Recessions & Mega Firms Forum

[Anonymous User]

In b4 brand new KE lateral from lower v100 "actually KE is well hedged against economic downturn because of its robust restructuring practice"

Doesn't KE do more Rx than most firms? It would probably matter on the margins (which is what OP is asking about). If the economy does a 2008 again then many associates would be fucked - basically a guessing game to decide which would be the MOST fucked. The Rx hedge might help save a few at KE that get axed at similar firms. It wouldn't be this massive difference, though.

The K&E hedge is real, at the outset of COVID when deals all died large numbers of corp associates were shifted into bankruptcy, and it personally turned my transactional adjacent practice from totally drying up to a low but minimally respectable billable number for several months.

It’s not going to save everyone in a downturn but it is legitimately more than just a talking point given how strong K&E’s bankruptcy practice is.

See e.g. that email from Andy Calder last May chastising Houston corporate associates for “hiding” and insisting that they “grab a restructuring assignment ASAP” because they had more work flowing in than they could handle and needed people to help. It was very much the opposite of struggling to find hours.

Yes - those are the points that have been made above about the so-called "K&E Hedge". It is a hedge when RXs are actually happening, such as when covid hit suddenly. But not a hedge in a more normal downturn, non-black swan event, where companies are trying to cut costs and ride it out, and not going straight to RX.

[Anonymous User]

Just a minor point about the previous post, but it's news to me that white collar lit is strongly profitable. My understanding was that the only parts of litigation that are truly profitable (in the sense of being anywhere near the ballpark of transactional practice) is complix/commercial lit. Now of course white collar lit will be more profitable than, say, appeals, but in the relevant context is it actually a money maker for large firms?

At my firm (one of the two megafirms), white collar is our most profitable lit group, so I extrapolated from that. I don't know if it holds true across the board.

White collar is one of (if not the) biggest cash cows for GDC’s lit practice.

Was told that a company involved in the largest FCPA cases paid high 8 digits in legal fees.

[Anonymous User]

In b4 brand new KE lateral from lower v100 "actually KE is well hedged against economic downturn because of its robust restructuring practice"

Doesn't KE do more Rx than most firms? It would probably matter on the margins (which is what OP is asking about). If the economy does a 2008 again then many associates would be fucked - basically a guessing game to decide which would be the MOST fucked. The Rx hedge might help save a few at KE that get axed at similar firms. It wouldn't be this massive difference, though.

The K&E hedge is real, at the outset of COVID when deals all died large numbers of corp associates were shifted into bankruptcy, and it personally turned my transactional adjacent practice from totally drying up to a low but minimally respectable billable number for several months.

It’s not going to save everyone in a downturn but it is legitimately more than just a talking point given how strong K&E’s bankruptcy practice is.

See e.g. that email from Andy Calder last May chastising Houston corporate associates for “hiding” and insisting that they “grab a restructuring assignment ASAP” because they had more work flowing in than they could handle and needed people to help. It was very much the opposite of struggling to find hours.

Yes - those are the points that have been made above about the so-called "K&E Hedge". It is a hedge when RXs are actually happening, such as when covid hit suddenly. But not a hedge in a more normal downturn, non-black swan event, where companies are trying to cut costs and ride it out, and not going straight to RX.

Go ahead and name a single era within the past 15 years where (1) both deal work and BK work slowed down pretty much completely and (2) layoffs became a thing.

[Anonymous User]

Speaking of KE & RX counter-cyclicality, do PW and DPW benefit from the same thing? They have Band 1 RX practices, right? Or are their RX groups relatively smaller compare the overall firm, so unable to keep the firm afloat in the same way.

[Anonymous User]

No one knows. It will depend on what the recession looks like and what the firm can leverage. Latham got really unlucky in 2008. I think 2 of their 5 biggest clients were Lehman and bear sterns, so... yeah.

At least this is what I recall them telling me when I was a Latham associate.


Also... 2008 was the worst recession in 80 years. Planning your career decisions around a one in a lifetime sort of thing that no one knows what it will look like is probably not wise.

