Barbara M. Boudreaux, a first-year corporate finance associate with Munsch Hardt Kopf & Harr in Dallas, says she starts her days reading The Wall Street Journal to keep up with changes in the economy that might affect clients and client industries.
“As scary as it seems out there, it’s a good time to be in my group,” says Boudreaux, who works on restructuring and bankruptcy matters. “Regardless of how the economy is doing, there are always going to be clients who need advice on how best to manage their business and finances.”
With a larger first-year associate class for the first time in several years and an offer rate for fall 2009 jobs to recent summer associates that mirrors previous years, it might appear that the hiring activities of Texas’ largest firms are a counterpoint to economic trends. Yet these are decisions that were made in the third quarter of 2007 and 2008, respectively — prior to the current financial crisis.
Boudreaux is one of 446 associates beginning their careers with 23 of Texas’ largest firms. According to Texas Lawyer‘s New Associates Survey, the 2008 first-year class is 5.2 percent larger than it was in 2007 at the same 23 firms. The state’s 25 largest firms, as listed on Texas Lawyer‘s “The Texas 100″ poster published April 28, 2008, were asked to participate in this year’s survey. Of those 25, 23 provided information. Brown McCarroll and Thompson, Coe, Cousins & Irons decline to participate.
The 2008 associate class at the 23 firms is larger than 2007′s, because Texas firms have been growing over the past few years, particularly in the financial markets practice areas, says William C. Cobb, founder of Cobb Consulting in Houston.
“When they made those offers back last summer , that was before the financial crisis,” he says referring to recent bank failures, the mortgage financing troubles and Congress’ $700 billion financial bailout plan.
As a result, Cobb says, he expects firms will be cross-training young attorneys so they can handle, for example, bankruptcy as well as transactions. [See "Tough Transactional Times," Texas Lawyer, Oct. 20, 2008, page 3.] “Some associates coming in will be moved around,” he says. He says new associates are easier to transfer into different practice areas, because they are still learning and have lower billing rates.
“It’s tougher for associates six or seven years out to make that transition,” he says.
Several of the 23 firms are moving around associates to fit practice group needs, as they try to align their larger incoming classes with their clients’ current needs.
With 45 new Texas associates, a decrease of 11 associates — a 19.6 percent drop from the fall 2007 class — Houston-based Vinson & Elkins has one of the largest first-year classes among the 23 firms.
“At some of the new lawyers’ and old lawyers’ request, we are shifting some folks around but within their same department like corporate or litigation,” says Thomas S. Leatherbury, the firm’s hiring partner. V&E employs 570 attorneys in Texas and 781 attorneys firmwide.
“The sectors that are the flattest right now are capital markets and mergers and acquisitions,” he says. “Bankruptcy, which is in our corporate department, is very active.”
Corporate associates do a two-and-a-half year or three-year rotation in the various practice areas within corporate, Leatherbury says, so it was easy to move new corporate associates to the bankruptcy group.
Rotations give associates a chance to become versed in more than one area of the corporate group, so the firm and its lawyers are better able to adjust to changing markets, he says. He predicts no problem keeping all 45 new associates busy. “Bankruptcy is very active,” Leatherbury says. “We have five or six new trial lawyers starting in Dallas, and they are fully occupied. The lender liability cases are starting to pop.”
At Dallas-based Winstead, depending on the firm’s needs, some new associates may work in their second-choice practice group, says Richard C. Leucht, the firm’s hiring shareholder. Winstead hired 13 new Texas associates this year, the same number as last year. The firm employs 289 attorneys in Texas and 291 firmwide.
But it’s not unusual for associates to decide on their own that they’d like to try a different practice group.
“Young lawyers, they probably haven’t been around long enough to know everything,” says Andrew M. Edison, Bracewell & Giuliani’s hiring partner, whose firm does not rotate new associates but places them in a particular practice group right away. Like many firms, when the summer associates finish their time at the firm, Bracewell asks them to indicate their preferred practice area. “You start off in one section and see what that practice of law is all about,” Edison says. Bracewell has 336 attorneys in Texas and 469 firmwide. It has 31 new Texas associates.
