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Leo Cunningham, one of Wilson Sonsini Goodrich & Rosati’s two hiring partners, calls them “born-to-do-deals transaction jocks.” They are the young associates who once populated the printers in Palo Alto, Calif. for weeks on end, breaking occasionally between IPO drafting sessions for 20-minute massages. And there was no truer disciple than Peter Thottam when he graduated from the University of California, Berkeley’s Boalt Hall School of Law in May 1999. After two summers spent at Wilson Sonsini, he was hooked on the prospect of working elbow-to-elbow with the young entrepreneurs hogging the headlines in the San Jose Mercury News. Life at the firm was, well, swell. But by January 2001 the mood, Thottam recalls, had shifted dramatically. Firm dinners were cancelled. Secretaries were forbidden to work overtime; the after-hours word processing staff was dismissed. At least a few powerhouse partners quietly warned their favored associates that layoffs were pending, but assured them that they were all in good stead. Nothing would happen — to them. Thottam, who’d only recently married an investment banker in New York, thought he might escape the rumored bloodbath altogether by transferring to Wilson Sonsini’s Manhattan office. But then the unthinkable happened: A few hours after he put in his request for a transfer, Thottam was terminated by the partner he had considered his mentor at the firm. Thottam was fired in March 2001, a few months before layoffs started happening almost as a matter of course at firms throughout the U.S. Silicon Valley was particularly bloody. With the economy sputtering, far fewer deals were getting done. The Valley’s busiest firms closed only 22 IPOs in 2001, compared to 175 the year before. The same corporate associates who logged hundreds of hours per month churning out dot-com IPOs during 1999 — and vexed their employers by jumping ship in order to join fledgling clients or firms that could offer them more — were now by far the most vulnerable to layoffs nationwide. “We probably suffered some irrational exuberance and grew immensely,” says Wilson Sonsini’s Cunningham. “But it would have been foolish not to ramp up.” Cooley Godward was the first major U.S. firm to announce layoffs publicly: 86 associates and 50 staff, it was reported, were fired on August 23. Cooley, though, was only the beginning of the autumn rout. One day after Tower Snow, Jr., resigned as managing partner of Brobeck, Phleger & Harrison, the firm offered a “separation incentive” — at a reported cost of $7 million — through which 82 associates were paid an amount equal to about four months’ salary and, reportedly, a share of the firm’s investment pool to leave in December. (There would be an additional 54 layoffs at Brobeck in February 2002.) Meanwhile, 100-lawyer Venture Law Group cut 10 corporate associates in October and employed only half as many summer associates in 2001 as the year before. But layoffs have not been limited to corporate associates in Silicon Valley like Peter Thottam, or even to those employed elsewhere by San Francisco Bay Area firms. In secondary technology centers like Boston and D.C./Northern Virginia, associates are — albeit with less fanfare — getting the ax. Boston’s Mintz, Levin, Cohn, Ferris, Glovsky & Popeo reported laying off 12 associates over the summer. D.C. — based firms Shaw Pittman and Arnold & Porter have let a total of nearly 30 associates go as of December, and Swidler Berlin Shereff Friedman laid off 10 associates in 2001 (6 percent of the associate workforce). Even where tech never quite took off, the economic downturn, combined with the shock of the World Trade Center attack, is taking its toll. In New York, firms heavily invested in M&A have been the hardest hit. But “nearly every firm,” says Jon Lindsey of recruiting firm Major, Hagen & Africa, “has turned people away.” In October, Morgan Lewis & Bockius let go of 50 of its more than 1,000 attorneys in one shot, many of whom were employed by the firm’s New York office. It was the biggest single layoff spree on the East Coast — until New York M&A powerhouse Shearman & Sterling dropped its own bomb. In late October, just as many of its competitor firms were busy calculating associates’ annual bonuses, Shearman’s management committee announced that it planned to show 86 associates — about 10 percent of the total number — the door. At Shearman, where growth has been especially rampant in recent years, the associate carnage has been particularly bloody. To the firm’s credit, and perhaps to the benefit of its long-term reputation, the layoffs were