Cadwalader lays off 96 in new round of cuts

Cadwalader Wickersham & Taft has announced it is laying off 96 lawyers in a second round of job cuts as the Wall Street firm continues to cope with the ongoing effects of the credit crunch, reports The American Lawyer.

W Christopher White, the firm's chairman, says the cuts will be made in its capital markets and global finance groups, which have been hit hard by the reduced appetite on Wall Street for commercial mortgage-backed securities. The cuts are in adddition to the 35 associates Cadwalader laid off in January, bringing the total number of redundancies to 131.

"If it had been, as we anticipated in the early part of the year, a less severe contraction and not as prolonged, we would have ridden this out," White says. "But it seems clear from the advice clients are giving us that this will be more severe and longer than we anticipated."

Of the 96 affected lawyers, White says 90% "are being laid off because of the downturn in the real estate finance and securitisation market." The job reductions principally affect Cadwalader's New York, Charlotte, and London offices (the majority are in New York). One or two Washington DC lawyers also face cuts, White says. Most are associates, though some special counsel are affected.

Cadwalader also is dismissing administrative staff, White says, though numbers were not immediately available. Cadwalader already had a hiring freeze in place since the fall, which remains in effect. To date, at least 21 staffers have left and not been replaced.

Cadwalader decided not to rescind any offers from its incoming class of associates, White says. A spokeswoman for the firm says Cadwalader expects 70 new associates.

Cadwalader expects that by 1 October, its overall headcount will be 580, White says. The firm had 630 lawyers at the end of June.

Cadwalader, considered a major player in commercial mortgage-backed securities, has suffered from a work shortage in its capital markets and real estate finance groups since the crunch took hold in the second half of last year. The firm was already forecasting a decline in revenue, but White says the firm's original projections budgeted for a rebound in the second half of 2008. The firm no longer believes that will occur.

Cadwalader is not alone in laying off associates. Firms such as Dechert, Sonnenschein Nath & Rosenthal and Thacher Proffitt & Wood also have reduced their associate ranks through layoffs and buy-outs since the market began heading downward last autumn.

But Cadwalader is the first firm to announce a second round of lay-offs, a shock move from a firm that only two years ago was ranked third in New York for profits per partner, behind only Wachtell Lipton Rosen & Katz and Cravath Swaine & Moore. Yet after work slowed down, profits per partner fell 6% to $2.72m (£1.38m). It now ranks fifth among New York firms, falling behind Sullivan & Cromwell and Simpson Thacher & Bartlett. Nationally, it ranks sixth.

Members of the management committee, in consultation with partners in the affected groups, first began debating associates lay-offs at the beginning of June. The full partnership was informed at a meeting last week. Associates are being told today (30 July).

The London office (pictured), which was not affected in January, this time will experience lay-offs in the capital markets group. "London sometimes finds itself behind the United States in market trends," White says. Now, the downturn is clearly a global problem, he adds.

Yesterday, London managing partner Michelle Duncan emailed employees to say the office's summer party scheduled for Friday was cancelled "due to budget considerations," adding there would instead be a "smaller-scale drinks event to take place later this summer."

The lawyers laid off will receive severance pay until the end of the year, White says. The affected associates will have a better chance of finding new jobs now than they would if the firm waited until January to enact the cuts, says White, as the beginning of the year typically is when most law firms conduct performance reviews and make changes.

The The American Lawyer is a US sister title of Legal Week.