What was a nice trickle has turned into a tsunami. Law firms are falling over themselves to hand out big time bonuses to associates to show the world how they’ve weathered COVID. And yet some firms are being forced to admit that they aren’t able to keep up with the Biglaw Joneses. Speaking of Joneses, we also check in on a Jones Day associate likely bound for the federal bench despite all normal rules of the profession.
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Above the Law – Thinking Like a Lawyer
Begun The Bonus War Has
Intro: Welcome to Thinking Like a Lawyer with your hosts Elie Mystal and Joe Patrice, talking about legal news and pop culture all while thinking like a lawyer, here on Legal Talk Network.
Joe Patrice: Hello. Welcome to another edition of Thinking Like a Lawyer. I am Joe Patrice from Above the Law. I am joined by Kathryn Rubino, my coworker and fellow senior editor and person who if you listen to all of the Above the Law podcast know thinks that I have an annoying voice.
Kathryn Rubino: I think not, that’s not what I said. That is not what I said. I said you had a distinctive voice, which is accurate.
Joe Patrice: It seems like shame.
Kathryn Rubino: It’s like you’re calling card.
Joe Patrice: Okay, I suppose that’s fair. Anyway, we will just leave it to the rest of you to go through the Above the Law podcast annuls to figure out where this came in, that will be an Ester egg for you all.
Kathryn Rubino: You have a very clear voice.
Joe Patrice: Well, I guess what we should do is we’re going to have a lot of talk today about business of law and the ways in which the legal industry is trending right now because we had a real turn, I think it’s fair to say over the last week and –
Kathryn Rubino: Yeah this is what we call very busy times here at Above the Law.
Joe Patrice: Exactly.
Kathryn Rubino: There’s not too much that really happens that we consider urgent at Above the Law, things that we get in and we kind of feverishly are like it up get it up, get it up, get it up as quickly as possible what I do later, but bonuses.
Joe Patrice: Yeah. That’s first of all, I take great umbrage at what you’re saying everything that I put up is of critical value, but –
Kathryn Rubino: Sure value but not urgency perhaps. Perhaps is a distinction there between, we will see because I’m a writer so the words that I choose are pretty important.
Joe Patrice: Oh, yes, so that’s fair. So yes, so we are in the middle of what we are going to term the COVID-19 Bonus Wars.
Kathryn Rubino: Yeah. That’s what I’m certainly been calling it.
Joe Patrice: Yeah. So, how should I put this? So let’s do this chronologically.
Kathryn Rubino: Sure.
Joe Patrice: Cooley LLP put out its key distinction to keep it separate from Cooley Law School, which is a very different animal. But Cooley LLP began by issuing some bonuses. So talk us through what they did.
Kathryn Rubino: Correct. They issued bonuses. I believe it was 4500 through 7500 for senior associates based on year and they are COVID-19 appreciation bonuses. Thank you very much. You’ve been working very hard, very diligently during a very trying time. Here’s a special thank you. Cooley also noted it’s something that has become a trend made it clear that these were in addition to the end of the year bonuses which is our other very busy time of year at Above the Law.
And they also committed to making sure that their bonus pool the amount that they will give per year will be no less than what they offered last year.
Joe Patrice: Which is important.
Kathryn Rubino: That’s pretty good. That’s pretty good news.
Joe Patrice: Because there was of course fear that even if somebody offered something here that it would trade off.
Kathryn Rubino: Of course, of course and they also gave bonuses of an unclear amount but there were bonuses as well that went to staff members at Cooley, which is also awesome.
Joe Patrice: And we’ll be talking a little bit more about this in a bit. But this is a market contrast because what we had been seeing —
Kathryn Rubino: Right, I think the most popular story immediately prior to that was about layoffs.
Joe Patrice: Right. So what we had been seeing is one of two things going into this Cooley move. We had seen some firms expressing their strength in the COVID times by reversing salary cuts, saying that we pulled back because we weren’t sure we can afford it but looks like we’re doing okay. We are going to restore your salary and then the other was people who were unable to do that and some bad add on, things were getting more permanent, furloughs were becoming layoffs, etc.
