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November 13, 2008 8:09 PM

Orrick's Baxter: In This Economy, No Practice Area is So Robust it's Bursting at the Seams

Posted by Zach Lowe

The Am Law Daily chatted with Ralph Baxter, chairman of Orrick, Herrington & Sutcliffe, a few hours after the firm announced it was laying off 40 lawyers--associates and counsel--and 35 staff members.

Hi, Ralph. When did you make this decision?

About three weeks ago. The firm leadership gathered for a meeting and we concluded we probably needed to do this. Unlike other firms, we did not do layoffs in January or earlier in the year. We waited. But we concluded we could no longer wait. That's what the numbers kept telling us.

You've mentioned you did your best to cut costs and move attorneys around, out of the areas hit by the lay offs--real estate, corporate and structured finance. What steps precisely did the firm take?

For example, we cut out all non-essential travel at all our offices around the world. We told people, "Do it another way, even if it's not optimal." We postponed the biannual meetings each practice group has, where all the lawyers from each group travel to one place to meet. We stopped all associate hiring and we postponed hiring certain staff positions. We also shifted some people to other practice areas. A couple went to Hong Kong. It all amounted to a lot of money, but when it was all said and done, the numbers told us we still had a problem. In this economy, no practice area is so robust it's just bursting at the seams.

What do you say to people who will look at your decision to hire 27 former Heller attorneys in early October, a month before this decision?

You take these two facts together (the Heller hirings and the layoffs), and you get a focused picture of Orrick. We're bullish about the future, bullish about the role of lawyers in global finance, and we are boldly taking action to diversify Orrick's practice. All of the Heller lawyers who joined us were in practice areas that are litigation-oriented. Compared with the layoffs, it's apples and oranges. They are mostly partners, and they bring business with them.

Were the laid off associates clustered at a certain level of experience?

No. I don't have the exact demographics, but the only clustering was in the practice areas.

You've mentioned your severance packages being above market. What were they exactly?

We haven't made all the details public, but this I can tell you: for lawyers based in America, they are getting full severance through April -- that's five months. And we're going to subsidize their COBRA payments.

You obviously made a decision to do this openly instead of laying people off in small groups and claiming the dismissals are performance related. Why go that route?

From the very beginning, we all recognized the importance of transparency. When we met three weeks ago, we decided, whatever we're going to do, we're going to be transparent about it. We told the affected attorneys first. Then we told the entire firm before we issued any release to the media, and then we told the external world.

Do you anticipate any more layoffs?

This is the end, as far as we can see. Our intention is for this to be it.

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Nice that they are giving such good severance packages to the attorneys. What about the support staff? Did they get more than a "Here's the door, don't let it hit you on the way out"?

I guess it is the cynic in me that says "nope".

Doubtful they gave much consideration to staff severance packages. Orrick has always displayed the attitude that if you are not a lawyer - why did God create you? It's sad that they they seldom acknowledge that it takes the entire firm to make things run efficiently and effectively.

my guess is they provided fairly for the staff as well. ralph, and the firm on a whole, are genuinly good people.

My guess is that support staff got good packages if they are in groups (e.g. minorities, over 40, pregnant) where the firm might have exposure in case of pushback. A word to the wise -- if you get offered a package and you fall into one of these groups, it's worthwhile counter-offering.

Not so sure about minorities being in a protected group. I am personally aware of a minority staff employee being "mistakenly" accused of insubordination, as well as other things by a partner. The employee was so devastated by the allegations that the employee requested the HR Dept to conduct an investigation. The employee had witnesses (staff and other attorneys) who were witnesses that the partner was mistaken. HR Dept refused to speak to the witnesses - in clear violation of EEOC mandates. Unless some changes were made as a result of this matter, I don't think being a minority is much of a consideration for severance packages.

Orrick is showing class by (1) making the layoff announcement public; (2) making clear that the layoffs are economy-related, not performance-related; and (3) offering 5 months severance and health insurance subsidies.

Compare this to Bart Winokur's mangled and despicable handling of Dechert's mass finance and real estate layoffs. He lied that they were economy-related, even though the FRE group's billable hours were down 45% from 2007. He also cheaped out by offering only 3 months severance. Very hard to find a new job in 3 months in this recession. Oh, all this while he takes home over $10 million this year, and the other partners just go along for the ride.

Dechert looks even worse, now that a similar firm has handled downsizing correctly.

baloney! more layoffs march with only 3mos pkg /1 mo health coverage to longtime,faithful staff. Baxter said no layoffs after Nov. Tentcity 4 2 many. Shame!Discrimination for over 40.Benefits and homes lost 4 sure.

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