Fall of 2009
The 23 firms made offers to 82 percent of their 2008 summer associates for the fall of 2009. This offer rate generally has been consistent at Texas’ largest firms at least since 2004.
One way the firms were able to maintain their high 2009 associate offer rates was by bringing in a smaller group of summer associates in 2008 — 9 percent fewer than the previous summer — to accommodate economic uncertainty in light of the drop in litigation and transactions during the first half of 2008. [See "Flight Plans" Texas Lawyer, June 2, 2008, page 1.]
Winstead made offers to 57 percent of its 2008 summer associates — 16 of 28. This was the second-lowest offer rate among the 23 firms and lower than the 100 percent offer rate the firm made to its summer associates in 2007. According to Leucht, Winstead changed its summer program for 2008 in an attempt to better forecast which summer associates would likely succeed in Winstead’s culture. This year the firm gave summer associates multiple work projects to assess not just the summer associates’ legal ability but also their ability to handle competing assignments, deal with deadlines, and interact with more than one lawyer at the same time and still produce a polished product.
Austin-based Clark, Thomas & Winters has the lowest offer rate among the 23 firms — 33.3 percent — for its 2008 summer associates, an offer rate driven by the fact that the firm has six new 2008 associates, says Larry McNeill, the firm’s president and managing shareholder. The firm had a strong 2007 summer associate class and made offers to all six of them to become full-time associates this year.
“I think we were a little surprised that all six accepted,” he says. “Six in one year is more than we usually absorb.” So the firm offered associate positions for 2009 to only two of its six 2008 summer associates. “We really liked the summer associates in this year as we did in 2007, but the success ratio [for the previous year] put a crimp in what we could do this year,” McNeill says. Clark, Thomas has 121 lawyers.
Dallas-based Akin Gump Strauss Hauer & Feld also had a lower-than-normal offer rate for its 22 summer associates this year. The firm offered 2009 associate jobs to 76.3 percent — or 29 — of its 38 Texas summer associates. In 2007, the firm offered full-time associate jobs for the fall of 2008 to 94.6 percent — 35 out of 37 — of its Texas summer associates. Since 2004, Akin Gump’s Texas offer rate has been between 85.3 percent and 94.6 percent.
Charles R. Gibbs, hiring partner in the firm’s Dallas office, says he expects the number of offers the 2009 summer associates will receive for the fall of 2010 will return to the firm’s historically higher rates.
“In Dallas, we had an aberrantly large class this past summer of 22, when in past years we have had 13 to 15,” Gibbs says. “And that class being aberrantly large probably resulted in the lower percentage of offers from this past summer.” The firm employs 260 attorneys in Texas and 956 firmwide.
Among the 23 firms responding to the survey, V&E had one of the highest 2009 associate offer rates for its 2008 summer associates and one of the largest summer associate classes. The firm employed 74 summer associates in its Texas offices during 2008 and made offers to 94.6 percent, or 70, of them. V&E’s offer rate for summer associates in 2007 was 91.8 percent — 90 of 98. Hiring partner Leatherbury says the firm’s goal always is to make offers to all those recruited for the summer, if they are qualified.
“We’ve got 31 already committed [as of Oct. 31] to start in Texas offices [in 2009], and we’ve got some who will do judicial clerkships and postpone,” he says. He adds that he does not expect to see higher-than-normal acceptance rates, which usually range from 50 to 65 percent.
“We could accommodate everybody out there with an offer, but we know we’re not going to get them all,” he says.
Bracewell is another one of the 23 firms offering 2009 associate jobs to a high percentage of its 2008 summer associates. The firm offered jobs to 91 percent or 38 of this year’s 42 Texas summer associates, says hiring partner Edison. He notes the offer rate is similar to the previous year when the firm offered 2008 associate jobs to 93 percent of its 2007 summer associates.
“It is fully our intention, when we bring students in for the summer, to extend them an offer,” Edison says.