Way back in June, Above the Law heard rumblings about issues regarding the incoming first-year class at Baker & McKenzie. The class had already been deferred until January 2010, but in June some tipsters reported that Baker was “rescinding” offers. Others claimed that the firm was simply “strongly encouraging” incoming associates to consider alternatives.

Still, some associates poised to start at Baker hadn’t heard anything at all. At the time, we brought these reports to the attention of Baker & McKenzie management. In June, the firm said:

As we’ve already communicated, we have had to make some difficult decisions in a difficult economy. But we haven’t taken the actions you suggest, and our start dates remain January (and, in some cases, earlier).

But that was back in the heady days of early summer. Now, as autumn approaches, Baker seems to be preparing its incoming class for economic reality. This morning, tipsters reported that deferral extensions — or worse — were coming down on at least some members of Baker’s would-be incoming class:

Last night at 10:30, we received an email from the [redacted] simpleton, asking to set up a phone call for this morning. Phone call from hiring partner was as follows:

Economy blah blah blah limited amount of work blah blah blah majority of you will not be starting in January. Starting in January, 5k stipend plus benefits for up to six months. at ANY time during six months, MAY get a call from b&m, have 1-2 weeks to report to work, but absent a major bump in work, not likely to happen. If after June, no call from b&m, “the relationship will end.”

Twelve of 18 incoming associates got this lovely treatment

“The relationship will end” does not sound promising. After the jump, Baker responds to these reports.

As we finish off the Vault top 50, we look at some firms went through some tough layoffs.

Here’s the list:

41. Orrick Herrington & Sutcliffe
42. Baker & McKenzie
43. Goodwin Procter
44. DLA Piper
45. King & Spalding
46. Jenner & Block
47. Dewey & LeBoeuf
48. Proskauer Rose
49. Vinson & Elkins
50. Irell & Manella

It might not look like it, but there is a lot of carnage on this list. Orrick is down four spots. Proskauer is down four spots. King & Spalding is down 3 spots.

And many of the firms here that are marginally up or holding steady still went through significant layoffs.

After the jump, Law Shucks offers some stats.

Baker & McKenzie, which held the #2 spot in terms of revenue for 2008, has taken a dip in 2009. The firm’s fiscal year ended on June 30, and AmLaw Daily reports that global revenue fell by 3% for the firm.

As noted in Morning Docket, profits per partner took a bigger hit, plummeting 17%, thanks to the recession:

Baker & McKenzie reported Friday that global revenue declined 3 percent to $2.11 billion and profits per partner fell a more significant 17 percent to $992,000 in fiscal year 2009, bringing an end to a four-year period over which the firm experienced consecutive double-digit revenue growth and an 85 percent increase in profits.

While Chicago-based Baker & McKenzie, which generated 66 percent of its fees outside the United States, highlighted the role currency exchange rates played in the falling benchmarks for fiscal year 2009, management admitted the economic downturn negatively impacted the firm’s financial performance.

As we’ve previously reported, Baker has been a leader in terms of outsourcing legal work. The new profit numbers should mean that the trend continues. More details after the jump.

Based on a Washington Post article profiling the Five O’Clock Club, an outplacement and career coaching company, we constructed a Biglaw blind item:

Which New York law firm, having already completed two rounds of layoffs, has hired the Five O’Clock Club to help it carry out additional layoffs (in August, October, and November)?

After we ran the item, several firms came forward to declare they’re not the firm in question. And now they’re joined by one more: Morgan, Lewis & Bockius.

A spokesperson for Morgan Lewis contacted ATL to say that it isn’t the firm with layoffs in the works. In fact, Morgan Lewis claims that it shouldn’t even be on the shortlist of contenders.

Read why — and check out the list of the Five O’Clock Club’s clients, including some very prestigious law firms that haven’t publicly admitted to layoffs — after the jump.

