Troubles in Big Law ? More partner departures at Patton Boggs and layoffs in size at Weil Gotshal could be canaries in the ole coal mine of Big Law !

http://abovethelaw.com/2013/06/musical-chairs-more-partners-part-with-patton-boggs/#more-253387

• 24 Jun 2013 at 3:05 PM
• BIGLAW, HOLLAND & KNIGHT, LATERAL MOVES, MUSICAL CHAIRS, PARTNER ISSUES, PATTON BOGGS,TEXAS

Musical Chairs: More Partners Part With Patton Boggs

By DAVID LAT

It seems that the firm of Patton Boggs is stuck in the mud right now. Back in March, the firm announced significant layoffs of attorneys and staff — possibly the biggest in 2013, at least until this morning’s Weil Gotshal layoffs. Patton Boggs is also feeling some heat over its involvement in the Chevron / Ecuador litigation mess (fifth link).

And now we have news that a sizable number of Patton partners are heading for the exit. How many partners are leaving, and where are they headed?

Please note the UPDATE at the end of this post.

Here’s a report from the Washington Post:

Seventeen partners last week announced their intention to leave storied Washington law and lobby firm Patton Boggs, a firm spokesman confirmed Monday.

More than half of the partners worked out of the firm’s Dallas office, but the defections also include partners in Washington and Denver. Patton Boggs spokesman Elliott Frieder said the partners have not left yet, but will be leaving soon.

Where are they going? The Post piece doesn’t say, and Patton Boggs did not respond to our request for comment. But we’ve learned that at least some of them, an unknown number at the current time, will be launching a Dallas office for Holland & Knight, according to a spokesperson for that firm.

In some sense it’s not surprising to see defections from Patton Boggs. The firm recently showed up on a top ten list of firms with the biggest partner compensation spreads in the Am Law 200. Firms with high spreads often experience greater lateral churn than firms with low spreads. When some “partners” earn 18 times as much as other partners at the same firm, as is the case at Patton Boggs, it’s hard to maintain a cohesive firm culture that keeps defections to a minimum.

We expect there’s a lot going on at Patton Boggs that we haven’t yet covered. Let us know, by email or text message (646-820-8477), if you know which way the wind blows at Patton Boggs.

UPDATE (5:10 p.m.): One tipster claims that some of the departing partners are the ones who werespoken to back in March about performance issues. That’s also the implication of partner Robert Luskin’s remarks to the Blog of Legal Times: “This is really Act 2 of a play we previewed a few months ago.”

17 partners to leave Patton Boggs [Capital Business / Washington Post]
17 Partners Plan to Leave Patton Boggs [The BLT: The Blog of Legal Times]

Earlier: Nationwide Layoff Watch: Patton Boggs Blows Folks Out the Door
Nationwide Layoff Watch: Major Cuts Come To Weil Gotshal
Which Firms Have The Biggest Gaps Between Their Highest- and Lowest-Paid Partners?

• 24 Jun 2013 at 11:46 AM
• BANKRUPTCY, BIGLAW, LAYOFFS, PARTNER ISSUES, PARTNER PROFITS, SECRETARIES / ADMINISTRATIVE ASSISTANTS, SEVERANCE, STAFF LAYOFFS, WEIL GOTSHAL

Nationwide Layoff Watch: Major Cuts Come To Weil Gotshal

By DAVID LAT

Since the Supreme Court’s ruling in Fisher, the major affirmative action case, turned out to besomething of a dud, the big legal story of the day is the news out of Weil Gotshal. The firm is conducting large layoffs of both attorneys and staff, as well as reducing partner pay.

Thus far, many of our recent layoff stories have involved staff layoffs, especially secretarial layoffs; relatively small numbers of affected individuals; and firms not in the tippy-top tier of Biglaw. So that’s what makes the Weil news so notable — and so frightening.

Weil is an elite firm, in both profits and prestige. The cuts it just announced affect lawyers, not just staff, and reach into the triple digits….

This has to be one of the largest rounds of layoffs by a leading law firm since Latham & Watkins laid off 440 people back in February 2009. Here are details from Peter Lattman of DealBook:

The leadership of Weil, Gotshal & Manges, a New York-based firm of 1,200 lawyers that counts General Electric and Sanofi as marquee clients and handled the bankruptcy of Lehman Brothers, informed its employees Monday morning about the reductions.

