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Sonnenschein Cuts Lawyers and Staff

Demand Declines
For Legal Advice
In Some Specialties
May 29, 2008; Page B8
The Wall Street Journal

In another sign of the tough market for the law business, Sonnenschein Nath & Rosenthal LLP has laid off 37 lawyers and 87 other employees -- one of the larger purges in a recent industry wave of layoffs.

The firm, which had close to 700 lawyers before the cuts, said demand is down for some of its practices -- particularly real estate, the group hardest hit by the layoffs.

Some "underproductive" litigators also were let go, firm Chairman Elliott Portnoy said. "We have to take the steps necessary to make sure we are competitive for talent and achieve the profitability our lawyers expect," Mr. Portnoy said. "A small group of firms are positioning themselves to pull away from the pack," in terms of profitability, he added. "We intend to be in that small group."

The lawyers who lost their jobs included partners and associates. Earlier this year, Sonnenschein also rescinded offers to two first-year lawyers slated to join in the fall and to two law students expected to work for the firm this summer, all in its Charlotte, N.C., office. Mr. Portnoy said business there was hurt by the slowdown in the market for mortgage-backed securities.

Other large firms, including Cadwalader, Wickersham & Taft LLP and Clifford Chance, also have fired attorneys in recent months. Corporate legal work, from securities offerings to private-equity deals, has slowed, and it isn't clear whether litigation and bankruptcy work will take up the slack. Industry consultants predict that many firms will be fortunate to achieve slight revenue growth this year compared to the double-digit increases common in recent years.

News of the layoffs at Sonnenschein was reported earlier on the Web site Above the Law.

Most law firms in recent years have become focused on the bottom line, dispensing with an industry reticence to fire lawyers. Even so, some firms may try to cloak their profit motives -- by claiming, for example, that employees were fired for poor performance, not economic reasons -- out of a concern for the firms' reputations.

Sonnenschein, Mr. Portnoy said, "concluded the better approach was to be open and direct about it."