Last week, the “normal-seeming” couple won our reader poll in a romp over the buttoned-up, hyper-achieving competition. No danger of that this week! All three of these contestant couples give off major type-A vibes and are firmly locked in prestigious-degree-accumulation mode. And oh, how we love them.

Here are the contestants:

1. Alyssa Worsham and Bretton Dimick

2. Sada Jacobson and Brendan Bâby

3. Julie Ehrlich and Noam Elcott

Check out these couples’ credentials and photos, after the jump.

So far, salary cuts have been localized to mid-sized and regional firms. But it appears Baker & McKenzie has become the first national firm to slash associate salaries. A tipster reports that associate salaries have been cut between 10% and 25% for some associates at the firm.

As we understand it, associates are receiving individualized memos about their salary reductions. Salary cut decisions are being made on a case-by-case basis and it is difficult for associates to know what is going on with colleagues down the hall.

Baker McKenzie has been making all sorts of news lately. Two weeks ago, the firm laid off 124 people. Then the firm pushed back start dates until January 2010. But it is surprising to see the firm get out in front on cutting salaries while its peer firms are resisting salary cuts.

Is this another nail in the lockstep coffin? Additional details after the jump.

More firms are pushing back the start dates of incoming first year associates. This weekend, we learned that Winston & Strawn has pushed back start dates to January 19th, 2010. Deferred associates will receive an additional $15,000 on top of their $10,000 bar stipend. The firm is also picking up health care for its incoming associates, starting in September.

We learned today that Baker & McKenzie has also pushed back start dates to January 2010. As we understand it, the firm is not offering any additional stipend other than what they normally pay out for bar expenses.

WilmerHale also announced a start date push back. According to a firm-wide memo:

As is our normal practice, we will have more than one start date. A portion of the class will start on January 20 and the remainder will start on March 17. To determine the group that will start on each date, Legal Personnel and Recruiting will work with department and practice group leaders to balance the stated interests of the incoming associates with the various needs of departments, practice groups and offices.

Those starting in January 2010 will receive a $10,000 deferral stipend on top of a $5,000 bar stipend, while the March 2010 first years will receive a $15,000 bar stipend.

But WilmerHale is also encouraging associates to take a full year off:

We also informed our incoming associates that they may defer their start dates until the fall of 2010 for a stipend in the amount of $75,000. This deferral is entirely at the option of the individual incoming associate and is not tied to his or her ability to obtain a pro bono or other public service position.

The WilmerHale deferral stipend is right at the top of the Latham-led market for these optional year-long programs. But its stipend for people being forced to start in January or March is a little on the low end.

Baker, Winston, and WilmerHale are announcing their programs late in the game. We’ll have to see if the delay puts incoming associates heading to the these firms at a disadvantage in terms of post-bar exam options.

After the jump, we check in on Sonnenschein’s late breaking, long-term deferral.

I hope you enjoyed the brief lull in major layoff news. It’s been five days since Mayer Brown axed 135 people. Alas, Baker & McKenzie has broken the layoff silence. Above the Law has been able to confirm that the firm laid off 124 people today. We obtained this statement from the firm:

[M]anagement in North America and Global Services today has informed 38 attorneys and 86 paralegals and professional staff that their positions are being eliminated due to the economic downturn. These changes involve various practices, offices and Global Services departments in North America. Individuals affected will receive severance packages.

We also understand that the layoffs affected first year associates.

This is the second round of layoffs for Baker. Back in January, the firm laid off six associates in its New York office. Today’s moves were obviously much more widespread, and affected all of the firm’s offices. Last time, attorneys received a three month severance package, and we understand that is what today’s casualties will be getting as well.

Good luck to the people who lost their job just before the holidays.

Read the full statement after the jump.

Earlier: Nationwide Layoff Watch: Baker & McKenzie Joins the List

It’s March. For those new to the game, March is when we traditionally get all kinds of data on last year’s profits at major law firms. The American Lawyer has been putting out profit numbers from individual firms for a couple of weeks. Today, The Lawyer gives us an overview of the top 30 firms in terms of global revenue:

Of the top 30 firms, eight posted flat or reduced incomes, while 19 saw a reduction in average profit per equity partner (PEP).