Sixty junior lawyers, known in law firms as associates, will lose their jobs. That amounts to roughly 7 percent of Weil’s associates. Roughly 30 of the firm’s 300 partners are having their annual compensation reduced, in many cases by hundreds of thousands of dollars. And 110 staff employees – roughly half of them legal secretaries – are being let go.

You can read the full firm-wide memo, from executive partner Barry Wolf, on the next page. His memo talks about how Weil managed to avoid draconian cuts in the past and trumpets the firm’s overall strength (lest you think Weil is another Dewey & LeBoeuf):

[G]iven the balance of the Firm, in particular the contribution of the BFR [bankruptcy and financial restructuring] and litigation practices (most notably as a result of Lehman), we have been able to avoid taking such actions. Further, we have continued to make meaningful investments in the Firm over the last few years as part of a strategic plan to increase our revenue base for the future.

We have been able to do this because of the Firm’s balance of practice and geography as well as our strong financial position. As you know, we have zero debt outstanding. This has been the case throughout our history — and we have no plans to change that. Further, our partner pension plan remains fully funded with over $500 million of assets in it, and we do not have any compensation guarantees with partners other than for the first year a lateral partner joins the Firm.

But because bankruptcy work has waned and transactional work remains weak, cuts are now necessary. According to Wolf, they are being made not because the firm is any crisis, but because it wants to prepare for the future:

[W]e must now make the adjustments we avoided over the last few years to position the Firm to continue to thrive. We are taking these actions from a position of strength. At the same time, from a revenue perspective we will continue to take significant steps to further increase our market share. However, it appears that the market for premium legal services is continuing to shrink. Therefore, actions to enhance revenue alone will not be sufficient to position the Firm as necessary for these new market conditions.

In other words, having the same or bigger slice of a shrinking pie is a problem. And the pain will be felt not just by associates and staff, but by partners too:

[T]here will have to be meaningful compensation adjustments for certain partners in light of the economic realities of the new normal. It may well be that some of these partners will decide to pursue other opportunities.

Why the compensation cuts instead of an outright forcing out? According to DealBook, the Weil partnership agreement allows only “for cause” firing of partners. So management must resort to the tactic of drastically cutting comp, hoping that affected partners will decide to go elsewhere.

Here are some reactions from readers. Said one former Weil lawyer, “I’m stunned, really. But honestly, when he says they made these choices from a position of strength, that sounds right to me.” Said a law student looking at Weil, “As someone leaning toward going into bankruptcy, I was very interested in Weil — and might have to reconsider that interest going into OCI.”

Another tipster tells us, “The Houston office of Weil gotshal has basically laid off the entire CCL [complex commercial litigation] group. Part of a de-emphasis on litigation in Houston. Word is the whole office is likely going to shut down soon.” This comment, while speculative, is consistent with Barry Wolf’s memo, which notes that “[f]rom a strategic standpoint we will be deemphasizing our CCL practice in Houston and Boston.”

On the bright side, affected associates are receiving six months of severance pay, which is definitely generous. And Weil also deserves praise for handling an unfortunate situation with honesty and transparency. Many other firms are going down the dishonorable path of stealth layoffs. (If you know of a firm that needs calling out for that, please email us or text us: 646-820-8477.)

Good luck to everyone affected by the Weil Gotshal layoffs. Alas, we predict more layoff news to come — as early as this afternoon, in fact. When a firm as high-powered as Weil is laying off lawyers and staff, you know that other firms can’t be far behind.

UPDATE (1:40 p.m.): Here’s a quick financial snapshot of Weil Gotshal, from Am Law Daily:

Monday’s move comes on the heels of a year that, according to the most recent Am Law 100 data, saw the firm’s gross revenue remain essentially flat from 2011 at $1.23 billion and its partners per profit figure drop 8.6 percent to $2.23 million. The decline in profits came as the firm added 20 lateral partners to bring its total partner head count at the end of 2012 to 195.

Commenting on the firm’s financial performance last year, Wolf said in early 2013 that he was satisfied with it because, though profits were down, demand for the firm’s services had increased by 3 percent year to year. “Our PPP is down, but in our view, that’s all just math. We did not draw down inventory simply to make results look stronger,” he said in February.

UPDATE (2:00 p.m.): As promised, here is additional law firm layoff news.