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February 27, 2009


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If you think there's a fundamental difference between Cravath and Wilmer on the one hand and Skadden and Paul Weiss on the other, you're wrong. If anything, the latter two are in a better position.

Cravath's business model is concentrated on the big banks of New York and London. They took a 24% PPP hit last year and have a new very pricey lease kicking in in 2009. Wilmer is still struggling to absorb the Hale & Dorr merger of a few years ago and tried to ramp up in NY at exactly the wrong time.

Paul Weiss is one of the few firms to report an _increase_ in PPP in 2008 (higher PPP than Cravath now, incidentally). And Skadden is the most diversified of the top firms.

They all might have to engage in cost-cutting measures before this is over. But your notion that the white-shoe firms are somehow immune from this just doesn't hold water.

Dan Filler

Anon, you may well be right on the financials. My only thought was that some firms have hiring reputations so sterling that they would absorb the shock, and defer layoffs, longer than other firms. To my mind, Cravath at least imagines itself as being in a different reputational league than Latham. I'll tell you this: once Cravath does a public layoff, the stigma around layoffs is fully gone. Kaput.


Professor Filler,

Thanks for your reply. I agree on the Cravath effect with regard to a stigma. The question is, will Cravath ever do a public layoff? If things stay as bad as they are, maybe they will gradually shed associates for "performance" reasons to reduce headcount enough. Skadden or Paul Weiss is more likely to pull a public layoff, if that's what you're getting at.

The six-month severance by Latham is interesting. These costs won't be off their books until September, so they are presuming that a recovery won't be in sight even then. Scary.


nice jab at crimson & maroon.


What strikes me as most interesting about this is the recognition that this may not affect LW's ability to recruit Crimsons, Maroons, Bulldogs or any other top law school grad in the future. This is probably a positive step and a rational realization that the mid-level market is one with lots of mobility anyhow - so those same Crimsons, etc., will be available as 3rd years, etc., when the markets turn.

Another interesting factor is that no partners were laid off, but that a reduction in leverage was suggested. Will this mean an effective increase in client costs (as partners do more "real work" that was delegated to associates? Or will this meant that we could once again see partner rates at biglaw hit the 400-500 mark? Time will tell.

joe smith

Law firms are lame-do something meaningful with your lives


Prof. Filler,

While it's true we're seeing the BigLaw layoff stigma evaporate in the current economic environment, I think the comparison to GM and Citi is stretched. These companies are truly in crisis and losing untold billions of dollars - they need radical restructuring and would not survive outside bankruptcy without government support. GM is selling less than half the cars they sold a year ago, and Citi has hundreds of billions of dollars of assets that are worthless because no one will buy them. These companies are destroying value/equity on an unprecedented scale.

BigLaw is very different - even in the current environment, these are profitable businesses. Latham, for example, is laying off 12% of its lawyers in response to a 4% fall in revenue in 2008 to $1.9 billion from $2 billion the year before, and a 21% fall in PPP from $2.27 million to $1.8 million. I repeat, the average partner at Latham is still taking home $1.8 million in profits per year. These firms could easily keep all their associates employed, just not at a $2M PPP level and not for 2000 billable hours per associate per year. Thelen & Heller collapsed for the same reason - these firms were still profitable businesses the day they liquidated, but they fell behind in maintaining competitive PPP levels, partner defections increased to a point that they breached loan covenants, and the partners just closed up shop and moved on to other, more profitable, firms, and put associates and staff out on the street.

Associates have been widgets for some time - that's nothing new - it's just that associate widget-hood has been highlighted in much starker terms in the current environment.


Is there any truth to the rumor that more layoffs are coming at Skadden on or around March 27? Are they going to be concentrated in one office (perhaps DC?) or are these going to be firm-wide?

air jordans

I hope you all have a blessed day

credit counseling

I was in a similar situation not to long ago. I worked for a law firm that went bankrupt. The firm had to do lay offs, I was out of work for 97 weeks. In that time I fell behind on all my bills and found myself in a mountain of credit card debt. I had to seek help through for credit counseling . I am now back to work and debt free, thanks to Debt Guru.

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