In one of the first clear signs that slumping credit markets are causing economic pain at law firms, Clifford Chance (CC) laid off six structured finance associates on Monday (5 November), writes the New York Law Journal.
John Christian, the partner in charge of the magic circle firm's US personnel committee, said the firm had made a difficult "business decision" to lay off the six associates in a practice group that worked exclusively for credit rating agency Standard & Poor's (S&P). The lawyers in the group had reviewed the documentation S&P used to rate mortgage-backed securities, the market for which has collapsed in recent months.
"We concluded this work just wasn't coming back," Christian said. He declined to discuss the severance packages offered to the associates, but one of those terminated said they were offered three months' salary with no bonus. Indeed, the associate said the timing of the layoffs seemed designed to deprive the targeted associates, all of whom were relatively senior, of their bonuses.
The past week has seen a flurry of bonus announcements from
Firms that have matched that range in recent days include Milbank
The high bonuses announced by law firms have stood in contrast to bad news at major clients such as investment banks, many of which have already had lay-offs.
Many of the job losses at banks are linked to the weakness of the structured finance market and many of the law firms with large practices in the area may feel pressure to make cuts.
CC is not regarded as a major player in the
Thacher Proffitt chairman Paul Tvetenstrand said his firm, while definitely slower than before, still had work from securitisations of assets other than residential mortgages. He said there were no economic lay-offs in the works and that associates at the firm have been reassured as such.
"Our partners are going to take the hit before we pass it on to the associates," he said.
McKee Nelson brought aboard another
Christian said CC had decided the associates in its S&P group could not be reassigned because of their relative seniority. The firm has about 260 lawyers in its
Law firms are generally loath to engage in lay-offs because they hurt the firm image in the eyes of both lateral and law school candidates. CC is still wrestling with the fallout from a leaked 2002 associates' memo that described widespread misery at the firm.
Nevertheless, law firms have engaged in major lay-offs in the past. Shearman & Sterling laid off 10 percent of its associates when mergers and acquisitions plummeted in 2001, while the former Dewey Ballantine also had a number of lay-offs.
The New York Law Journal is a US sister title of Legal Week.