Skadden secured the top spot with $2.2 billion in global revenue in 2008. That’s just a little bit more than the firm earned last year.

Baker & McKenzie was a surprising number two. But there’s one huge caveat to Baker’s revenue numbers:

Despite the apparent ­vindication of Bakers’ longstanding global strategy, the firm’s delight at securing the number two spot could be short-lived. Bakers has a 30 June year-end, meaning its most recent fiscal year avoided the harshest months of the recession and the corresponding impact on deal flow.

This is excellent news for John McCain.

More revenue numbers after the jump.

The holidays are over. Now it’s time to get back to business, and in Biglaw these days that means getting back laying people off.

Multiple tipsters report that there were layoffs at Baker & McKenzie this morning. The firm just confirmed the news:

Therefore, consistent with our strategy and discipline, and in response to the economic conditions we are currently witnessing, we are taking proactive steps to ensure that we remain financially strong. In particular, we are proactively focusing on helping our clients manage through these turbulent times, and we are acting to reduce our own operating costs. These actions include, but are not limited to, slowing or deferring some long-term projects, travel and hiring restrictions, and some limited workforce reductions, including six associates in our New York office this week.

The laid off associates were given a 3 month severance package.

One tipster reports:

No one was safe from first years to senior associates to support staff which were terminated. … Those who are left are worried about more cuts.

Another tipster, who also claims that some first years were let go, adds this:

The reasons given were that not enough work was available.

Read Baker & McKenzie’s full statement after the jump.

The terrorist attacks in Mumbai reminded everyone that we live in a dangerous world. But as India takes the steps necessary to improve its homeland security, we shouldn’t expect the tragedy to stem the tide of outsourcing American legal functions to Indian companies.

The National Law Journal reports that firms are increasingly proud of their outsourcing initiatives:

As outsourcing becomes more commonplace and corporate counsel and law firms are under increasing pressure to reduce costs for clients, law firms such as Baker & McKenzie; Greenberg Traurig; Milbank, Tweed, Hadley & McCloy; and Shapiro Sher Guinot & Sandler are actually touting at conferences the benefits of outsourcing.

Baker & McKenzie was the last best hope for Heller Ehrman, Greenberg Traurig is conducting stealth layoffs, and Millbank just announced Half-Skadden bonuses. But their outsourcing operations are thriving.

And the wave of firms outsourcing legal services to India is only going to get bigger:

Forrester Research projects that legal outsourcing to India will reach $4 billion by 2015. Some experts, however, find that number too low and others too high. Regardless, other numbers don’t lie — there are an estimated 800,000 lawyers in India and nowhere near that many jobs. Attorneys there charge, on average, $35 an hour, or no more than half of what an upper paralegal or lower-level associate bills, and up to three times less than an upper-level associate’s time.

After the jump, will global terrorism have a chilling effect?

Though law firms can’t practice in India, several firms have opened offices there to do support work and handle back-office functions. (Howrey got attention for this earlier this year.) Baker & McKenzie has had its eye on India for some time now (which scares Indian law firms); Baker’s India Focus Group has more than 200 lawyers working in over 70 offices.

Last week, a number of those attorneys were meeting in Mumbai, and found themselves in the middle of the terror attacks that killed at least 172 people. COO Greg Walters sent a firm-wide e-mail out on Thanksgiving. Here’s an excerpt:

We have now accounted for all of our Baker & McKenzie people who were visiting Mumbai. The majority of those are now together in a safe house in Mumbai. However the remaining two members of our group are still in one of the hotels.They are both in their hotel rooms and are not being held hostage (you may be hearing reports of people inside the hotel being directly held hostage). We are continuing to do everything possible to get them out of the hotel as soon as it is safe to do so. We are in constant contact with both of those individuals and their immediate families and are providing support and advice.