Kathryn Rubino: And if I just might, I would say that there isn’t a clean distinction between those two cams. We were seeing folks who were rolling back associate pay cuts, but also doing layoffs or extending furloughs for their staff members and I think that what really we’re seeing is because even firms that did had no austerity measures were still taking the opportunity to redo their staffing.
Joe Patrice: Yeah, so that is topic 2 if you look at your agenda, so you’re not anywhere near that so I don’t know why you’re wasting all your energy now.
Kathryn Rubino: I just wanted a more complete picture.
Joe Patrice: Okay.
Kathryn Rubino: I just want everyone to –
Joe Patrice: I just feel like does mean has anybody read these sheets, these agendas that I slave over and put together.
Kathryn Rubino: First agenda you’ve done in 2020. Let’s be clear.
Joe Patrice: It’s not.
Kathryn Rubino: I think it might be.
Joe Patrice: It’s false, see this is a sign that you aren’t reading these things. If I wanted to co-host, you didn’t read any of the agendas, Elie could come back.
Kathryn Rubino: I read a 100% more agendas than Elie ever did.
Joe Patrice: Fair enough.
Kathryn Rubino: No shade, little bit of shade.
Joe Patrice: It’s just — I mean we have a plan here and I am worried that you aren’t following it. You know what else I am worried it, I am worried contract deadlines.
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So Cooley issued these bonuses with the highest bonus available to the most senior person of around $7,500.00, which is wonderful and then Davis Polk, another law firm decided to blow that up.
Kathryn Rubino: Out of the water, out of the water. I mean, I guess we don’t really know kind of internal to DPW what was going on and how long they’ve been planning these before they made the announcement. But shortly after the — I think it was the next day. It was your story right? It’s like the following day DPW came up, came out and completely obliterated the scale.
Joe Patrice: Yeah. So Davis Polk came out and decided that 7,500 sounded like a very good number for their first years. So the first year associates are going to be getting 7,500 as a special bonus and it moves up from there to the most senior associates getting 40 grand as a COVID appreciation bonus.
Kathryn Rubino: And again, this is in addition to end-of-the-year bonus, is that correct.
Joe Patrice: Also clarifying the end-of-the-year bonuses will be a thing and that they do not see any scenario in which those will be less than they were last year. So you’re looking at a situation if that is true that the first years are going to take home at least 22.5 grand in bonuses this year on top of their salary which we were very nervous. Obviously the economy is in all sorts of shambles. But I mean, I think this really underscores that when it comes to big law and the super elite, who are mostly working with financial clients that divide that we have in the country right now between Wall Street going gangbusters while nobody has a job, which is a bizarre divide but it’s nonetheless one that we’re seeing every day.
Unemployment will top a million a week and the stock market will go up another 200 points but it does mean that those firms that do a lot of work that rests on banks and financial institutions are not feeling the economy in the same way that other folks are and that means that folks like Davis Polk are in a position to actually be walking out of this crisis in great financial shape.
Kathryn Rubino: Yeah, and if we can kind of pause the timeline for a moment right here sort of after the bombshell of the DPW announcement talking to a lot of sources at a variety of big law firms. I think that we’re getting a bunch of different reactions from people kind of at firms, firms that are traditionally the leaders of the compensation pack, people who consider themselves the best of the best in big law.
There’s very much a sense of anticipation when — not if, but when, the firm will meet these bonus numbers, some are even saying that they wouldn’t be surprised because it were kind of been the end of the year if they rolled in those special bonuses with the end of the year announcements, particularly at firms that make the payments in 2020 as opposed to 2021, that may happen but there’s a sense of anticipation and wondering.
And there is also a guess wondering for other firms, but there’s kind of that mid bracket where folks are wondering, can I firm match this.
Joe Patrice: Well yeah.
