Milbank’s surprise move to raise associate salaries prompted a raft of competitors to follow suit, even as a slowdown in corporate practices in Big Law persisted for the second straight year, contributing to layoffs, delayed start dates, and a broad dip in hiring.
This is the uneven picture of 2023, as the gap widened between the most profitable firms and the group a tier below them.
Law firms, meanwhile, continued to be thrust into the center of domestic and geopolitical controversies. Several rescinded job offers over students’ comments on Israel and Palestine. On the domestic front, they also became a fresh target of anti-DEI activists in wake of the Supreme Court ruling eliminating affirmative action in higher education.
Another mega-law firm emerged this year. Allen & Overy and Shearman & Sterling combined to create a shop with nearly 4,000 lawyers worldwide. Stroock Stroock & Lavan, a longtime staple of the New York legal space, collapsed, marking the end of an entity founded in 1876.
Here are the legal industry stories that mattered most in 2023, as told by the numbers.
In spite of a broad slowdown in corporate work, Milbank in early November upped its associate salary scale, with first-year-associates earning a base pay of $225,000. Cravath Swaine & Moore, the industry standard-setter on wages, followed suit weeks later with a seniority-based scale between $225,000 and $420,000.
Several Big Law firms, including Paul Weiss, McDermott Will & Emery, Dechert, and Baker McKenzie, quickly matched Cravath’s salary boost.
Industry analysts predict the pool of firms matching the Cravath scale to be smaller than in years past, given a broader economic picture that has contributed to slowing demand in some key corporate practices.
At the same time, many top firms are increasingly poaching star lawyers from less-profitable shops while generating stronger revenue gains. Net income among the 50 largest law firms rose by 5% on average in the first nine months this year, compared to the next 50 largest firms, where net income declined by 0.7%.
A slowdown in work hit technology-focused operations particularly hard. Orrick Herrington & Sutcliffe in June laid off 90 attorneys and staff, about 6% of its workforce, and delayed first-year-associate start dates from the fall to mid-January.
The move aligned with steps other Silicon Valley law firms took, as they dealt with with overcapacity issues stemming from stagnant demand in M&A and capital markets practices. Global IPO activity is set for its worst year since the financial crisis, according to Bloomberg data. Gunderson Dettmer laid off 10% of its attorneys, paralegals, and staff. Cooley and Fenwick & West also delayed start dates for incoming first-year corporate associates.
Cooley asked some to defer their start date by a year in exchange for a $100,000 stipend.
Beyond Silicon Valley, other firms to implement layoffs or delay start dates included Kirkland & Ellis, Dechert, Katten Muchin Rosenman, and Bryan Cave.
UK Magic Circle firm Allen & Overy and New-York based Shearman & Sterling combined in a merger that creates another mega-law firm with about 3,900 lawyers across the globe. The merger, which will create A&O Shearman, is expected to officially close in May 2024.
The merger underscores how big some firms have gotten amid increased consolidation in the industry. It may also demonstrate that the easiest way to increase market share and compete with bigger rivals is by merging with another firm.
A&O, which has tried to gain a foothold in the US, previously weighed a merger with US firm O’Melveny & Myers in 2019. Shearman & Sterling also abandoned tie-up talks with Hogan Lovells in March before reaching an agreement with A&O.
Law firm diversity programs became targets following the landmark US Supreme Court decision striking down affirmative action in college admissions.
An anti-affirmative action group led by Edward Blum, who helped spearhead efforts that led to the high court decision, filed lawsuits against Winston & Strawn, Perkins Coie and Morrison & Foerster alleging their diversity fellowships discriminate against straight, white men.
The group also sent letters to firms including Adams and Reese, Hunton Andrews & Kurth, Fox Rothschild, and Susman Godfrey threatening lawsuits unless they amended race- and gender-based criteria for their diversity programs.
Blum’s group dropped its suits against Perkins Coie, Morrison & Foerster and Winston & Strawn after each firm overhauled its fellowship program. Winston & Strawn, for instance, updated language about its diversity program on its website to remove references to “disadvantaged and/or historically underrepresented groups.”
At least four law firms pulled job offers or fired an employee over comments made on Israel and Palestine following the outbreak of war in the region.
