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With blockbuster merger announcements and even Internet initial public offerings once again making headlines, it’s only a matter of time before the legal job market soars back to its late ’90s heights. Right? Don’t hold your breath. Though a robust market for litigators and intellectual property specialists continues apace, opportunities for transactional lawyers, both at firms and in-house with corporations, remain elusive. “Nobody’s leaving,” notes one frustrated headhunter. “Everyone’s holding onto their job because they’re still scared.” The lack of attrition within corporate legal staffs has driven many legal employers to curtail new hiring and is one major reason many job-seekers in the legal profession, like their counterparts in other industries, are experiencing something of a “jobless recovery.” It is not the only reason, though. The rising tide of mergers has not lifted all firms, and the inability of many out-of-town firms to wrest such business from the top New York firms has dampened their enthusiasm for rapid expansion. At the same time, corporations have steadily built up the expertise of their own legal departments, with the goal of reducing their reliance on firms. The turbulence of the recent business cycle has also prompted many firms to re-think their hiring philosophies. At some of them, the ease of lateral hiring has weakened commitment to the traditional seven- or eight-year path from first-year associate to partner. At others, a lingering prejudice against laterals still limits their opportunities. The trend in head counts at New York firms certainly suggests that the improving economy has not led to a surge of hiring. While many top New York firms grew in size at the height of the recession in 2001 and 2002, most firms barely budged their head counts in 2003. For instance, at Cravath, Swaine & Moore, where lowered attrition to investment banks and Internet startups contributed to an almost 20 percent increase in professional staff from 2001 to 2002, the number of lawyers increased a mere 2 percent in 2003. Other New York firms have contracted in size, with partners declaring the need for a greater focus on profitability. Top New York firms like Cravath hire very few, if any, lateral lawyers, but the recent expansion of many out-of-town firms into the New York market raised expectations that the new entrants would hire in large numbers. Indeed, many announced intentions of becoming Manhattan behemoths of 300 lawyers or more. Thus far, however, firms from Chicago, California and elsewhere have virtually all failed to meet the grandiose goals they set for their New York offices. Chicago’s Winston & Strawn, which had 252 lawyers in New York in 2001, now has 197. Los Angeles’ Paul, Hastings, Janofsky & Walker has gone from 211 New York lawyers to 182. London-based Clifford Chance’s 421 New York lawyers is down from the 455 the firm counted in 2000. Such firms have simply not yet made the inroads they’d hoped to make in New York’s most profitable corporate practice areas, said John Carroll, Clifford Chance’s managing partner for the Americas. “There’s enormous competition for high-end work,” said Carroll, “and there is a finite amount of high-end work.” Big-time mergers and acquisitions engagements are what most lawyers are talking about when they talk about “high-end work,” and a glance at the firms on board for recently announced mega-deals shows that the top New York firms have not relinquished much market share to out-of-town firms. Wachtell, Lipton, Rosen & Katz is advising Disney in its defense against the hostile takeover bid of Comcast, which is in turn represented by Davis Polk & Wardwell. Sullivan & Cromwell is representing cellular service provider Cingular in its acquisition of AT&T Wireless, which is also represented by Wachtell. But the staffing needs of even the biggest deals is down somewhat from a few years ago, particularly as corporations have built up increasingly sophisticated in-house legal staffs. With high-powered legal talent of their own, clients are less inclined to defer or even turn to expensive outside counsel. Not that in-house legal positions offer any refuge for frustrated job-seekers. In fact, the opposite is true, said one Manhattan legal recruiter, not least because in-house jobs are the holy grail of billable-hour-fleeing firm refugees. Heavy demand for in-house jobs and low turnover in such positions have further exacerbated law firm’s overcapacity issues. Given the generally low odds of making partner, most mid-level and senior associates either want to or need to leave their firms. Moreover, the massive hiring law firms undertook in the late ’90s swelled associate ranks. Both in spite of and because of firm layoffs, a glut of legal talent willing to jump ship has created a buyer’s market for such talent. Those in-house and lateral firm positions that are available have many more applicants than they would have attracted in years past, and employers have accordingly become more selective, stressing credentials like Ivy League law degrees and prestigious judicial clerkships. It also helps if a candidate is coming from a top New York firm like Cravath or Simpson, Thacher & Bartlett. On the other hand, said one headhunter who asked to remain unnamed, associates at some major firms seem to be at a disadvantage. In particular, she said, the high turnover of associates at Cadwalader, Wickersham & Taft has resulted in a flood of candidates, feeding a negative perception of the firm’s training among other legal employers. “We have to fight harder for them,” she said of lateral candidates from Cadwalader. The headhunter also said it seemed law firms are now limiting lateral associate hires on the corporate side to those who accompany or can immediately support a lateral partner with a significant book of business. The ready availabillity of lateral hires, often with specialized experience, has also forced some firms to reconsider whether or not they should continue to follow the traditional path of hiring associates right out of law school. Morrison Cohen Singer & Weinstein decided to abolish its small summer associate program this year and made no offers to any of its 2003 summer associates. David Scherl, managing partner of the 65-lawyer firm, said it was simply so much easier for smaller firms like his to hire lawyers who have already been seasoned at larger firms and can step in quickly to work in specific practice areas. “We don’t want to train junior associates on our clock,” said Scherl. “We want to offer our clients great senior-level attention.” The managing partner of one of New York’s largest firms said the training of young associates was indeed a troublesome issue with clients. “Clients hate first- and second-year associates,” the partner said. “They view them as untrained and expensive and there is enormous resistance to paying the rates we charge for junior associates.” Moreover, the managing partner said, the hiring and training of scores of young lawyers in order to identify a small percentage who may become partners is an incredibly inefficient process. But he said laterals are no panacea. Noting that other firms tend to hang on to their best people, the managing partner said the success rate for lateral associates is just as low as that for the “homegrown” variety. “You’re never, ever going to have an excess of talented lawyers,” the partner said. “How do you find those diamonds? You probably have as good a chance of growing one yourself as hiring one from someone else.” Sanford W. Morhouse, the co-chairman of New York’s Dewey Ballantine, agreed that, despite their abundance and experience, lateral candidates are often suspect. “Those resumes that are out there are out there for a reason,” he said. Whenever possible, said Morhouse, it was preferrable to promote associates from within. On the other hand, he said, firms’ desire to quickly ramp up practices built around lateral partners meant they would continue to rely on lateral associates. “There’s no question that you don’t always have the luxury of time,” he said. Of course, when firms really lack time, there are always contract lawyers willing to work on a project basis. Jay Horowitz, the head of Strategic Legal Solutions, a New York-based legal temp agency, said his firm’s business had lately been driven by document production work on large litigations, but the last few months had seen an uptick in the number of temps called upon for due diligence and other work on the corporate side. Horowitz said he thought law firms might be testing the waters by hiring temps instead of permanent associates. “We’ll know that jobs are coming back if in six months, these temporary positions become permanent,” he said.

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