[Anonymous User]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

[Anonymous User]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

Isn't the point that LW/KE are on the extreme end of this trend...

[Anonymous User]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

Isn't the point that LW/KE are on the extreme end of this trend...

That's one point. Another point is we now have many firms would have been "mega firms" in another era. They just don't seem giant because KE exists.

KE also does things like taking 50+ summers in Houston. I can see that blowing up one day. It's generally safer to expand in a market like NYC.

[Anonymous User]

How big of a diff is there bw a white shoe 1k size firm and a 3k mega firm? In a black swan event does it mean that each layoff 25% of attorneys, in which case the probability of you getting axed is equivalent, just that the metrics look worse at the mega firm due to sheer volume of layoffs. Or is it that the white shoe only has to layoff 10% in the first place.

[LBJ's Hair]

what's most relevant here isn't whether a firm has a decent bankruptcy practice to "pick up the slack," or whatever. like yes it's better to have one than not have one in a recession, but I doubt even Weil is truly "hedged."

what's relevant is whether a firm, culturally, is willing let associates billing 1200 hours stick around b/c they're nice or whether they're gonna make a "business decision" and fire people

[Anonymous User]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

Isn't the point that LW/KE are on the extreme end of this trend...

That's one point. Another point is we now have many firms would have been "mega firms" in another era. They just don't seem giant because KE exists.

KE also does things like taking 50+ summers in Houston. I can see that blowing up one day. It's generally safer to expand in a market like NYC.

They actually did 50+ summers in KE Houston in 2019. Ppl were very concerned. Then, for some reason, mysteriously like half of them didn't return (believe it was a 100% offer rate). I actually remember 2019 heading in to 2020 was looking like more of a gradual downturn. Things were kind of slow.

[Anonymous User]

what's most relevant here isn't whether a firm has a decent bankruptcy practice to "pick up the slack," or whatever. like yes it's better to have one than not have one in a recession, but I doubt even Weil is truly "hedged."

what's relevant is whether a firm, culturally, is willing let associates billing 1200 hours stick around b/c they're nice or whether they're gonna make a "business decision" and fire people

I think this ties into the prior question. Can or do any of the mega firms afford a culture where it can be sustainable to hold onto associates. I’m guessing the answer is almost a resounding no based on that type of business model… but am hoping that I’m not seeing something

Edit: or by virtue of the previous poster, are even the white shoes so close to megafirms these days that it’s a wash

[Anonymous User]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

Isn't the point that LW/KE are on the extreme end of this trend...

That's one point. Another point is we now have many firms would have been "mega firms" in another era. They just don't seem giant because KE exists.

KE also does things like taking 50+ summers in Houston. I can see that blowing up one day. It's generally safer to expand in a market like NYC.

They actually did 50+ summers in KE Houston in 2019. Ppl were very concerned. Then, for some reason, mysteriously like half of them didn't return (believe it was a 100% offer rate). I actually remember 2019 heading in to 2020 was looking like more of a gradual downturn. Things were kind of slow.

As a member of that summer class, the implication of “half mysteriously not returning” is just bullshit lol. Of 52, four were 1Ls: two returned to the firm this year, one went to KE NYC, and one went to S&C NYC. Of the 2Ls, 6 clerked, 1 went to KE SF, 1 to KE DC, 1 to KE SF, 1 to KE Chicago, two to KE Austin, 1 to Latham SD, 1 to Wilson SF, and 1 to local government. Everyone else is still at the Houston office.

[BrowsingTLS]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

Isn't the point that LW/KE are on the extreme end of this trend...

That's one point. Another point is we now have many firms would have been "mega firms" in another era. They just don't seem giant because KE exists.

KE also does things like taking 50+ summers in Houston. I can see that blowing up one day. It's generally safer to expand in a market like NYC.

They actually did 50+ summers in KE Houston in 2019. Ppl were very concerned. Then, for some reason, mysteriously like half of them didn't return (believe it was a 100% offer rate). I actually remember 2019 heading in to 2020 was looking like more of a gradual downturn. Things were kind of slow.

