Cadwalader Wickersham & Taft will stop paying partners, cut associate salaries by 25% and impose pay cuts of 10% to 25% on its staff in response to the coronavirus crisis and its impact on the economy, according to a firm memo on Tuesday.
The 380-lawyer firm, which recorded profits per equity partner of $3 million last year, is the latest to look for places to cut back amid concerns about the COVID-19 pandemic and its economic fallout. The firm’s memo said the cost-saving measures would go into effect Wednesday and would likely last for four months.
In an internal firm memo, managing partner Patrick Quinn wrote that firm leadership placed a “high priority on protecting the jobs of our staff, both legal and non-legal. Our first priority during this difficult time is to do our best to avoid any layoffs.”
“The longer we wait to take action in response to the virus, the more difficult it will be for us to avoid much more drastic measures later on,” Quinn wrote.
Quinn wrote the firm would be reducing discretionary expenses wherever possible, but the “unprecedented circumstances require us to do more.”
In particular, Cadwalader’s partners “have been told not to expect any distributions during the peak months of the crisis,” according to Quinn’s memo. Also, members of the legal staff and senior administrative staff earning over $100,000 will have a temporary 25% pay cut, and other administrative staff will have a temporary 10% pay reduction. Above the Law reported that associates were part of the legal staff experiencing the 25% cut.
Quinn said the firm would seek to restore normal levels of compensation as soon as circumstances permit.
“Despite how busy some of us are with urgent client needs at this moment, even the most benign reasonable projections make clear that firm revenues and billable hours are likely to be reduced during this crisis,” Quinn wrote in the memo. “The spread of the COVID-19 virus is a monumental event that is having an unprecedented and uncertain effect on every aspect of our lives and the lives of everyone around the world.”
“The massive and unprecedented effect of the virus on the economy and the shuttering of businesses have immeasurably changed the landscape of the work we have been doing. While it is clear to us that there will be an end to this crisis, when that will happen and how quickly the markets will recover is very unclear,” Quinn said.
In 2008, Cadwalader laid off about 120 lawyers amid slumps in the real estate finance and securitization industries. Before that financial crisis, the firm’s lawyer head count was about two-thirds higher than it is today.
But in the Tuesday memo, Quinn drew a contrast between today and the 2008 crisis. “Because it does not emanate from the financial markets, it should not have the regulatory overhang that the credit crisis had on the finance industry back in 2008,” he wrote of the pandemic.
In a statement on Tuesday, Quinn reiterated that “the health and well-being of our people is our first concern.” By acting early and making a shared sacrifice, he said, “we are doing our best to minimize the economic harm for our people, avoid the need for layoffs, and ensure the ongoing vitality of our firm.”
Cadwalader, with a clientele that includes Wall Street banks and others in the investment and financial services industry, has about 400 lawyers, most of them focused on transactions and corporate work and most of them in New York. The firm also has offices in Washington, D.C., Charlotte, London and Brussels.
While restaurants and travel-related industries may have been the hardest hit by COVID-19, the coronavirus pandemic and its rapid spread in the U.S. have upset plans and called budgets into question at several law firms. In a February interview, Quinn said that he anticipated a strong year, noting that even if the economy turned south, banks would need the firm’s structured products expertise.
Law.com has reported that other firms have laid off staff amid the current economic plunge, including Am Law 200 firm Goldberg Segalla and two midsize firms.