In the days leading up to Thursday, Jan. 10, the offices of Cadwalader, Wickersham & Taft were wracked with anxiety. Something was about to go down at the white-shoe law firm with a knack for attracting both celebrities and bedbugs. But nobody knew what.
The availability of conference rooms at Cadwalader is visible on the firm’s intranet, and observant associates noticed that Mitch Walsh, Cadwalader’s executive director, had reserved an entire floor of conference rooms on that Thursday. Patti Ellis, the firm’s head of Associate Development and Recruitment, had reserved another half-dozen conference rooms for the day.
Some speculated that associates were going to be called up to conference rooms and notified individually of their year-end bonuses. Others wondered if a merger was afoot. But the biggest fear was that Cadwalader was about to announce layoffs, and the conference rooms would be used to process the victims. It was a widespread theory, and turned out to be correct. Still, not everyone was prepared.
“I thought I was being called in for my year-end review,” one unlucky associate said. “I totally wasn’t expecting it.”
The associate, who asked to remain unnamed, was among 35 lawyers Cadwalader laid off that morning—the firm called them “targeted personnel reductions”—in its U.S. offices. The laid-off lawyers were in the capital markets and global finance departments, two areas of the practice hit especially hard by the credit crunch.
Cadwalader wasn’t the first firm to announce associate layoffs since last year’s credit market meltdown. In November, the New York office of U.K.-based Clifford Chance laid off six structured-finance lawyers. And given the rapidly deteriorating economy, Cadwalader probably won’t be the last. Thacher Proffitt & Wood and McKee Nelson, two other firms that are active in the securitization field, have offered buyouts to associates to encourage them to leave.
“IT’S TOUGH. PEOPLE are scared,” the jettisoned Cadwalader associate said. “It’s so rare that this happens. The first-years are freaked out. People are wondering: Is this continuing on a rolling basis, or did they take one big hit? People worry about [the impact on] recruiting efforts, both on a lateral basis and for incoming law students.”
The associate, like the others laid off that day, was given barely more than a week’s notice: His last day of work would be the following Friday, Jan. 18.
He’s getting three months of severance, paid out every two weeks, just as when he was employed. But he’s no longer able to tell prospective employers he’s still at the firm, which he predicts will make his job search harder.
“It’s like dating,” he said. “When you’re with someone, everyone wants you; when you’re on your own, it’s that much harder.”
Aside from the issue of notice, the associate was also upset about the firm’s perceived overexpansion, back when structured finance and securitization—the legal work associated with putting together mega-loans, then converting them into securities for investment and trading—were red-hot.
“I thought it was a little bit insulting that these law firms come out with these announcements about increasing salaries and paying special bonuses,” he said. “I didn’t expect the layoffs to happen because I thought to myself, ‘They wouldn’t play with the big boys if they couldn’t do it.’”
On the whole, though, he said he understands that the firm did what it had to do. “They argue that taking a hit on PPP [profits per partner] would make it more difficult to attract lateral partners. So they would rather make that decision than [save] the associates.
“Considering how supremely profitable the firm has been, the fact that they didn’t take more of a hit is disappointing,” he said. “But that’s always been CWT—a bottom-line firm.”
Still, the associate said he is not bitter, and added that Cadwalader gets more than its fair share of criticism from other firms. “The firm is a new player on the scene, in terms of prestige and partner profits, and nobody likes the nouveau riche mentality. So I think that explains the animus you sometimes see from Cravath or Simpson lawyers—they don’t want to see Cadwalader as equals.”
For the moment, though, they are not equals. Firms such as Cravath, Swaine & Moore and Simpson Thacher & Bartlett, less affected by the credit crunch, have not announced any associate layoffs.
IF YOU ARE tempted to shed a tear or two for the homeless lawyers, think twice: I spoke with a former associate at Thacher Proffitt who has actually profited from the firm’s distress.
In an effort to reduce its payroll and avert layoffs, Thacher started paying lawyers to go away. The firm offered first-year associates a four-month severance package if they left by the end of January. Some associates decided to stay put, hoping to weather the storm, but others started pounding the pavement.
The job search was not particularly difficult: “The firm basically said to us, ‘When you’re out there interviewing, blame it on Thacher.’ I really didn’t have to explain myself.”
Nor have the past few weeks been particularly demanding for Thacher Proffitt lawyers. “I would come in at 10 and leave at 4,” said the former associate. “I didn’t bill an hour in my last month—and it hasn’t been an issue. I’d enter my time under the firm administration code, with a description like ‘looking for work.’”
Finally, Thacher Proffitt is paying severance to its lawyers regardless of whether they land new jobs. Thus, ex-Thacher associates who find new employment quickly will effectively get twice the normal pay for one-third of a year. In other words, they will wind up better off than their law school classmates who went directly to more stable firms.
It’s an ironic twist, making out like a bandit because your firm is in trouble. But considering how unfamiliar layoffs are to the world of large law firms, ironies are inevitable.
“It’s been very strange, very different around the office,” said one Cadwalader lawyer who survived the layoffs. “Certainly, Thursday [the 10th] was very strange. There were lots of closed doors, avoidance of eye contact, strained conversations. A lot of vacant stares.”
Vacant stares? That sounds like par for the course in the land of Big Law. But those stares are typically caused by having too much (mind-numbing) work, not too little. Where’s Cameron Diaz when you really need her?
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