As a member of that summer class, the implication of “half mysteriously not returning” is just bullshit lol. Of 52, four were 1Ls: two returned to the firm this year, one went to KE NYC, and one went to S&C NYC. Of the 2Ls, 6 clerked, 1 went to KE SF, 1 to KE DC, 1 to KE SF, 1 to KE Chicago, two to KE Austin, 1 to Latham SD, 1 to Wilson SF, and 1 to local government. Everyone else is still at the Houston office.

When K&E's legal recruitment team comes out in full force with the offer data and outcomes.

[Anonymous User]

what's most relevant here isn't whether a firm has a decent bankruptcy practice to "pick up the slack," or whatever. like yes it's better to have one than not have one in a recession, but I doubt even Weil is truly "hedged."

what's relevant is whether a firm, culturally, is willing let associates billing 1200 hours stick around b/c they're nice or whether they're gonna make a "business decision" and fire people

I think this is spot on and the stats shared earlier ITT that compared in 2008-10 Cleary basically staying the same size vs. Latham doing the Lathaming show this well. Not trying to shill for Cleary although I think of them as farther on the old-school, one-for-all all-for-one egalitarian-style firm spectrum than surely a Latham or a Kirkland.

If anything, the fact that Latham has really seen no long-term detriment to being the face of massive layoffs as recently as 13 years ago will probably motivate firms to being more ruthless, and every firm that gets aggressive with layoffs provides more cover for the next firm to do the same thing (and not take sole heat for "Lathaming").

[Anonymous User]

what's most relevant here isn't whether a firm has a decent bankruptcy practice to "pick up the slack," or whatever. like yes it's better to have one than not have one in a recession, but I doubt even Weil is truly "hedged."

what's relevant is whether a firm, culturally, is willing let associates billing 1200 hours stick around b/c they're nice or whether they're gonna make a "business decision" and fire people

I think this is spot on and the stats shared earlier ITT that compared in 2008-10 Cleary basically staying the same size vs. Latham doing the Lathaming show this well. Not trying to shill for Cleary although I think of them as farther on the old-school, one-for-all all-for-one egalitarian-style firm spectrum than surely a Latham or a Kirkland.

If anything, the fact that Latham has really seen no long-term detriment to being the face of massive layoffs as recently as 13 years ago will probably motivate firms to being more ruthless, and every firm that gets aggressive with layoffs provides more cover for the next firm to do the same thing (and not take sole heat for "Lathaming").

Bingo. Latham’s big mistake was being public about the cull - made it hard for them to run their associate churn business model for a little while, but they learned their lesson - don’t do it publicly, focus on dumping mid-levels and seniors - and have recovered.

Plenty of firms dump people when convenient to do so. There’s at least one V10 that seems to lose its black associates from Howard by their third years, without fail. Even aside from that, we know that lots of firms have big culls from years five to seven. The issue for associates is that law firms try to pretend it doesn’t happen or that every involuntary exit is only on performance-based grounds.

If there’s going to be banker-level churn, then maybe firms and the industry should be dealing with this with banker-type attitudes. But they have no incentive to do so when there’s still a supply of the labor they need.

[Anonymous User]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

Isn't the point that LW/KE are on the extreme end of this trend...

That's one point. Another point is we now have many firms would have been "mega firms" in another era. They just don't seem giant because KE exists.

KE also does things like taking 50+ summers in Houston. I can see that blowing up one day. It's generally safer to expand in a market like NYC.

They actually did 50+ summers in KE Houston in 2019. Ppl were very concerned. Then, for some reason, mysteriously like half of them didn't return (believe it was a 100% offer rate). I actually remember 2019 heading in to 2020 was looking like more of a gradual downturn. Things were kind of slow.