One of the Baker attorneys trapped in a hotel was Australian partner David Jacobs, who was staying at the Oberoi/Trident Hotel. He was meeting 10 other Baker attorneys there, but they were out to dinner when he arrived at the hotel Wednesday night. His bad luck— they got to a safehouse, while he spent the next two days surrounded by explosions and gunfire.

According to the Sunday Mail, his Blackberry was his savior, as were two security experts hired by the firm to advise him:

Mr Jacobs spent the next 46 hours, desperately keeping the lines of communication open with his family and two security advisers, hired by his firm, who were in contact with Indian authorities….

The security advisers from a private firm in the US maintained contact throughout the ordeal, telling him about the progress of the rescue team and what to do if there was a fire or if he came face to face with the terrorists.

They told him the best escape routes and passed on advice according to the latest intelligence.

“Should an unlikely scenario play out where you are located by a terrorist first, you are best suited to comply at the initial contact,” one email said.

“If you are taken by terrorists, you need to plan escape.”

How much do security advisers get paid to come up with that one?

Jacobs’ son reports that his father kept his spirits up by making unfunny dad jokes, like, “I’m getting pretty hungry but the room service in this hotel is terrible.” Full Baker e-mail from Greg Walters, and more from “Indiana Jacobs,” after the jump.

If any Heller Ehrman attorneys were hoping that a major firm would sweep in and hire a whole bunch of Hellerites, the Dissolution Committee is warning you not to hold your breath. The Recorder reports:

On Tuesday, Peter Benvenutti, the chairman of the dissolution committee now controlling the firm, confirmed whispers that Baker & McKenzie and Winston & Strawn, both one-time merger candidates, had withdrawn proposals to pick up large groups of lawyers and their expensive real estate. While Benvenutti would not say whether deals on this scale are being discussed with any other firms, he did say there’s interest in taking over certain of the firm’s leases, and “we expect to have clarity in a day or two.”

At this point, why would Baker or Winston Strawn take on expensive lawyers when they can just sit back and cherry pick the superstars they want? We haven’t heard any story of a Heller rainmaker saying “If I come, these 30 people are coming with me.”

More bad news after the jump.

We’re back with another installment in our series of open threads on the Vault 100. This is an opportunity for insiders to sound off on their firms for the benefit of wannabe potential first-year and lateral associates.

Here are the next ten on the Vault list, with prestige scores in parentheses:

41. Baker Botts LLP (6.096)
42. King & Spalding LLP (6.066)
43. DLA Piper (6.039)
44. Baker & McKenzie (5.982)
45. Wilson Sonsini Goodrich & Rosati (5.976)
46. Boies, Schiller & Flexner LLP (5.974)
47. Morgan, Lewis & Bockius LLP (5.941)
48. Dewey & LeBoeuf (5.924)
49. Fulbright & Jaworski LLP (5.906)
50. McDermott, Will & Emery (5.892)

The most interesting set of “notable perks” in this bunch can be found at Boies Schiller. On the upside, there is an annual trip to Jamaica for attorneys and their families — in December, no less — but on the downside, it’s a “sweatshop run by a genius.” This makes us think of David Boies as the legal profession’s Santa Claus — who likes to take the elves to Montego Bay.

We invite the curious to ask questions about these firms, and for those in-the-know to take pity.

Earlier: Vault 100 Open Threads - 2009

In the immortal words of Roxette, “It must have been love; but it’s over now.” Last month, we marveled at all the law firm merger rumors making the rounds. These days, however, merger talks are falling apart, left and right.

As we first reported, the contemplated merger between Heller Ehrman and Baker & McKenzie is officially dead. For the skinny on their breakup, see Legal Pad. Apparently client conflicts were the deal breaker (as they so often are; they’re the law-firm equivalent of serious religious differences, or really bad STDs). Baker & McKenzie will have to settle for being a firm with a measly $2.2 billion in annual global revenue.

