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Law Firms Tightening Belts -- By Request

By V. Dion Haynes
Washington Post Staff Writer
Monday, October 20, 2008

Robert Ruyak, chairman and managing partner of Howrey LLP, said he began feeling the heat from corporate clients last year. With tighter budgets, legal departments at Procter & Gamble, Qualcomm, GE Healthcare and others prodded the Washington-based law firm to provide significant savings in the fees it charges.

Howrey responded: It is assigning more work to lower-paid staff attorneys and negotiating fixed fees for certain clients rather than billing by the hour. To keep up profit, the firm is hiring fewer associates and has acquired a Madrid firm to expand its antitrust practice into the booming Spanish market.

Washington area law firms are retooling due to a financial crisis that is bringing growing pressure from corporations and a drop in work in mergers and acquisitions, litigation and commercial real estate. At least one global firm with a D.C. office is closing, and another announced layoffs last week. Some big firms here are becoming bigger through mergers, which are up this year, or by snagging teams of lawyers from their competitors. Others are shifting to more lucrative specialties, such as bankruptcies, foreclosures and regulatory work related to implementing the bailout package, or capping salaries of associates and restructuring.

"Clearly, we have to economize for our clients," Ruyak said. "This is more important because of the uncertainty."

More than 36,000 lawyers work in the Washington region, ranking it behind only the New York City area, according to the Greater Washington Initiative, an economic development organization. More than 60,000 people work in the legal profession in the Washington area, which, per capita, employs more in that sector than any other metropolitan region in the nation. Washington lawyers' heavy reliance on work in government contracts, regulations and technology has protected them from the widespread layoffs occurring in New York, particularly their counterparts involved in mortgage-backed securities.

Still, the D.C. area's legal community is not immune to the shakeups at global law firms.

Heller Ehrman, a San Francisco-based law firm with an office in Northwest Washington, said recently that it is closing. The firm had operated since 1890 and specialized in big litigation. It collapsed in part because it was unable to replace income from several cases that were settled and after some of its key lawyers were hired away by other firms, according to an official who spoke on condition of anonymity because he was not authorized to speak publicly. The official said about 80 people worked in the D.C. office.

Last week, the Clifford Chance firm announced it was laying off 17 lawyers from its New York office and three from the District after losing litigation work from the demise of the financial services industry. The firm said it expects to lay off some non-lawyers in its business unit by the end of the year.

The firm "did all kinds of litigation. But that's not happening right now," said George Schieren, a partner at the firm who oversees securities litigation.

"After September 15, we lost investment banks," he added. "That's what drove the problem."

The conventional wisdom has been that litigation work, which represents nearly a quarter of the revenue generated by the legal industry, increases in economic downturns. But the West Peer Monitor Economic Index, a survey of law firms around the nation, shows that while demand for bankruptcy and regulatory work grew, litigation declined 2 to 5 percent in each of the past 10 months. Mark Medice, who oversees the survey, attributed the decrease to cost-conscious corporations curtailing their legal filings.

And as demand drops, so does revenue at some law firms.

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