As a member of that summer class, the implication of “half mysteriously not returning” is just bullshit lol. Of 52, four were 1Ls: two returned to the firm this year, one went to KE NYC, and one went to S&C NYC. Of the 2Ls, 6 clerked, 1 went to KE SF, 1 to KE DC, 1 to KE SF, 1 to KE Chicago, two to KE Austin, 1 to Latham SD, 1 to Wilson SF, and 1 to local government. Everyone else is still at the Houston office.

When K&E's legal recruitment team comes out in full force with the offer data and outcomes.

More like when one of the associates you’re talking about knows who her fucking coworkers are and is annoyed to see anons talking out of their ass about it. There is plenty of shit to talk about KE and Houston that’s legitimate, but it’s frustrating to see 2Ls at NYU sprinkling in bullshit on top of it.

[Anonymous User]

There is less job security at firms with higher partner-associate leverage just because there's more fat to trim when times are lean. That's not necessarily K&E/LW though (depends on the office and practice).

I would be more concerned with the higher billables and turnover at these firms (more K&E than LW, though that's also very office and practice-dependent). Burnout is waaay more likely to derail your career than a recession.

[Anonymous User]

Just a minor point about the previous post, but it's news to me that white collar lit is strongly profitable. My understanding was that the only parts of litigation that are truly profitable (in the sense of being anywhere near the ballpark of transactional practice) is complix/commercial lit. Now of course white collar lit will be more profitable than, say, appeals, but in the relevant context is it actually a money maker for large firms?

At my firm (one of the two megafirms), white collar is our most profitable lit group, so I extrapolated from that. I don't know if it holds true across the board.

White collar is one of (if not the) biggest cash cows for GDC’s lit practice.

At one of the V10s being discussed and our white collar practice mints money on a per attorney basis; there's almost no true fee sensitivity beyond a little up-front negotiating to save face. The bigger issue with white collar is it's hard to get matters that scale as easily. So white collar is highly profitable but you have to bring in a lot of matters to keep the machine running. Vs. complex commercial lit. where the discounting is rough and the push for flat fee is real but on the other hand they're also easy cases to throw a dozen associates at instantaneously.

[Anonymous User]

I think we are glossing over how big firms have gotten. Even firms like Sidley (2000 lawyers) and Ropes (1500 lawyers) are huge now. Even Dechert has 1000 lawyers. It's not just Latham and K&E. If the economy goes south, there are lots of mouths to feed.

Isn't the point that LW/KE are on the extreme end of this trend...

That's one point. Another point is we now have many firms would have been "mega firms" in another era. They just don't seem giant because KE exists.

KE also does things like taking 50+ summers in Houston. I can see that blowing up one day. It's generally safer to expand in a market like NYC.

They actually did 50+ summers in KE Houston in 2019. Ppl were very concerned. Then, for some reason, mysteriously like half of them didn't return (believe it was a 100% offer rate). I actually remember 2019 heading in to 2020 was looking like more of a gradual downturn. Things were kind of slow.

As a member of that summer class, the implication of “half mysteriously not returning” is just bullshit lol. Of 52, four were 1Ls: two returned to the firm this year, one went to KE NYC, and one went to S&C NYC. Of the 2Ls, 6 clerked, 1 went to KE SF, 1 to KE DC, 1 to KE SF, 1 to KE Chicago, two to KE Austin, 1 to Latham SD, 1 to Wilson SF, and 1 to local government. Everyone else is still at the Houston office.

When K&E's legal recruitment team comes out in full force with the offer data and outcomes.

More like when one of the associates you’re talking about knows who her fucking coworkers are and is annoyed to see anons talking out of their ass about it. There is plenty of shit to talk about KE and Houston that’s legitimate, but it’s frustrating to see 2Ls at NYU sprinkling in bullshit on top of it.

Lmao.

[Anonymous User]

Isn't the point that LW/KE are on the extreme end of this trend...

That's one point. Another point is we now have many firms would have been "mega firms" in another era. They just don't seem giant because KE exists.

KE also does things like taking 50+ summers in Houston. I can see that blowing up one day. It's generally safer to expand in a market like NYC.

