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For all the talk of litigation, bankruptcy and intellectual property practices making up for the shortfall in major corporate transactions, the nation’s largest law firms are struggling with how to manage growth in the face of a slower-than-expected recovery. According to research conducted by Danilo DiPietro, the head of the law firm group at Citigroup Private Bank, average revenue growth at large firms has slowed to around 6.5 percent for the first half of 2002. This compares with the 13 percent revenue growth The American Lawyer Am Law 100 saw in 2001 and the 19.5 percent revenue growth in 2000. DiPietro, citing results from 67 of the firms in The American Lawyer Am Law 100 and 45 Am Law 200 firms, said he is projecting flat profits at best for most firms this year. “Even if there were an uptick in the second half, it probably wouldn’t be reflected this year,” he said. In any case, that uptick is nowhere on the horizon more than two years after the first signs of trouble hit the legal economy. Despite the layoffs and aggressive performance reviews that have thinned the ranks of both associates and underperforming partners at many firms, DiPietro said firms are still overstaffed by an average of between 5 percent and 10 percent. “It’s a question of how much excess capacity they want to maintain,” said DiPietro, who recently discussed such issues with more than 25 large-firm managing partners at a conference he hosted on Martha’s Vineyard. In the early 1990s, many firms that had cut associates were caught short-handed when the economy heated up again. This time around, many firms planned hiring of new associates and retained underemployed transactional lawyers in anticipation of a swift recovery. But the slow pace of that recovery, coupled with the chilling effect on deals in the current scandal-plagued environment, may be causing some reconsideration of hirings and firings. Whether or not more firms will lay off more attorneys in the coming months, that very real possibility has already affected the worldview of prospective young lawyers, as well as the firms at which they want to work. LAW FIRM INTERVIEWS For the next week or so, the Doubletree Hotel in New York’s Times Square will stand at the center of the storm. That is where Columbia Law School students started interviewing with firms last Thursday. As some students stood outside smoking, the weakened legal economy weighed on their minds as much as the stifling heat weighed on their bodies. “In a normal year, people would be a lot more confident about their chances,” said one second-year student, who had just interviewed with Cleary, Gottlieb, Steen & Hamilton for a summer associate position. “The cockiness level is nonexistent,” she continued. “People are not sure they’re going to firms.” Another second-year student agreed. “We’re definitely feeling the pressure,” she said. “We feel like we have to show them more personality, more accomplishment, more desire to get the job.” That seems to have been the case among this year’s summer associates as well. Though there was no shortage of parties and lunches, there was also a high level of anxiety. Paul Morning, the partner who chairs the hiring committee at Cadwalader, Wickersham & Taft, said there was a great deal of concern about whether all the summer associates would receive offers — fears not allayed by partners’ periodic reassurances that the firm hoped to make offers to all summer associates. “They worked very hard,” he said. “They were working at a rate we expect of our junior associates.” In the end, nearly all of Cadwalader’s 70 summer associates received an offer to join the firm full time next fall. But Morning said he found summer associates’ attitudes this summer “refreshing” compared with past summers, when the pressure was on the firms to keep summer associates happy. Boom times fed some fairly wretched excess in some summer associate programs. One former associate in the New York office of Morgan Lewis & Bockius said that office’s summer program included one event summer associates were to devise on their own. When she was a summer in 1998, the summer associates planned a murder mystery night. In the summer of 2000, she said, the summer associates asked to be driven in liquor-stocked limousines to a rented house in the Hamptons, where a party was thrown in the middle of the week. The excesses of that summer caused widespread resentment among both partners and associates, she said, and has continued to haunt that summer associate class, many of whom joined the firm last fall, after the firm announced a number of layoffs. A Morgan Lewis spokesman confirmed that the Hamptons blowout had caused a stir and called it “an anomaly that should never have happened.” Another casualty of the economy may be expectations that all summer associates will receive an offer of permanent employment at the end of their summer. At Weil, Gotshal & Manges, whose powerful bankruptcy practice has proven one of the strongest hedges against the corporate downturn, 11 out of 91 summer associates did not receive offers to join the firm next fall. Jeffrey Tabak, a Weil Gotshal partner and co-chair of the firm’s hiring committee, said it has never been the firm’s policy to try to give offers to all summer associates. He added that the offer rate to past classes reflected only the firm’s great need for associates in recent years. At a time when the firm’s needs are not as great, he said, the firm had the largest class it has ever had. Tabak also said Weil Gotshal has never extended a “cold offer,” or one made solely to allow a summer associate returning to law school to interview on campus with other firms without the stigma of not having received an offer. With many firms unlikely to do much third-year recruiting, students may be tempted to accept cold offers despite discouragement from the firm. CLASSES REDUCED Many firms had reduced classes this summer. Shearman & Sterling, which had 114 summer associates in 2001, had only 80 this summer, all of whom received permanent offers. The lower number may also reflect in part difficulties Shearman has faced in recruiting since becoming the first top New York firm to announce large-scale layoffs last October. A number of Columbia students interviewed last Thursday said they were not interviewing with the firm for fear of being fired. If many major firms are becoming more conservative about hiring new associates, others think the time is ripe to step up the pace of recruiting. Indeed, the relative reticence of leading firms about hiring these days means many students at top schools are considering firms they might not have considered in the past. Morning said this summer’s class at Cadwalader was definitely of a higher caliber than previous years’ classes, with many more students coming from Ivy League and similar law schools. The 70 summer associates this year are 30 more than the firm had last year. Many Columbia students said the New York office of Akin, Gump, Stauss, Hauer & Feld had been highly active on campus in the last year, sponsoring events and aggressively recruiting first-years as summer associates. A number of students said they were under the impression Akin Gump was hiring a lot of new lawyers. JeanMarie Campbell, Akin Gump’s New York director of recruitment, said the firm had been aggressively pursuing students at Columbia, Harvard and other top schools. As a result, the firm had seen interest skyrocket. In New York, the firm is preparing to interview more than 400 students at Columbia and New York University. However, Akin Gump’s 150-lawyer New York office, while growing, may disappoint many students; the firm is looking for only 15 summer associates for 2003.

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