[IHT] Slow Economy Hits Lawyers Jonathan D. Glater New York Times Service Saturday, August 25, 2001 High-Flying California Firm Is Forced to Announce Layoffs Cooley Godward LLP, one of the San Francisco area's highest-flying law firms during the Internet boom, has told employees that about 85 of its 645 lawyers as well as 50 paralegals and other support staff will be laid off. The move - one of the first large, open staff reductions at a law firm in about a decade - is the latest and perhaps the most prominent sign that law firms are vulnerable to the current economic slowdown. In an internal memorandum distributed Thursday, Stephen Neal, the firm's chairman and chief executive, said that "with no foreseeable resurgence in the economy, we are making personnel reductions" throughout the firm. Ironically, the announcement came just weeks after Vault Inc., which runs a Web site that allows employees to post messages about their workplaces, ranked Cooley as the best law firm in the country to work for. "When the downturn hit, it left us with too many" lawyers, Mr. Neal said by phone. "In response to what was in retrospect a huge spike in demand for our services in 1999 and 2000, we hired and built up capacity." But that move was in anticipation of a continued business boom, and because that business has failed to materialize, Cooley ended up with too many lawyers and too little work, he added. "It's easy to say in hindsight that we should have known," Mr. Neal said. "But nobody in the world knew." Mr. Neal said the morale of lawyers was a factor in the decision, because associates with no work would not develop and were unlikely to stay at the firm. He said no partners were let go and that members of the firm had decided not to cut salaries in order to retain people. And Cooley will still take on about 85 law school graduates this autumn at starting salaries of $125,000 per year, he said. According to The American Lawyer magazine, Cooley's profit per partner - a critical measure of a firm's success in the legal industry - totaled about $905,000 last year. Layoffs at law firms are not new and under these economic circumstances are not surprising, said Jim Cotterman, a principal at Altman Weil Inc., which serves as a consultant to law firms. "We've seen this before," he said, "and the results that we're seeing now shouldn't be surprising given that we know what happened the last time there was a slowdown after a period of intense activity." In the late 1980s, he said, firms raised salaries as the economy grew, just as firms did recently. But then in the early 1990s, many firms let people go - and had a tough time both luring law school graduates and, when the economy eventually recovered, had a hard time finding enough experienced lawyers. "They spent the better part of the last decade as a profession, working out of the increases in associate compensation that they had going into the decade," he said. "Now we're back where we started from." "It's totally scary," said an associate at a big New York firm. One of the reasons to go to a big firm, the associate said, is the stability of the job: Most young lawyers believe firms will be immune to economic conditions because they will be cushioned by bankruptcy-related work in slow times and buoyed by corporate transactions during booms.