And now this, from the National Law Journal:

In the days that followed the joint announcement by Wolf Block and Akerman Senterfitt that their merger talks hit a snag over a conflict, sources have pointed to deeper issues affecting the drawn-out discussions…

One source aware of the merger discussions said the combination would be a good thing for both firms but said Wolf Block leadership is unwilling to work out certain tax and pension concerns.

There is concern among some of Wolf Block’s partnership over having to pay a significant amount in taxes upon merging with a corporation, the source said. There is also concern over having to make up for Wolf Block’s unfunded pension liabilities. Both of the issues could cause partners to “take a real financial hit,” the source said, adding that a loan could solve those problems, but firm leadership seems unwilling to go that route.

We’d end with the requisite punchy quip, but unfunded pension liabilities leave us uninspired.

(It’s a Friday, in August, after 3 PM. Why are you still here?)

Trouble with WolfBlock-Akerman merger talks over more than conflicts [National Law Journal]
Conflicts Blamed for Failed Heller Merger Talks [Legal Pad]
Bakers breaks £1bn mark with 20% revenue boost [Legal Week via ABA Journal]

Earlier: Heller Ehrman Is NOT Merging With Baker & McKenzie
Law Firm Merger Mania: Collected Rumors and News

Last week, Legal Pad offered this update on the merger talks between Heller Ehrman and Baker & McKenzie (the subject of intense speculation, in these pages and elsewhere):

A few weeks ago, partners from both firms met for dinner in the city.

A deal still seems possible, although it probably would require Heller to make some big concessions. (Several people we trust have increasingly said they wouldn’t be surprised if Heller is forced to de-equitize a lot of partners, and reluctance to do so may be slowing the talks down.)

Perhaps these concerns were dealbreakers. A knowledgeable tipster tells us that the Heller / Baker merger is officially off. A voice-mail went out to all Heller shareholders about two hours ago.

So what’s next for Heller? It seems that they’re still losing lawyers. Will they find a new partner to take to the altar, just as Dewey Ballantine rebounded with LeBoeuf Lamb, after being spurned by Orrick? Time will tell.

Inquiring Minds Ask: What’s Up With Heller? [Legal Pad]
Another Lawyer Leaves Heller [The BLT: The Blog of Legal Times]

Lately it seems there’s been a lot of law-firm merger activity. The statistics bear this out, although there’s disagreement as to degree. From a piece by Leigh Jones in the National Law Journal:

Law firms didn’t slow down their march to the altar in the second quarter of 2008, but just how many mergers occurred depends on whom you ask. Altman Weil announced a sharp increase in merger activity during the second quarter. It pegged law firm mergers at 26, compared with 18 in the first quarter.

At the same time, competitor Hildebrandt International announced steady merger activity, with a total of 14, compared with 12 mergers in the first quarter of 2008.

There has also been a steady increase in rumors about law firm mergers. Some of them will turn out to be true, some not. The fact that some gossip won’t pan out doesn’t make it any less interesting. Lawyers need some way to pass the time, and speculating about their competitors — or themselves — is as good a way as any.

Here’s an excerpt from a recent profile of our media idol, former Us Weekly and Star editrix Bonnie Fuller, from the New York Times:

Ms. Fuller knows the dyad of funny / hurtful, having run cover articles about people getting divorced, pregnant and tossed into rehab. Sometimes those stories were true.

“There have been a lot of false pregnancies and laugh-out-loud groaners,” says Simon Dumenco, a longtime analyst of the magazine industry who writes a column for Advertising Age. “What she has done is gotten at a kind of essential truth that is less about the specifics of the gossip. This endless speculation and estimation about the lives of these people has become the stuff of culture.”

In that last sentence, replace “these people” with “these law firms,” and that’s ATL for you. A lot of what we write in these pages may turn out to be inaccurate, but we’re getting at “a kind of essential truth that is less about the specifics of the gossip.”

