Legal Marketing & PR

Sonnenschein Lays off 37 Lawyers -- Including 6 Partners

By Larry Bodine, Esq.

Today's Chicago Tribune reports that 619-lawyer Sonnenschein Nath & Rosenthal, one of Chicago's biggest corporate firms, laid off 124 employees, including 37 attorneys, six of whom are partners.  The firm blamed the recession for taking a toll on billings.

As usual, it was all about profits.  Profits per partner (PPP) of $915,000 were just not enough. American Lawyer reports in its May 2008 issue that the average PPP was $1.3 million for the nation's top-grossing law firms.  Sonnenschein ranked No. 68 in PPP among the AmLaw 100.

The layoffs are the result of a failed strategy to lift Sonnenschein's profitability from the middle of the AmLaw 100 into the top echelon. But the growth plans did not materialize.

The firm hoped to boost its profits-per-partner from about $800,000 in 2005, to $1.4 million by 2008. In 2007, the firm's profits-per-partner came in at $915,000, according to American Lawyer.

PPP for other Chicago firms were $1.29 million at Winston & Strawn, $1.155 million at Katten Muchin and a mere $780,000 at Jenner & Block.

The 37 fired Sonnenschein attorneys represented about 5 percent of the firm's 691 lawyers. Of the 37, six are partners, four are of counsel and 27 are associates, a firm spokeswoman confirmed.
The majority of the layoffs involved paralegals, secretaries and other administrative staff. The Chicago office, which is its largest, was the hardest hit by the cuts. Ten lawyers and 30 support employees were let go out of a total of 691 employees in the Sears Tower.

The most affected practice areas were real estate and litigation, the firm's largest practices and traditional strengths. Financing for new real-estate projects has dried up after a mortgage crisis locked up credit markets. The cuts in litigation were more surprising, observers said, because the practice is typically countercyclical.

Sonnenschein's layoffs follow announced reductions at a handful of law firms around the country, including Thelen Reid Brown Raysman & Steiner, Thacher Proffitt & Wood and Cadwalader, Wickersham & Taft. Many of the lawyers sacked at these firms worked in the securitization of assets, from mortgages to credit cards, a business that has ground to a halt because of the credit crisis.

Last year, Chicago firm Mayer Brown fired or demoted 45 less-productive partners. See Mediocre AmLaw Ranking Sparked Mayer Brown Layoffs. The news, reported by the Tribune, stunned others in the legal community because the firm starkly framed its downsizing as a means of improving profitability.

The cuts at Sonnenschein came after a rapid expansion in recent years. The firm hired dozens of partners from other firms and opened five new offices in smaller markets such as Phoenix and Charlotte. It also quietly trimmed less profitable practices, resulting in the demotion or involuntary departure of more than two dozen partners, according to published reports.

Full post as published by Larry Bodine's LawMarketing Blog on May 29, 2008 (boomark / email).