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Cooley Godward may be the first Silicon Valley law firm to lay off associates, but it’s certainly not the only one wrestling with tough financial choices. The three largest technology firms in the Valley — Brobeck, Phleger & Harrison, Cooley and Wilson Sonsini Goodrich & Rosati — employ more than 2,000 lawyers. And there simply isn’t enough work to keep all of them billing at the levels of the frenzied tech boom of the past few years. Partners say privately that by becoming the first firm to officially do layoffs, Cooley may provide other firms the cover they need to make such a choice. But publicly, firms insist they are not ready to ax associates. Brobeck and its chairman, Tower Snow Jr., have been the most adamant in their assertion that layoffs will be unnecessary. “Nothing that has happened today, and nothing that can happen in the days to come, will change that,” James Burns Jr., Brobeck’s managing partner, said in reaction to Cooley’s announcement. “We believe we can navigate the downturn in the corporate practice.” Wilson Sonsini has also said it will not lay off associates, and a spokeswoman said Thursday that there has been no change in the firm’s stance. Nevertheless, firms may be running out of options. Most have already made drastic cuts in discretionary spending and some have laid off staff. Brobeck, Pillsbury Winthrop and Venture Law Group each have already cut staff. “It’s obviously a scary time for everyone — there’s a lot of uncertainty out there,” said Marina Park, Pillsbury’s managing partner. Pillsbury also cut $10 million to $11 million from its budget this year by canceling retreats and free meals, slashing marketing and recruiting spending, and eliminating overtime for most secretaries and paralegals. “We’ll come in on a net basis a little behind where we were last year, but not appreciably,” Park said. So far, VLG has been the most aggressive when it comes to looking at personnel for places to save money. The firm laid off staff, cut a handful of associates with performance-based firings and offered several other associates a stipend if they’d take a public service job for a year. VLG also demoted another five associates by putting them to work on the firm’s internal databases for a reduced salary. “We hope we’re done with the cuts,” said Donald Keller Jr., a VLG partner. Besides, cost-cutting only gets a firm so far, Keller said. “You have to look at other ways to make sure you’re being aggressive on the revenue side,” Keller said. He and his partners have been out in force, working their networks for new clients. Keller claims the firm has bagged about 100 new clients this year. Some firms have managed so far to skirt making deep cuts. Gray Cary Ware & Freidenrich is expecting to increase its revenue this year by 25 percent. The firm pulled down $190 million in revenue last year. Still, the slowdown will take a bite out of the firm’s profits. “We are accepting the fact that we’re not going to grow our profits by the amount we had hoped,” said J. Terence O’Malley, Gray Cary’s chairman. Money, however, isn’t the only issue for firms: Keeping lawyers engaged not only helps morale, it may insulate the firm from client complaints that they are paying for a bloated, underworked legal bureaucracy. “The tough call we’re all having to make is what is normal,” said Steven Bochner, a Wilson partner. “Clearly, the last two years have not been normal, but is this normal?” “Making a decision about what is the normal level of business going forward is one we’re all trying to make,” Bochner said. Cooley’s layoffs target corporate associates, the group most affected by the downturn in the economy. Stephen Neal, the firm’s chairman and CEO, said the decision to do layoffs was — in part — to make sure all of the firm’s attorneys were engaged and working. Complicating matters further for the firms is the dilemma of keeping a new crop of first-years busy. Cooley has to make room for 85 first-year associates this fall. Moreover, the firm had some 65 summer associates and must decide how many of them to hire for next year while still not knowing what kind of business environment is on the horizon. “We were looking at our gross volume of business from now into the middle of next year — that’s roughly a year — and what is the right head count that we need to keep everyone engaged,” Neal said. Rescinding offers to the first-years was unthinkable, Neal said. It would undermine the firm’s reputation at law schools — damage that’s even greater than the public relations nightmare of a layoff. Wilson and Brobeck are facing similar challenges. Wilson has a summer class of 72 lawyers and expects 84 first-years to arrive later this year. Brobeck has about 80 first-year associates arriving in the fall. On top of that, the firm has a summer class of 128 associates and plans to make offers to about 100 of them. That’s in anticipation that about 80 will accept and come to work next year. “More of them are going into other practices than into corporate,” Burns said.

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