The downturn in the Silicon Valley is affecting the top law firms...
_____________________________________________
Lawyer layoffs: Cooley Godward cuts 85
by David Marcus
Posted 06:50 PM EDT, Aug-23-2001
In a sure sign that the legal profession is being slammed by the tech wreck, Palo Alto, Calif.-based Cooley Godward llp said it is laying off 85 associates and special counsel as well as 50 paralegals and support staff.
"I think it could very well open the floodgates," said Lawrence S. Watanabe, a legal recruiter at Watanabe, Nason & Seltzer llc in Los Angeles. The layoffs could be the first of many by Silicon Valley law firms, he predicted. "Many firms are in a position similar to Cooley," Watanabe said.
In a firmwide memorandum distributed Aug. 23, Cooley chairman and CEO Stephen C. Neal wrote: "The slowdown has been deeper and more persistent than we anticipated, and a dramatic near-term turnaround seems unlikely. We now have a number of talented people who have been significantly underutilized for too long. Thus, with no foreseeable resurgence in the economy, we are making personnel reductions."
Neal's memo further called the lay-offs "significant, economy-driven personnel reductions." The memo added that the job cuts were "necessary to insure the long-term health" of Cooley.
The announcement shocked law firm associates across the nation. Though many firms have instituted stiffer performance reviews to cope with the business downturn, no law firm in recent memory has even laid off so many lawyers at once in such a public way.
"There's paranoia sweeping the nation," said one associate at a New York law firm, who added that several of his friends had forwarded the e-mail to him within hours of its release to Cooley employees. The associate, who asked not to be identified, said, "The memo had no mention of 'performance-based.' The letter was cold, I thought. It's more, 'We're slow in these departments, and we're cutting.' "
Cooley had employed almost 500 associates and 11 of-counsel, meaning that 17% of the firm's associates are being cut. The firm, known best for bringing information technology and life sciences companies public, has 154 partners. The law firm brought 15 biotech companies public in 2000, helping them raise about $1.2 billion. Thomson Financial Corp.'s Issuer's Counsel list for 2000 ranked Cooley second in number of deals in which it was counsel for an issuer. Cooley had 23 deals while Silicon Valley legal heavyweight Wilson Sonsini Goodrich & Rosati was first with 41 deals.
But Cooley's work in mergers and acquisitions and in initial public offerings has dropped off drastically this year. Cooley worked on 36 M&A deals in 2000, but it worked on a mere six in the first half of this year.
The law firm still plans to bring in 85 associates this fall, Neal said in a telephone interview Thursday. He added that the firm will recruit aggressively in law schools this fall. "We believe that having fixed the problem, we'll be stronger than ever," he said.
Like many other law firms riding the tech boom, Cooley grew very aggressively in the late 1990s. In 1995, the firm had 214 lawyers, according to the American Lawyer's survey of the 100 U.S. law firms. By Thursday's layoffs, the firm had grown to approximately 610 lawyers — a 19% compound annual growth rate since 1995.
Neal admitted that such growth caught up with his firm. "We viewed this as a problem because there's no quick, easy or intermediate fixes," he said. "That's why we're doing what we're doing."
Richard Hall, a partner with New York's prestigious Cravath Swaine & Moore, said, "It was very interesting to see them acknowledge that they grew too much." But unlike some others in the profession, he doesn't see job cuts sweeping law firms. "Somehow I suspect this is not going to set a trend."
Another lawyer at a major New York law firm believes that lay-offs will be contained in the Silicon Valley area.
Just a week ago, the Vault.com career Web site ranked Cooley No. 1 among the best 20 law firms with the best working environments. The list was based on a survey of associates nationwide who considered such factors as quality of life, pay, diversity and training.
Some law firm observers thought that Cooley was more honest than firms that have ditched associates through performance reviews. Sheri Michaels, a vice president with New York-based legal recruiter Mestel & Co., said, "I applaud the firm for standing forward and being straight and saying, 'This is a business decision,' as opposed to firms who are telling people that they're not measuring up. It will be very difficult for these people, but at least their firm was straight with them and with the outside world."
Cooley isn't the only Palo Alto firm to reduce headcount. Cross-town rival Wilson Sonsini Goodrich & Rosati has dipped from 812 lawyers in Aug. 31, 2000, to 750 currently, even though it brought in a large class of associates last fall. But Wilson has reduced its headcount quietly, through attrition and performance reviews. |