Kathryn Rubino: Is this where we’re going to draw the line between the truly, just figuring out in defining who’s the best of the best in law firms. It’s always kind of a crapshoot right? It’s like well, you know, this one has a slightly more attorneys, but less on average profits per attorney. How much does all this really matter? Who knows? Both sets of partners coming or going home with 4-5 million dollars a year, who cares, right?
And I think that kind of figuring all that out can be a little bit tricky and this might be a pretty clear line in the sand to say these are the folks that that do have the cash and are very ready to meet the demands of the market and then we have others who are happy to be around.
Joe Patrice: Yeah. I think that’s definitely going to be true and that tracks what we’ve seen the last several years. The Citigroup Private Bank has this Law Firm Index where they track law firm financials and we’ve seen for quite a few quarters now that there is a have –
Kathryn Rubino: Rich getting richer.
Joe Patrice: Haves versus have not divide happening where the top 20 to 25 law firms are pulling away from everyone else. Now that said, I will be interested to see how this turns out because of the point I made a few minutes ago those with heavy financial sector books seem like they’re going to be doing much better than people who do other stuff.
So I’m interested to see what happens to their law firms that are based on the west coast that we think of as part of the elite tier but who get a lot of money from tech organizations, stuff like that, sectors of the economy that are not doing as gangbusters as banks and I will be interested to see if there’s a — if that’s a gap.
Kathryn Rubino: Client composition.
Joe Patrice: Yeah, and that would be slightly different than our usual elite versus non-elite but if they join, then I think you’re definitely right that it becomes just a pure elite versus non-elite. As to the next point you made which is who’s making the moves. This is an industry that for most of our lives has been entirely dominated by a questionably collusionary, questionably collusive worldview of we just let Cravath tell us what we’re going to pay everybody and then we pay everybody that.
Kathryn Rubino: Sometimes other firms go first.
Joe Patrice: Very rarely, and to the extent that that’s the world we’ve tended to live in. This is a big, big move for Davis Polk to move first and to force everyone to follow. The firm that immediately followed them of course was Milbank, which is the firm that moved the last time when it came to salaries.
Kathryn Rubino: Sure and if you recall and it’s bit of the nuance in the minutiae of it, but the Milbank salary move was in 2018 was Cravath came over the top when it came to seniors, mid-level and senior associates offering the same, sort of for first I think 3-4 years and then giving more to associates then and in the higher levels and Milbank happily met those added numbers, but it was kind of stealing the thunder of Milbank in a lot of ways, right.
It wasn’t just the Milbank raises. It was the Milbank/Cravath scale. And so I think that Milbank moving as quickly as they did, it was the very next day that that Milbank was ready to come with the full match of the DPW scale. First of all, I think the more folks who are able to fall onto the scale, the less likely there is another competitor who re-raises the scale.
Joe Patrice: Yeah, which is a trend we saw last time, we felt like the faster people jumped on the last round of salary increases, the less likely and then it turned out that that we are wrong.
Kathryn Rubino: Sure that we were wrong, it turned that we were wrong but I do think that that re-raise was specific to just the senior and senior associates and I think that it was more of an issue on trying to maintain folks who have other options potentially and trying to prevent people from laddering away from firms and even just other opportunities in house or other places that they can fall to because it wasn’t first-years got the same amount of money, no matter where they were, second years got the same amount of money.
So I think that it was a little bit more nuanced and exactly what the firm’s were trying to do by having that higher scale for senior associates.
Joe Patrice: Yeah, no definitely.
Kathryn Rubino: And there are not the only ones who matched the salary, the boutique law firm Hueston Hennigan also the next day matched the salaries and they also gave staff bonuses as well as actually their second round of staff bonuses mid-spring, they gave thousand dollar bonuses to every staff member and a $500.00 tech allowance in addition to their normal tech money and tech resources to their associates in order to — and again that is very much in line with what Hueston Hennigan does.
Their end-of-the-year bonuses tend to outperform the big law market, but that’s sort of one of the benefits of being a smaller boutique, you have less folks to pay. So perhaps you can be a little bit more generous particular if everyone is productive.
Joe Patrice: Yeah, so it seems like some of these firms are having a pretty good go of it and that brings you to the question how have law firms weathered previous economic downturns and come out stronger on the other side.