publicly attributed to market forces rather than associates’ shortcomings. Still, news of the firm’s layoffs traveled at warp speed — as did highly critical commentary about the firm’s decision. Associates — or at least people posing as associates — bombarded the free-for-all “Greedy Associates” Web message board. Using the most incensed rhetoric they could muster, they railed at the firm’s management team: “599 Lexington Avenue is hell right now,” posted the anonymous Rockbottom. Not surprisingly, Shearman hiring partner Stephen Fishbein doesn’t have much nice to say about Greedy Associates either, characterizing the anonymous message posters as “a few angry people making a whole lot of noise.” Firm spokesman Edward Burke adds that, “It’s hard to separate fact from fiction on these chat rooms, and we’d rather not comment on anonymous assertions.” Elsewhere, the scene is far less dramatic. Lawyers working between the coasts, and outside of tech centers like Austin, Boston, and D.C./Northern Virginia, were less likely to catch the upside that the tech boom brought two years ago but are now weathering the recession better overall than their peers. In cities like Atlanta and Houston (Enron notwithstanding), where firms have grown fairly conservatively and rely less on technology and capital markets than their peers on the coasts, mass layoffs have been avoided so far. “You look at New York and California, and those are the extremes,” explains Wesley Dobbs, the head of legal recruitment in Major, Hagen & Africa’s Atlanta office. “They set a negative tone for the rest of the country, but it’s not necessarily true. You get to the middle of the country and things aren’t rosy, but they are as they have always been — there’s a bit of a calm.” These days, calm is good, and firms are trying to manufacture a sense of economic stability any way they can. Though the practice of law has gradually morphed into the business of law, law firms do not feel they can openly behave like the big banks and corporations they serve by simply laying off employees wholesale. Law firms still try to be collegial places, packed with the possibility of mentorship and the promise of lifetime employment. So, in an unquantifiable number of cases, firms have attempted to rejigger associate numbers without crying “layoffs.” Firms with a flair for redefinition can simultaneously avoid “layoffs” and reduce associate head count by implementing “accelerated” or “aggressive” performance reviews (terminating lawyers who suddenly don’t meet the firm’s standards). The result? In New York, some 4,200 lawyers and legal staff actually lost their jobs over the summer, though only a few hundred layoffs have been reported by firms. In Boston, says Mark Kwatcher of Kwatcher Legal Placement, layoffs are happening quietly — a few people let go here and there based on “stricter reviews.” Brobeck tried to avoid layoffs in the technical sense when it offered severance packages to 82 associates in December. And when Wilson Sonsini handed Peter Thottam his walking papers, the young lawyer was given, he says, very little explanation of why. What’s more, Thottam claims that he was required to sign a sheet of paper stating that his departure was voluntary in order to get his three-month severance package. Thottam soon found a new job in O’Melveny & Meyers’s San Francisco office — only to be terminated for “performance” in early 2002, at a time when, he says, deal-making work at the fledgling office had slowed to a standstill. Relabeling layoffs as performance-based terminations or anything else, however, is tricky business. Of course, it is reasonable for a firm to behave as rational businesses do, by helping the process of natural attrition along in order to cut costs and keep employees busy. But “firms make a big mistake when they [say they] let lawyers go for performance reasons,” says one New York — area recruiter who has seen recession cycles come and go. “They might as well have shot those kids in the head right there and ended their career. Those associates have been branded.” Plus, the ruse can backfire if word that the layoffs were merely meant to save money gets out. “Ten years ago firms blamed layoffs on the associates, and many paid the price,” says Major, Hagen & Africa’s Lindsey. Firms that were forced to lay off associates the last time recession hit, in the early nineties, have in many cases learned their lessons well. Some, at least, took measured steps towards a diverse expansion while attempting to be forthright about the economic health of the firm. “Going back 10 years, we had too many of our resources committed to too few