The moves came as a swell of protests across the US contributed to larger debates about free speech and firings over controversial comments. Winston & Strawn pulled a job offer for a law student who faulted Israel for the Oct. 7 attack the country faced from Hamas.
Davis Polk & Wardwell revoked job offers to three students at Harvard and Columbia universities who were leaders of groups that signed onto statements holding Israel solely responsible for the attack. Foley pulled a job offer for a Georgetown Law graduate who it claimed made statements about the conflict “inconsistent with our core values.”
Foley’s decision spawned legal action from the incoming associate, who has claimed the firm equated her support for Palestine with terrorism. She has filed a discrimination charge with the Equal Employment Opportunity Commission.
Stroock Stroock & Lavan is winding down operations, marking a stunning collapse for a firm that was founded in 1876 and later ascended to a perch as one of New York’s most powerful firms.
The shuttering marks the first major casualty of a broader slowdown in demand over the last couple years. But it is also linked to some significant partner departures and the failure of some important clients over the past decade. More than 40 bankruptcy lawyers left the firm in 2022 for Paul Hastings, bringing with them considerable business.
Stroock tried to find a merger partner but failed to generate a buyer this year. The firm’s executive committee voted to dissolve the business in October. Roughly 70 attorneys have since found a new home at Hogan Lovells.
A New York lawyer’s citations of court decisions invented by ChatGPT showcased the pitfalls of relying on generative artificial intelligence in a legal context.
The lawyer, Steven Schwartz, entered the spotlight after admitting that he filed a brief in a personal injury matter in New York federal court citing six nonexistent cases made up by the generative AI tool. During a June hearing, Schwartz said he never considered ChatGPT, the chatbot launched by OpenAI, could produce entirely fabricated information.
Judge P. Kevin Castel fined Schwartz and his colleague, Peter LoDuca, $5,000, finding they “abandoned their responsibilities” to the court by submitting fake case citations and failing to quickly correct the error after the citations were first called into question.
The case comes as generative AI spurs questions about the role it could play in the legal sphere. Federal judges in Illinois and Texas have issued standing orders requiring lawyers to certify that their filings were created without generative AI, or that a human reviewed the accuracy of any language AI did craft.
Cravath Swaine & Moore quietly created a salary partner tier, making it the latest Wall Street firm to revamp its pay scheme in response to new competitive forces.
The firm, credited with creating the partnership structure many “white shoe” firms once emulated, created the non-equity partner tier in an effort to “retain and promote extraordinary people at all levels so their experience and expertise can continue to benefit clients,” according to a firm memo seen by Bloomberg Law. The firm has between five and 10 partners within the salary tier.
Simpson & Thacher and Willkie Farr & Gallagher instituted non-equity tiers in 2019. Wall Street firm Paul Weiss is also considering adding a salaried partner tier, as firms try to free up more cash to keep star partners.
Paul Weiss said in September that it hired away 13 private equity partners from its rivals, including London-based Kirkland & Ellis debt finance lawyer Neel Sachdev and a group of his senior colleagues in the UK. The firm’s raid of Kirkland intensified a brewing talent war between two of the industry’s most powerful and profitable firms.
Paul Weiss, whose big clients include Apollo Global Management, in London poached eight Kirkland partners, including Sachdev and Roger Johnson, who will each co-lead the office. The firm also brought on a group of New York-based Kirkland partners and a London corporate partner from Linklaters.
At the same time, Paul Weiss in August lost corporate partner Alvaro Membrillera, the former head of its London office, to Kirkland. Still, the spree of departures in the London office of Kirkland, the largest law firm in the US, engendered questions about its UK presence and Paul Weiss’s strategy.
Star litigator David Boies is officially handing over the reins of his namesake law firm Boies Schiller Flexner. The 83-year-old lawyer said in November he will step down as chair at the end of 2024. The firm’s partnership tapped Matthew Schwartz, a New York-based litigator who once worked as a federal prosecutor in Manhattan, to take the helm.
The chair vote comes after two previous succession plans fell apart, as some potential leaders in waiting left due to tensions over Boies’s continued control over the firm. Boies will continue to be a member of the firm’s executive committee after stepping down as chair.
