Latham & Watkins Cuts 190 Lawyers
Saturday, February 28, 2009
In a vivid illustration of how the global recession is battering the legal profession, Latham & Watkins, one of the largest law firms in the nation, announced yesterday that it will let go 190 lawyers and 250 paralegal and support staff.
The firm is struggling with declining profits as corporate clients slash legal spending because of a reduction in mergers and acquisitions, capital finance and transactions. The job cuts are among thousands that have roiled through the industry in recent months.
In February, hundreds of jobs were cut at firms with District offices, including 243 at Holland & Knight, 134 at Bryan Cave and 29 at Dechert. Officials at Latham and the other firms declined to say how many of the dismissals were in Washington.
Legal experts say 2008, following years of steady expansion and growing profits, was the worst year in recent memory for many law firms. Given the spate of layoffs this year, they expect 2009 to be no better.
"I think in 2009 you'll see that more [firms will experience a lower] profit level than we've ever seen. No doubt about it," said Thomas S. Clay, principal of Altman Weil, which provides management consulting services to law firms. Clay, noting that profits dropped 30 percent at some firms, added: "They could go through another round of layoffs if the work doesn't come back."
Bob Dell, who is Latham's chairman and managing partner and works out of the firm's San Francisco office, said yesterday that the 440 jobs being eliminated represent 12 percent of the firm's associates and 10 percent of its paralegals. The cuts will occur in several of Latham's 28 offices, including those in the District, New York and Los Angeles, the firm said.
In recent years, the firm expanded its hiring of associates, based on revenue that were growing 15 percent annually, Dell said. But revenue declined to $1.9 billion in 2008 from $2 billion in 2007 as transactional work fell off, prompting an examination of staffing levels, he said.
"We had an overcapacity [in staff] for some time. We were willing to live with that," Dell said in an interview. But in talking to clients, "we concluded this is not a normal recession. It will be longer lasting and a slower recovery. We couldn't maintain that overcapacity."
Nationwide, the number of employees working in the legal profession grew steadily during the past decade before taking a turn last year, according to Bureau of Labor Statistics data. Last January, 1.16 million were working in the profession, down from 1.17 million in January 2007. It fell to 1.15 million in January 2009.
Many lawyers have indicated that they think the job cuts will continue this year. In a recently published survey by the ABA Journal, 39 percent of 14,000 lawyers polled said they expected layoffs at their firm this year. Nearly 20 percent said they expected to lose their jobs this year.
Firms also are cutting costs through voluntary reductions. Hogan & Hartson this month offered buyouts in an attempt to reduce 257 support staff positions -- including 149 in the District.
"As technological capabilities evolve, our attorneys are able to generate more of their work product and we're finding out we don't need the same level of support," firm Chairman J. Warren Gorrellsaid.
"We're trying to make sure we're being appropriately cost conscious," he added. "We've been living with overcapacity for some time."
Latham's growth strategy reversed quickly. Just three months ago, Latham announced it had named 28 associates and two other lawyers as partners in Chicago, Hamburg, London and several other offices.
Dell said the workers losing their jobs will be offered a more generous severance package than usual.
The employees will receive salary for six months, instead of two to three months, he said. They also will retain their health coverage for that period, he said.