Cadwalader to Cut 96 Lawyers

[WSJ_law_blog]

This morning, the partnership of Cadwalader, Wickersham & Taft is slated to inform 96 lawyers — a group spanning from first-year associates to counsel — that they will be laid off. 90 of the 96 cuts will come out of the real estate finance and securitization practices, said the firm’s chairman, Chris White. Most of the affected lawyers, said White, are in the New York, Charlotte and London offices, with “one or two” in Washington. The 96 layoffs are in addition to the 35 lawyers the firm laid off in January.

Last evening, White, and the head of Cadwalader’s litigation practice, Greg Markel, invited the Law Blog to a 40th floor conference room, where they explained the move.

White said that real estate finance and securitization — areas that he referred to, alternatively, but not necessarily inconsistently, as “discrete areas of the firm” and “a large part of the practice” — grew “very rapidly” over the past five years, focusing principally in the area of commercial mortgage-backed securities. “Our finance department was involved in every major leveraged buyout last year,” said White, including Blackstone’s $23 billion acquisition of Equity Office Properties.

“All of those financings were done on mortgages on those properties, and those mortgages were turned into securities. Every major deal that was done in 2006 and 2007 was done off the back of mortgage-backed securities.” He added: “There was a frothiness that occurred as a result of the Blackstones and the Apollos using mortgage-backed securities to fund their buyouts. It was a lot like junk bonds becoming the instrument of choice in the late 80’s and early 90’s.”

White explained that, in 2004, there were only $98 billion worth of mortgage-backed securities issued. In 2008, he said, that number ballooned to $314 billion. “So we grew right along with client demand. And now that market has contracted severely. That $314 billion from last year will go to roughly $60 billion in 2008 — an 80% contraction.” White said he expects that market to come back, and, in anticipation, is retaining 150 real estate finance and securitization lawyers.

As for offering the “affected” associates an opportunity to transfer into other groups, White said, “We can do that a little bit at the junior levels — the first and second years — but, at the third, fourth and fifth years, lawyers aren’t fungible.”

Markel, a litigator, added: “I have fifth year associates working in securities litigation who’ve read every securities case in the Southern District of New York in the last five years. That isn’t replicated by somebody coming over who’s been reading mortgage-related documents for the last five years.”

Markel said that the 96 associates who are laid off will receive severance pay through the end of the year.