areas,” says Robert Dell, Latham & Watkins’s managing partner. When the last recession hit, Latham let some 30 associates go. “We were heavily weighted in corporate finance and M&A,” he says, “and then our three largest clients basically imploded.” This time around, the firm has avoided layoffs — so far. “The goal has been stability,” says Dell. It’s probably no coincidence that M&A giant Shearman & Sterling, which escaped the downturn a decade ago, largely unscathed, this time had to scale back. Willkie Farr & Gallagher, where layoffs of a decade ago are still fresh in the mind of managing partner Jack Nusbaum, had a record year in 2001. The firm saw its highest revenue and profits per partner to date, and no layoffs. Unlike other firms, says Nusbaum, Willkie didn’t put all its eggs into M&A. To the extent firms are concerned with their reputations among freshly-minted associates (those who have recently or are preparing to graduate from law school), layoffs, and how they are characterized, may not matter much. While some firms are hiring fewer summer and first-year associates than in years past, law firm career placement offices are reporting steady hiring rates. And many recruiters and law firm hiring partners alike say, cautiously, that they see the legal market turning a corner in the near future. At Shearman, says hiring partner Stephen Fishbein, the number of summer associates who have signed on to join the firm full-time — nearly 90 percent of the summer class — is the highest it has been in recent years. There are even rays of hope in Silicon Valley. “There are still opportunities for some attorneys,” says Carl Baier, managing director of the Palo Alto branch of national recruiting firm Major, Hagen & Africa. Firms there, he adds, “are hiring litigators, as well as bankruptcy and intellectual property lawyers.” Venture Law Group partner Don Keller says the firm saw impressive returns on its investment portfolio last year despite the sagging market and high tech fallout, and passed $1 million of the bounty on to associates at the firm. Technology, and the boom that it brought, is not dead and gone, explains Wilson Sonsini’s Cunningham. “It’s not like someone bombed Silicon Valley and blew up all the good ideas.” In any case, unlike junior and midlevel associates already mired in the current legal marketplace, law students still looking for postgrad jobs are unlikely to hold layoffs against any firm that will hire them. “I don’t think firms will be hurt by layoffs, attrition, merit downsizing, re-engineering, or whatever nom du jour they use,” explained one anonymous student in responding to a message board posting last April. “Recent graduates have two things on their mind: passing the bar and landing a job. The thought of a $125K starting salary can certainly cloud any objective thinking when it comes to a reputation.” Law students trying to make sense of this are in a tough spot. How to weed out the good information from the bad? How to differentiate the encouraging state-of-the-firm addresses doled out by firm managers from the often baseless whining on the Web? “We encourage students to read legal magazines and journals, and to studiously do their homework,” says Susan Robinson, assistant dean of career services at Stanford Law School. As for Greedy Associates? “We let them know it’s there, and they definitely read it,” says Robinson. “We strongly emphasize that it’s gossip. But some gossip is true.” Law students can also learn some lessons from Peter Thottam’s story — one of many unfortunate tales wrought by the partial undoing of the new economy. Now a two-time victim of the economic downturn, Thottam (having recently relocated to Los Angeles, where his wife found a new banking job and where he still searches for employment) counsels new lawyers to hedge their bets by never investing too much in one practice area, or getting too attached to one firm. Thottam — himself a Yale graduate and former analyst and investment banker at Goldman Sachs — also warns them not to assume too much about their marketability based on a paper pedigree. Tottham still remains unemployed, but he isn’t out of ideas. An entrepreneur and an optimist, he’s created his own Web site solely for the purpose of posting his retooled resume. In addition, the former Wilson Sonsini associate has read a text familiar to more and more young lawyers these days, Jay Foonberg’s “How to Start Your Own Law Firm.” “I’m giving a lot of thought to opening my own practice,” he says. “Frankly I’m a little scared. But I think I’ve got what it takes to pull it off.”

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