They actually did 50+ summers in KE Houston in 2019. Ppl were very concerned. Then, for some reason, mysteriously like half of them didn't return (believe it was a 100% offer rate). I actually remember 2019 heading in to 2020 was looking like more of a gradual downturn. Things were kind of slow.

As a member of that summer class, the implication of “half mysteriously not returning” is just bullshit lol. Of 52, four were 1Ls: two returned to the firm this year, one went to KE NYC, and one went to S&C NYC. Of the 2Ls, 6 clerked, 1 went to KE SF, 1 to KE DC, 1 to KE SF, 1 to KE Chicago, two to KE Austin, 1 to Latham SD, 1 to Wilson SF, and 1 to local government. Everyone else is still at the Houston office.

When K&E's legal recruitment team comes out in full force with the offer data and outcomes.

More like when one of the associates you’re talking about knows who her fucking coworkers are and is annoyed to see anons talking out of their ass about it. There is plenty of shit to talk about KE and Houston that’s legitimate, but it’s frustrating to see 2Ls at NYU sprinkling in bullshit on top of it.

Lmao.

Yeah, was just going to let that response end the matter, rather than mention the town hall Calder held after their summer was over.

[Joachim2017]

Just a minor point about the previous post, but it's news to me that white collar lit is strongly profitable. My understanding was that the only parts of litigation that are truly profitable (in the sense of being anywhere near the ballpark of transactional practice) is complix/commercial lit. Now of course white collar lit will be more profitable than, say, appeals, but in the relevant context is it actually a money maker for large firms?

At my firm (one of the two megafirms), white collar is our most profitable lit group, so I extrapolated from that. I don't know if it holds true across the board.

White collar is one of (if not the) biggest cash cows for GDC’s lit practice.

At one of the V10s being discussed and our white collar practice mints money on a per attorney basis; there's almost no true fee sensitivity beyond a little up-front negotiating to save face. The bigger issue with white collar is it's hard to get matters that scale as easily. So white collar is highly profitable but you have to bring in a lot of matters to keep the machine running. Vs. complex commercial lit. where the discounting is rough and the push for flat fee is real but on the other hand they're also easy cases to throw a dozen associates at instantaneously.

Interesting. I guess "per attorney basis" is the key here though. In Big Law the scaling seems like it'll matter a lot more.

[Sackboy]

How big of a diff is there bw a white shoe 1k size firm and a 3k mega firm? In a black swan event does it mean that each layoff 25% of attorneys, in which case the probability of you getting axed is equivalent, just that the metrics look worse at the mega firm due to sheer volume of layoffs. Or is it that the white shoe only has to layoff 10% in the first place.

I'm pretty sure I literally posted data on this for the 2008 recession on the first page.

[Anonymous User]

Just a minor point about the previous post, but it's news to me that white collar lit is strongly profitable. My understanding was that the only parts of litigation that are truly profitable (in the sense of being anywhere near the ballpark of transactional practice) is complix/commercial lit. Now of course white collar lit will be more profitable than, say, appeals, but in the relevant context is it actually a money maker for large firms?

At my firm (one of the two megafirms), white collar is our most profitable lit group, so I extrapolated from that. I don't know if it holds true across the board.

White collar is one of (if not the) biggest cash cows for GDC’s lit practice.

At one of the V10s being discussed and our white collar practice mints money on a per attorney basis; there's almost no true fee sensitivity beyond a little up-front negotiating to save face. The bigger issue with white collar is it's hard to get matters that scale as easily. So white collar is highly profitable but you have to bring in a lot of matters to keep the machine running. Vs. complex commercial lit. where the discounting is rough and the push for flat fee is real but on the other hand they're also easy cases to throw a dozen associates at instantaneously.

Interesting. I guess "per attorney basis" is the key here though. In Big Law the scaling seems like it'll matter a lot more.

https://www.reuters.com/legal/legalindu ... 021-06-21/

Don’t think pocketing 12M is common for civil lit partners, even at firms like DPW.