So, with that caveat in mind, are you interested in hearing the latest law-firm merger gossip? Read more — about rumored deals involving Baker & McKenzie, Heller Ehrman, Nixon Peabody, Pillsbury Winthrop, Sonnenschein Nath & Rosenthal, and Harris & Moure (who?) — after the jump.

We thought that Monday was going to be the big day for announcement of a merger between Heller Ehrman and Baker & McKenzie. But Monday passed without any word. So did Tuesday, and Wednesday.

Does delay mean no deal? Not necessarily. The parties’ mating ritual continues, according to Legal Pad:

Heller Ehrman partners received some promotional materials about Baker & McKenzie…. Apparently, there was little to it — we hear it was mostly information that could be found on Baker’s Web site — and the word “merger” didn’t accompany the packet….

We’ve heard about the mystery packet too. From an ATL tipster:

I did see the packet that my boss got—about a 2” thick bound book of promotional materials about Baker & McKenzie, along with an NDA (which means I’m not sure I’ll be getting much more info on it). The shareholders then had a conference call [earlier in the week] about the merger talks.

So I guess there was kind of an announcement…. just not to the associates or public. The waiting game continues.

Indeed. We may lay off this story for a bit, despite the apparent keen interest in it, because it’s like waiting for Angelina to pop out her twins. It will happen when it happens.

And an announcement, while perhaps imminent, is not that imminent. Legal Pad says to expect an announcement “within the next two weeks.”

Now, back to more productive pursuits. To the extent that anything we do around here is “productive.”

Update (8/11/08): It seems that these merger talks have died.

Heller Partners Bone Up on Baker [Legal Pad / Cal Law]

We have a draft post saved with the title “Breaking: Heller Ehrman Merging With Baker & McKenzie.” It’s ready to go at a moment’s notice.

We thought we’d get to use it today. Last week there was overwhelming speculation about a Heller/Baker combination. Then, this morning, a Heller tipster told us:

[T]here’s supposed to be some sort of merger announcement today. Word on the street is that the merger’s with Baker & McKenzie (which you already appear to know), and that the shareholders have already gotten some sort of packet of info on the deal. Still no word, however, on what this will actually mean for all of us associates who are keeping an eye on the job ads just in case…

That’s smart. And if you’re looking for help with your job search — to learn why you’re better off using a recruiter than trying to go it alone, see our recent roundtable — we encourage you to work with one of the many fine search firms that advertise on ATL.

We reached out to both Heller and Baker for comment. Heller didn’t respond; Baker issued this statement:

Like all leading law firms, we are continuously studying the market for strategic growth opportunities. At any given time, we may be in discussion with a number of individuals, practice groups or firms around the world. By Firm policy, we do not comment on such discussions until they are positively concluded.

It’s now past 5 PM Eastern time, with no announcement. So check back tomorrow (or later in the week).

Earlier: What the Heller Is Going On?

What’s going on over at Heller Ehrman? Darned if we know.

But we don’t feel that bad about our ignorance, since even people who work at Heller are in the dark. From the first post in a popular ATL Community thread (btw, nice use of the Community section):

I have noticed that there have been an increased number of hush-hush conversations going on around our office, and I’m sure its happening elsewhere as well. The big questions: are we merging? when will the announcement be?

Good questions. We’ve reached out to the firm’s spokesperson, with whom we’ve been in contact over the past few weeks, but haven’t heard back yet.

Here are the broad outlines of the Heller situation. Lately there have been some very significant partner departures from the firm — about 35 in the past year, including two top members of the firm’s insurance recovery practice, who recently left for Covington & Burling.

As is often the case at firms with lots of partner turnover — whether it’s causation or correlation is an open question — merger rumors have been swirling around Heller. Despite lots of buzz, contemplated combinations involving Winston & Strawn and Proskauer Rose have not come to pass.

The latest merger candidate: Baker & McKenzie. Read more, after the jump.