The Law Firm Recession Has Arrived

The Law Firm Recession Has Arrived
The Wall Street Journal examines the law firm travails in North America - And Elsewhere
LawFuel.co.nz - Legal Jobs & News Daily - For years, the law firm Heller Ehrman LLP used a goofy coat of arms inside its offices: a laurel wreath, scales of justice and a Latin quotation, elvem ipsum etiam vivere. Rough translation: Elvis Lives.

In ate Septemver, Heller Ehrman went the way of Elivs. Just two years after is most profitable year ever, the freewheeling San Franciso firm expired, closing its doors after 118 years in business.

After upending a succession of US industries, the recession has arrived for US law firms, which have long seen themselves as partially insulated from economic downturns. In December thelen LLP, another large San Franciso firm, also shut down for good, citing recessionary pressures. Later that month, Thacher Proffitt & Wood LLP, a 160-year-old New York firm, announced that iw as closing. Dreier LLP of New York is dissolving after its founder was arrested for fraud.

Pay cuts and layoffs are becoming commonplace. This month, Clifford chance laid off more than 70 lawyers in London, Cooley Godward Kronish LLP fired 50 lawyers and 60 other staffers, and Akin Gump Strauss Hauer & Feld LLP let go of 65 staff members across the US.

In November one of the New York legal giant Cravath, Swaine & Moore LLP announced it was reducing year-end bonuses for junior lawyers and that it wouldn't raise its billing rates in 2009. Latham LLP, one of the nation's highest-grossing firms, said in December that associates would not get raises in 2009 - a move followeMore firms are in a fragile condition than I've ever seen", says William Brennan, a law firm consjultant with Altman Weil Inc and formerly chief financial officer at two large Philadelphia firms.

Profits, on average, were down 8 per cent to 12 per cent across the industry last year, after 15 years of consistent profit growth, sayd Peter Haugh, managing director for the Legal Specialty Group of Wachovia Wealth Management.

Throughout the industry, business has dropped off in such key practice areas as mergers, public offerings and corporate finance. Litigation, often counted on to carry firms through downturns has become less profitable as clients increasingly settled big cases, forgo lawsuits altogether or pressure firms to discount their fees, lawyers say. Some practice areas, such as bankruptcy, however, are robust.

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