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Kathryn Rubino: That was pretty smooth. I mean I can only tell because you had a little like smirk on your face that it we’re about to go to an –
Joe Patrice: What is this? It’s just this constant attack, not reading the agendas, making fun of my voice, smirks.
Kathryn Rubino: None of these things are attacks. First of all, sometimes you just got to say what you got to say, it’s not an attack. It’s a description of the status quo.
Joe Patrice: Anyway, hmm. So on the flipside of these firms, let’s talk about firms that have been doing things that are indicative of not weathering this economic crisis nearly as well and you previewed this for us graciously a few minutes ago but let’s go through it. Why don’t you jump on this again and focusing on in particular a firm with some really bad news this week.
Kathryn Rubino: Yeah, Winston & Strawn had some layoffs both on the associate and staff level. They’re actually — I think laid off most of their staff, but they are re-forming a new resource center and there are apparently jobs available that people can re-apply for and test for. It’s one of the — some of the sources that the firm had said that you have to test into these new positions.
So kind of put a pause into the question of staff layoffs because I think that those are not always indicative of dire financial issues or even any financial issues oftentimes. I think that staff reorganizations are I think that there’s a way that the way that big law has staffed supporting roles was largely unchanged with the advent of a whole bunch of technology, including the computer, right.
So I think that in a lot of ways it’s very much due. So let’s kind of put that to the side for a moment and say that this is not the first set of associate layoffs we’ve heard about during the pandemic. I doubt it will be the last set of associate layoffs, sort of things that are not particularly well-publicized but you get enough sources that we can really put together a pretty clear picture of what happens.
I believe at Winston, it was about 10% of the associates. And so it’s not encouraging and was productivity based is what we’re hearing as opposed to performance-based, mainly, there wasn’t enough work to go around. Unclear at this point if particular groups were hit harder than others or if particular years where hit worse than others, but it seems to very much be based on the inability to keep those attorneys that they’ve hired busy.
Joe Patrice: Yeah, it’s unfortunate and it does lend some credence to what we were talking about earlier that there might be firms that have a different melange of business that are going to be hit a little bit harder. But it’s horrible news. We’ve also thought that there’s some firms that are overall economically stressed that this could hurt but this is an Am Law 50 firm and this is number 40. So your top 40 countdown begins with the layoffs.
So it’s not encouraging. This is not the only bad news we had this week. We also had some Baker Donelson news.
So the Baker Donelson, they were just slightly different, they’re not going to have people fired. It doesn’t appear but it’s still not good. They’re going — they just told everybody that the salary cuts that they put in place for the pandemic are going to stay in effect while so many — not everyone, but so many other people are pulling back and saying hey, it’s been rough but at least we can start paying you again.
They wanted everyone to know that that’s not going to happen there and it gives the associates some guidance on how they can start working more and maybe get back some of the money they were supposed to be paid in the first place.
Kathryn Rubino: In the first instance, yeah.
Joe Patrice: Which is not great, not encouraging.
Kathryn Rubino: Not encouraging and the staffing news is also bad, especially for those that find themselves out of work in the middle of a pandemic, right, but some of the biggest names in big law cut staff positions; Skadden, Cleary both big, very big names have recently done away with staff positions.
And again, as I said earlier, there might be plenty of reasons to do it that aren’t just financial problems at the firm. But obviously, I think that people who are losing jobs during a pandemic is crappy. I think it sucks if you’re impacted by that and I think that the economic downturn has allowed a lot of firms to kind of take a harder look as to what their expenses really are and how much of those expenses they really need.
I mean Winston said of their staff re-organization that it was years in the making and it seems likely because they are radically altering the way that their staffing support roles and that’s true but launching that and then in the middle of COVID, not great.
Joe Patrice: Yeah. It’s problematic and this was true of the last economic downturn too. It’s somewhat perverse that we have these institutions that sit on long trends, we need to reorient how we staff because we can outsource this or we need to reorient this –
Kathryn Rubino: Because no people can use a computer at their desk.
