03 March 2009

Worst Law Firm Layoff Ever

Not all is well in law land:

Latham & Watkins . . . is cutting 190 associates and 250 staff members. Above the Law says it knows of no other law firm to have laid off so many employees, absent a dissolution. . . . The firm is offering an unheard of severance package that includes six months' salary and medical coverage. The pay will be capped at $100,000 . . . the cuts amount to 12 percent of the firm’s associate ranks and 10 percent of paralegal and administrative staffers. The firm's offices in New York and Los Angeles "will be particularly impacted," . . . The firm is also pushing back start dates for new associates until mid-December and offering $75,000 to associates who agree to delay their start date until October 2010 . . . . Law firm chairman Robert Dell said the firm's 550 partners will not be affected by the cuts. . . . The firm had an "over-capacity issue that we have to deal with," he said.

The 2300 attorney law firm has a headquarters in Los Angeles and a total of twenty-eight offices. The firm operates in three countries in addition to the United States. It is (or was at any rate) the 7th largest law firm in the world.

Pay freezes and/or layoffs are in place in other large law firms, but not to the same extent.

The nation's largest New York and Los Angeles law firms have historically had major financial companies (and parties to large scale financial and ownership transactions brokered by these financial companies) as a key component of their client mix, so it is not entirely surprising that these firms are feeling the impact of the financial crisis.

Before the layoffs, Latham & Watkins had a 3.18 to 1 ratio of attorneys' to clients. After the layoff, the associate to partner ratio drops to 2.84 to 1. Large New York City law firms typically have a partner to associate ratio ranging from 2:1 to 4:1.

Large and medium sized law firms predominantly outside financial centers frequently have 1:1 ratios of partners to associates, or even slightly more partners than there are associates. This is mostly because clients tend to prefer to have at least one experienced partner responsible for their cases. In anything but the largest litigations and transactions, the need to have a partner engaged in every single significant matter poses practical limits on how much work can be delegated to associates. While a rare lawyer manages to personally supervise eight or ten associates, this is not the norm, even in large law firms.

Incidentally, large law firms are largely a product of Anglo-American legal systems.

Of the 100 largest law firms in the world, #99 is based in Spain, #91 is based in the Netherlands, and #85 is based in France. Fidal, the largest law firm outside the Anglo-American legal world, which is based in France, has about 1200 lawyers. Loyens & Loeff, with 800 lawyers and a headquarters in the Netherlands, is the second largest law firm in the civil law world. Garrigues, based in Spain, which is the third largest law firm in the civil law world (by revenues) has 1,963 lawyers.

Of the remainding 97 firms in the top 100 by revenues, one is Canadian (#64), four are Australian, seventeen are British and the rest are American. This probably has a lot to do with the lack of a unified legal profession in many civil law countries, and the tendency of of large corporations in civil law countries to use law trained in house executives for transactional work, rather than practicing attorneys in separate firms.

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