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A combination of rising attrition and reduced hiring has led to sharp drops in the number of attorneys at many of New York City’s leading law firms. Sullivan & Cromwell, one of the largest and most prestigious, saw a 16 percent reduction in the ranks of its New York-based lawyers. Last year, the firm counted 518 lawyers in its Manhattan headquarters. This year that number is down by 85, to 433. “This is a function of the job market opening up,” said Sullivan & Cromwell Chairman H. Rodgin Cohen, who said higher number of associates at the firm had left in the past year to join other law firms and in-house legal departments. Though Sullivan & Cromwell has seen the sharpest drop in staff levels, it is not alone. According to the most recent survey of law firm sizes by the National Law Journal, an affiliated publication of the New York Law Journal, six of the 10 largest law firms based in New York have shrunk their Manhattan offices in the past year. Of the top 25 firms, 15 have reduced their numbers in New York. A similar trend is apparent in the largest New York offices of out-of-town firms. Davis Polk & Wardwell, another elite firm, has 53 fewer lawyers in New York this year. Other major New York firms reporting substantial drops include Shearman & Sterling, down 46 lawyers in New York; Cravath, Swaine & Moore, down 32; Dewey Ballantine, down 36; Fried, Frank, Harris, Shriver & Jacobson, down 36; and Skadden, Arps, Slate, Meagher & Flom, down 30. Out-of-town firms with large New York offices have also shrunk. British legal giant Clifford Chance has 73 fewer lawyers in New York this year. Sidley Austin Brown & Wood is down by 39; Latham & Watkins, by 34. The smaller sizes of incoming associate classes is one reason for the lower head counts at many firms. Of the 25 largest law offices in New York state, more than half had smaller first-year classes starting this fall than in 2003. Sullivan & Cromwell only had 30 first-years this year, down from 55 a year earlier and 82 in 2001. Cohen said the firm hired a smaller class to start in 2004 partly because of concerns about lowered attrition in the last few years. With attrition now rising, the firm has seen an especially sharp drop in its associate pool. The rising attrition rate was one of the reasons Sullivan & Cromwell offered its associates interim bonuses in October between $10,000 and $20,000. The bonuses were the first boost to associate compensation by any major New York firm in almost three years. Cohen said the attrition rate was similar to that seen by the firm during the late 1990s boom, except that most of the departing associates appeared to be taking legal positions. In the past, he said, more had taken investment banking and other non-legal jobs. GROWING FIRMS Many of the lawyers leaving Sullivan & Cromwell and other firms no doubt wound up at some of the firms that substantially expanded in 2004. White & Case added 71 New York-based lawyers in the past year, an 18 percent increase. Simpson Thacher & Bartlett; Willkie Farr & Gallagher; LeBoeuf, Lamb, Greene & MacRae and Schulte Roth & Zabel were other firms that saw substantial increases in their New York staffs. Not all staff reductions were entirely due to an expanding job market. The 17 percent drop in head count at Clifford Chance is explained in part by a tide of departures of senior partners over the past year. The firm’s former U.S. managing partner, James N. Benedict, joined the exodus in October by heading to Milbank, Tweed, Hadley & McCloy. The dozens of departed partners have further depleted Clifford Chance by recruiting associates from the firm. During the boom years, high attrition left many firms understaffed in the face of heavy work volumes. But Cohen of Sullivan & Cromwell, said the current level of transactional work was well within his firm’s capacity. “If M & A and capital markets were to just soar, I could see us having some staffing problems at the margins,” he said, “but that hasn’t happened.”

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