Joe Patrice: Right. We need to make these long-term changes, but they feel obligated to not make those changes because we can afford to keep these people on in good times and then it’s only when it’s bad times those people get cut loose, which is unfortunate and perverse because in the good times those folks would have an opportunity to go get it something else and now you’ve cut them loose in the middle of the biggest economic crisis since FDR.
Kathryn Rubino: Yeah that’s not great.
Joe Patrice: And I say it that way because I think people need to internalize how ridiculous that sentence is like how long we’re talking about. So it always happens this way and it’s too bad, I don’t want to — like you don’t want to sound like the person who says law firms need to do a better job about laying people off routinely like that’s not a great way to sound but –
Kathryn Rubino: Sure but in good times, law firms let a lot of the — sort of in efficiencies build-up and it doesn’t matter because we’re still making money and good is good enough and it’s only when things get bad that they’re put in this position.
Joe Patrice: Yeah, and it’s super unfortunate and it’s very unfortunate for the people who are on the wrong end of it who and are not getting any support from anywhere really. I mean some of these firms have severance packages, and so on obviously but it’s not great. And I think there’s some hope always the folks will reach a point of retirement that and maybe they can eke out the good times and then retire on top, but it just doesn’t work that way all the time.
Kathryn Rubino: Yeah I mean some of the layoffs were even preceded by voluntary buyouts and I suppose they didn’t get quite the response they had hoped for because they are followed a couple weeks later by involuntary layoffs.
Joe Patrice: What a shock, people didn’t want to take a voluntary buyout when the world is exploding around them. I mean that’s correct. Of course, they wouldn’t.
Kathryn Rubino: True, but it’s looking very interesting to see how this shakes over the next few weeks and even through the end of 2020 because I do think how it all — I think it’ll be very interesting to see what the end-of-the-year bonuses look like who’s matching. If not now but perhaps at the end of the year, matching these special bonuses and so I think that we will have several months of sort of questions until we get those final bonus numbers.
Joe Patrice: Yeah. Well then we also had a story of there’s an associate at Jones Day who’s going to take a voluntary pay cut it sounds like.
Kathryn Rubino: Let’s repeat that one more time. Associate –
Joe Patrice: There’s an associate at Jones Day.
Kathryn Rubino: Associate, not of counsel.
Joe Patrice: No.
Kathryn Rubino: Not a partner.
Joe Patrice: No.
Kathryn Rubino: Not even up for partner.
Joe Patrice: No.
Kathryn Rubino: No. No.
Joe Patrice: No, there is an associate at Jones Day who is apparently going to take a voluntary pay cut in that she appears to be on the — tried to the front of a railway engine that is pushing her into a lifetime federal appointment to the District Court.
Kathryn Rubino: Yeah again associate.
Joe Patrice: Yes.
Kathryn Rubino: I mean that is beyond, that is beyond and I believe she for her trouble despite a excellent pedigree for an associate, not an excellent pedigree for a federal judge got an unqualified rating from the ABA because she’s associate, I think.
Joe Patrice: Yes the ABA wrote what I mean, I would characterize as a fairly scathing opinion when they look at people’s records who are nominated to the Federal Bench and evaluate whether or not they’d be good at that job.
Kathryn Rubino: Sure.
Joe Patrice: Several of the nominees of the Trump Administration have received not qualified ratings because they are not qualified to be judges and this is another one and the argument here was actually so scathing because it wasn’t pointed. We’ve had some not qualified rating –
Kathryn Rubino: Ghost hunters.
Joe Patrice: Well, right. We’ve had some not qualified ratings where there’s just ridiculous stuff going on. They are clearly like bonkers. This one was more scathing just on the grounds that that there isn’t anything out of the ordinary. It’s just oh my God, she is a child.
Kathryn Rubino: She is 10 years, 10-15 years frankly.
Joe Patrice: And they did the best they could and that’s actually what made it look worse. They tried to play up her record as and what was good about it.
Kathryn Rubino: Well in law school.
