Monday, March 23, 2009 | The focal point at many law firms these days is the conference room. Though conference rooms still host pep talks, strategy sessions, and birthday parties, they are also where law firm employees go to be laid off. That’s why employees are keeping an anxious eye on the booking of the conference room, especially when a senior partner reserves it on a Friday.
Paranoia has become commonplace as law firms around the nation have jettisoned thousands of attorneys and support staff recently, and San Diego’s law firm employees have not been spared. Last month, local firm Luce Forward laid off 12 attorneys and 15 support staff, and scuttled the program that brings third-year students on as newly-minted associates.
In January, Cooley Godward Kronish, which is headquartered in Palo Alto but has offices in a number of cities including San Diego, cut 52 attorneys and 62 staff from its ranks; Cooley laid off seven attorneys and five support staff from its San Diego office, according to a source who asked not be identified.
National law firm Paul Hastings recently let go of two San Diego attorneys and an unspecified number of staff, said Mary Dollarhide, a partner in the San Diego office.
DLA Piper and Latham & Watkins, so-called national firms with sizable staffs in San Diego, both announced layoffs in January, but declined to discuss whether their San Diego contingents remained intact; Morrison & Foerster, which has more than 100 employees in San Diego, laid off 53 attorneys and 148 staff in January, but declined to talk about layoffs in San Diego.
While the number of attorneys laid off is dwarfed by firings in other sectors, the law firm layoffs underscore the weakness in the economy because in past recessions, law firms have prospered in the “countercyclical” environment, because business is naturally more contentious when there’s less to share, and because lawyers are necessary to restructure failing corporations.
But this recession is different, attorneys claim. Businesses aren’t reorganizing, they’re liquidating, leaving less work for lawyers. With credit scarce, transactions are at a standstill, and litigation begs the question “what am I going to get, and how much is it going to cost me?” Law firm profits can no longer sustain the suddenly unproductive real estate transaction practice; among the most disillusioned and vulnerable lawyers are young associates with massive student loan obligations and no “book of business” to claim as their own. Their angst is reaching down to law schools, charged with supplying even more lawyers to firms who can’t use them.
“Twelve lawyers and 15 staff may sound little, but it was excruciating,” said Kirk Kicklighter, managing partner at Luce Forward. “It’s not a huge percentage — we have around 185 attorneys — but it’s a profession based on investing in people for the long term. You’re not used to dealing with people as expenses but as assets, so it’s terrible to have to cut people.”
“Historically, lawyers do well when the economy is either growing or declining, because changes bring opportunity,” Kicklighter said. “But this particular decline was so swift, it hit the transactional practices much harder in a shorter time period of time and so there’s less of a horizon suggesting when those transactional practices will come back to proper levels, especially real estate.”
Even commercial financial disasters prove lucrative for lawyers, since companies get reorganized and an orderly payment of creditors is arranged, so that the enterprise or some new version of it can continue. “In this recession, though,” Kicklighter said, “people were just turning the keys over and walking away. When they do that there’s no one to sue or negotiate with and we see the same thing happening in retail, where companies are liquidating” rather than reorganizing.
A law firm partner who asked not to be identified agrees this downturn is different.
“In the past we relied on the ‘countercyclical effect,’ because there’s more litigation, but that’s largely not true this time around,” he says. “This is such a severe downturn and capital is so precious that people don’t want to spend on anything including fighting litigation,” though he notes “our bankruptcy practice is very busy.”
The partner senses vulnerability among the large national firms. “It used to be just 10 or 20 years ago, law firms were smaller, regionally based businesses,” he adds. “But now if you’re national or even international, you can’t steer clear of the big shifts in the economy.”
Meanwhile, Dollarhide’s employment law practice at Hastings is “hopping,” she says. “My work is related to reductions in force.”
Dollarhide leads the Hastings employment law department in San Diego and advises business clients about how not to get sued for discrimination when downsizing. The trend is going toward age discrimination. “If you look at numbers, we’re laying off the older workers,” Dollarhide said. “They’re laid off because they’re more expensive.”
Though the workforce in general may be laying off older workers, the legal industry is laying off the young, which has become a hot topic among recent law school grads. They vent on abovethelaw.com, a popular legal blog that keeps a running tally of law firm layoffs.
Commenters on a recent abovethelaw.com story took up the question of whether it was in hindsight irresponsible to take out student loans for law school. “It wasn’t irresponsible to take out those loans when I had a $160,000 job lined up,” snapped one. “I didn’t know I was going to get laid off as a first year along with half my class and 87 other people from my office.”
Rants questioning the value of a legal education are taken seriously by Lou Helmuth, assistant dean for career services at San Diego’s California Western School of Law, who says he reads abovethelaw.com daily.
Helmuth says he’s concerned about firms like Luce losing their new associate programs, but adds that many law students do not land a job until after they graduate and take a state bar exam. At Cal Western the majority of students find work after taking the bar, Helmuth said, while about 40 percent receive an offer before they graduate. Another aspect of this recession is a trend toward hiring so-called “contract lawyers” instead of associates, he said. “The difference is there’s no security, no promise of longevity, it’s addressing the need for a human resource, but balancing that with concern about when the other shoe might drop. It’s an entry level job, but not a ‘partner track,’ like an associate would be.”
Law schools are also concerned about keeping up the number of applications.
At the University of San Diego School of Law, Carl Eging, assistant dean of admissions and financial aid, says applications are up 1 percent over last year, as 4,300 applicants vie for about 1,200 first year seats.
“Normally the axiom is recessions are good for graduate school enrollment,” he said. “Generally, someone starts thinking seriously about law school in their junior year (of undergraduate school), and it’s a question of whether the full effect of the current recession was known to people at that point, so they may have already made plans or they are sitting it out a year to see what happens.” Rich Acello is a San Diego-based freelance writer. Please contact us directly at andrew.donohue@voiceofsandiego.org with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.