January 16, 2008
Law Firms Are Subprime Casualties Too
Posted by Garry Jenkins

   

Perhaps this is old news to many of you, but I’ve been in a grading cocoon (just a few more left) for the past week or so. Well, I just learned that the subprime market turmoil is responsible for the layoffs of 35 lawyers at Cadwalader, Wickersham & Taft.  Granted this is small potatoes compared to the impact on many of the big banks, but I think it’s interesting on a couple of fronts.
   

First, according to various reports, Cadwalader turned to giant public relations experts, Hill and Knowlton (where I worked as a summer intern 17 years ago, yikes!), to help the law firm handle the fallout.  I don’t know why, but seeing the statement from a p.r. firm regarding a law firm layoff struck me as odd and made me wonder which constituents Cadwalader is most concerned about…  Clients?  Potential recruits?  The firm’s current lawyers?

  • Clients:  Surely, most of the firm’s clients have made similar decisions before.  They would certainly understand the “market demands” to pursue reductions in force to stay fiscally competitive.

  • Law Students:  Do law students care that a firm has handed out a bevy of pink slips in prior years when selecting law firms?  Do today’s students talk about which firms laid off associates in 2001 after the dot com bust?  I’m guessing that many law students consult the profit per partner and revenue per lawyer rankings produced by the American Lawyer Magazine each year, and the ironic reality is that these layoffs will likely improve those figures.

  • Current Lawyers: The cynic in me wants to ask whether the remaining lawyers are particularly interested in giving back any of their record-breaking bonuses to keep their fellow associates around.  That said, without question, layoffs are difficult and emotional--not just for those being laid off but also for those who remain.  Considering how poorly most firms generally handle communications, hiring some professional communications expertise is probably a sound investment for long-term employee morale.

Second, it seems to me that these types of layoffs are a real downside of two important trends in the legal profession: (1) the growing corporatization of professional service firms and (2) the push toward specialized practices.  According to the WSJ Law blog, the credit markets are responsible for (smaller) layoffs at Clifford Chance, McKee Nelson, and Thacher Proffitt as well.  Although unrelated to the subprime mess, evidently partners are not immune from law firm dismissals: as nearly 50 Mayer Brown partners learned in March 2007.  (Of course for some handful of white-shoe firms the idea of layoffs, even in difficult economic times, will continue to be a subject that is anathema.)  It occurs to me that business schools (at least MBA programs) discuss, teach, and prepare students for periods of time when they might find themselves unemployed (due to no fault of their own) and how you bounce back from career disappointments.  As the world of legal practice evolves are law schools doing our students a disservice by not doing the same?

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