Joe Patrice: Yeah when your nomination to the Federal Bench includes well in law school, she did a clinic that is not good.
Kathryn Rubino: That is damning.
Joe Patrice: That’s not particularly positive for your I’m ready to run a case.
Kathryn Rubino: Have a life time appointment too, right, there is nuts and they are like oh, well we can fix it what if somebody else gets elected. Nope, can’t do it, got to stick with it and you have no idea how she’ll actually perform because she’s an associate.
Joe Patrice: Right.
Kathryn Rubino: She hasn’t even practiced that long. Most of her career right has been spent doing clerkships.
Joe Patrice: She clerked last year.
Kathryn Rubino: Last year.
Joe Patrice: Well, I guess technically the Supreme Court season is over so now it’s the year before last but –
Kathryn Rubino: 2019.
Joe Patrice: Yes.
Kathryn Rubino: She clerked in 2019.
Joe Patrice: She was clerking in the summer of 2019. Yeah.
Kathryn Rubino: That’s last year. That’s last year. I don’t care. I don’t care, last year, she was clerking, not practicing, clerking.
Joe Patrice: But when this first happened she was very low on the priority. There are several other judges who have to be — who I mean, there’s an order to these things, but the decision was made in the senate to move her up the list. There was a straight, pretty straight partisan hearing where somehow Senator Mike Lee in particular attempted to put some lipstick on this thing and act like he talked about how shocked he was that she accomplished so much in her young life and I was like, okay man cool, but –
Kathryn Rubino: Cool, cool.
Joe Patrice: But so it appears as though this is moving towards vote. We’ve already had over the last 48 hours, tons of votes on these apparently rather than stimulus packages or medicine or medical exams.
Kathryn Rubino: Things people actually need during the pandemic.
Joe Patrice: We are just doing judges.
Kathryn Rubino: No we need an associate on the federal bench, that tracks, that tracks.
Joe Patrice: In a lot of ways this is — this feels very — to get very historical about the courts. I feel like we are right now in the midst of the fact pattern of Marbury v. Madison. We are quite, we’re straight in the middle of a party that is just giving judicial appointments until the clock runs out and that’s all they’re going to do. And that’s where we are.
Kathryn Rubino: What a time to be alive.
Joe Patrice: Indeed. Well, I think that sums us up for the week.
Kathryn Rubino: This is very busy people.
Joe Patrice: Yeah, it was a busy week.
Kathryn Rubino: Very bust week. I anticipated continuing. Even more things to talk about next week.
Joe Patrice: Yeah and we didn’t even approach the latest bar exam, which we don’t need to get into but we did have about 15 hour period in which New York banned, without telling anybody really, just banned half the folks trying to take the test from being able to use their computers. They have now reversed that so we don’t need to get too deep in the weeds on it. But it was what a time to be alive indeed especially for those poor folks who have to deal with this day in day out and have had to deal with this day in day out for months now as things keep getting delayed, move to another place, canceled.
Kathryn Rubino: I am so glad I no longer have to take the bar exam. This year is going to be really, really rough.
Joe Patrice: It’s ridiculous and unfair and yeah, we should be fixed and unfortunately –
Kathryn Rubino: It won’t be.
Joe Patrice: No very few, I should say very few people seem to have the motivation or basic human concern to fix it. Anyway, whatever. So that’s that. So we’re ending on a down note, but we began on bonuses. So it all balances out.
Thank you all for listening. You should be subscribed to the show, of course give reviews, not just stars but write something, recommend it to people, we depend on that to get an audience built. You should be reading Above the Law as always, you should be following I’m @JosephPatrice. She’s at @Kathryn1, both at Twitter.
You should be listening to the other podcasts in the Above the Law universe. We have the ATL COVID Cast talking about kind of unexpected ways in which law and COVID are impacting each other and we have the Jabot, which is Kathryn’s show about diversity issues in the law. There’s also the full panoply of shows from the Legal Talk Network. You should check out and with all of that said, I think we’re done. We will talk to you all next week.
Kathryn Rubino: Peace.
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