t do that,” he says. In one sense, the layoffs elsewhere in the country may benefit Texas firms. Menges, along with Patrick Oxford, managing partner of Bracewell & Patterson, and Peter Riley, managing partner of Thompson & Knight, suggest the cuts at California firms put some talented associates in the job market. “We see that as opportunity perhaps to pick up a few good folks,” Menges says. The axe started falling in California in August, when Palo Alto’s Cooley Godward announced the layoff of 86 associates and 50 staff. In September, Fenwick & West, also of Palo Alto, announced pink slips were going to 32 associates and 15 paralegals. That’s led to speculation and worry among associates around the country who may be finding themselves much less busy than a year or two ago. One recruiter in Texas, who did not want to be identified, says he is picking up a lot of tension among associates at some large Texas firms, but not necessarily concrete news of layoffs. “I think right now everybody’s waiting for the axe to fall,” the recruiter says. But lawyers at the nine large firms say right now their firms aren’t laying off associates for economic reasons and haven’t instituted hiring freezes. While time will tell what havoc a possible recession will place on Texas firms, one concrete indicator of the health of the firms is the number of summer clerks who were offered jobs for the fall of 2002. According to statistics collected from 19 of the 25 largest firms in Texas, 79 percent of the students who clerked at the firms during the summer of 2001 having completed at least two years of law school were offered jobs as first-year associates to start in the fall of 2002. That is 687 of 870 clerks at the 19 firms. (The numbers also include a couple students who will do judicial clerkships after graduating from law school in 2002 and won’t start their firm jobs until the fall of 2003.) The offer percentages range from 100 percent at Winstead Sechrest & Minick (20 of 20 clerks) to 60 percent at Akin Gump (39 of 65 clerks.) W. Mike Baggett, managing partner of Winstead Sechrest, says the firm purposely cut back the size of its summer clerk program in 2001, and expected to make a high percentage of offers. “The main thing is to try to plan ahead far enough in advance so you aren’t overstaffed, but that’s easier said than done,” Baggett says. “We want to look at the long-term picture, kind of how the stock people tell you to remain diversified. Well, law firms better remain diversified, and they better pay attention to the mix and the cycle.” Daniel Micciche, hiring partner at Akin Gump, says the firm’s offer percentage is slightly lower than normal, maybe by one offer per office. The more normal rate for offers is 75 percent, he says. He says the firm’s partners are looking at hiring cautiously because of an uncertain economy. But also, he says, retention is up. “Our retention plans are really working,” Micciche says. “We put so much time, money and effort in associate retention with our training programs and our compensation plans and, for example, in our compensation plan, we’ve got profit-sharing elements as well as a longevity bonus.” Haynes and Boone had its largest summer clerk class ever in 2001, but only made offers to 84 of 117 2Ls, or 71.8 percent of them. Taylor Wilson, the firm’s hiring partner, says the percentage is consistent with the firm’s five-year average. He says the firm extended offers to 78 percent of its summer clerks in 2000, but only 69 percent in 1999. “We hire for the long-term, and we really do not vary our offer rate dramatically in the face of economic conditions or changes in economic conditions,” Wilson says. He adds that the firm made a mistake during the early 1990s, during an economic downturn, and cut hiring dramatically. “In retrospect, we should have maintained our numbers during that period,” he says. SERENDIPITY, TOO So what are Texas firms doing to avoid layoffs? Firms are looking to fundamentals, like expenses. But there’s serendipity, too. Some firm leaders are wiping their brows in relief that supply and demand kept them from hiring as many corporate associates as they wanted to in the recent boom years. But some of it is structural. That’s true for Fulbright & Jaworski, suggests Michael Conlon, a member of the firm’s executive committee. “We don’t borrow money, so we don’t face debt-service requirements. We have a diversified general practice so … we were not heavy into technology. We’re not heavy into the dot-com, we are heavy into biotech,” Conlon says. Howard Ayers, managing partner of Andrews & Kurth, says his firm is benefiting from having a large bankruptcy section, and a large number of energy-industry clients, among other strengths. Richard Johnson, managing partner of Baker Botts, notes, “It’s a little bit like how you handle your retirement plan. The advice you get from professionals is to diversify a bit. Our firm is reasonably well diversified.” Thompson & Knight has traditionally performed better in a struggling economy than in a prospering one because of its practice mix, so the firm is doing as well this year as in 2000, says Riley, the firm’s new managing partner. He says the firm’s litigators have gone from being 90 percent busy to fully employed, and while lending is down on the corporate side, international energy and other energy work is still strong. He says the firm continues to hire laterals, although probably not lending or corporate lawyers. “We see this as an opportunity to actually grow,” Riley says. Oxford says Bracewell has tried to stick with its growth plan and didn’t succumb to the temptation of hiring an overabundance of lawyers for the dot-com, high-tech practice. He says the firm manages its workload by using contract and part-time lawyers. “You can’t be driven by the long-term economic blips,” says Baggett, Winstead’s managing partner, who wonders what some firms will do with some of the “high-tech IPO gurus” they hired two or three years ago when startups were all the rage. ASSUMPTION OF THE RISK Recruiter Rob Rowland, owner of Houston-based Associated Counsel of America, says he’s seeing more orders for contract lawyers and says some clients are requiring their outside counsel to use contract lawyers for work like document production. While firms are still hiring selectively, recruiter Geoffrey Lee, of Counsel Source Inc. of Dallas, says the market is “incredibly soft across the board” compared to a year ago. “There are a few exceptions . . . bankruptcy and litigation and IP, but transactional across the board is very quiet, and the process that a year ago took a couple of days, now takes a couple weeks or maybe a couple of months,” Lee says. “There is no great sense of urgency to snap somebody up for fear somebody else is going to snap them up.” To prevent layoffs, partners should also be prepared to take home less money, says Steven Zager, the partner in charge in Texas for California firm Brobeck, Phleger & Harrison, which has offices in Austin and Dallas. Zager says Brobeck isn’t laying off anyone. He says that while the partners are looking at expenses, he expects profits per partner in Texas to be lower in 2001 than the $1.17 million on average in 2000. (Those profits were considerably higher than the $614,000 on average for partners in all of the 25 highest-grossing firms in Texas in 2000, according to Texas Lawyer‘s annual report on firm finance.) Zager says the firm’s partners decided to take the brunt of the economic downturn. Notes Zager, “When you own the business, shouldn’t you take the risk?”

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