Having resorted to cuts, furloughs, Md. law firms hope worst is over

Big Maryland law firms have not been immune to the financial ills wrought by the COVID-19 pandemic, with many having resorted to salary reductions, furloughs, and spending cuts in the past two months spurred largely by suspended court proceedings and an absence of new clients.

But these firms said their cost-cutting efforts are temporary. They see hope in Gov. Larry Hogan’s easing of his orders and Maryland Court of Appeals Chief Judge Mary Ellen Barbera’s phased-in reopening of the state’s court system through this summer and early fall.

“With on-site operations suspended, Miles & Stockbridge made the very difficult decision in mid-April to move about half of our staff colleagues, and some lawyers, to a furlough status or reduced schedule,” Nancy W. Greene, who chairs the Baltimore firm, stated in an email.

“Like other firms our size, we did so only after eliminating discretionary expenses and after reducing salaries for our lawyers and senior administrative team and reducing and deferring salary payments for our principals,” Greene added. “Fast forward five weeks, and we are in a different place. We are implementing phased re-opening of our Easton, Frederick and Richmond (Virginia) offices consistent with government orders and public health guidance, and beginning to recall employees across all seven of our offices, with many employees returning on May 26 and plans to return more as restrictions are lifted and when the economy rebounds.”

Miles & Stockbridge last year reported having 182 attorneys in Maryland.

The economic plight in Maryland reflects the state of the legal industry nationwide, with court proceedings in limbo and would-be clients reluctant to spend money on  legal assistance during hard economic times. The legal case management firm Clio said 56 percent of law firms have reported a substantial drop in business due to the pandemic.

Many law firms nationwide have applied for loans under the federal Payroll Protection Program authorized by Congress and administered by the U.S. Small Business Administration amid the pandemic. The Maryland State Bar Association reported Monday that 60%, or 21, of the state’s 35 largest law firms have applied for PPP loans.

The COVID-19-induced economic downturn is unlike other financial hits, such as the Great Recession in 2008, in that the timing of this recovery remains a mystery to economists, forcing law firms to take an especially cautious approach.

Baker Donelson’s managing partner in Baltimore said the firm’s goal is to “safeguard the future” during this “time of almost unprecedented uncertainty.”

James E. Edwards Jr. said Baker Donelson, which last year reported having 84 attorneys in Maryland, has reduced the salaries of partners and associates temporarily, furloughed some administrative staff members and cut its summer associate program from six to four weeks. The summer associates will be working virtually rather than on-site, Edwards added.

“We are attempting to be really good at service in a crisis,” Edwards said. “We have weathered this in strong financial shape, better than what one might have expected.”

Venable LLP spokesman Brendan J. McCormick said Baltimore’s largest law firm has taken the cost-cutting measures of reducing the pay of attorneys and administrative aides and furloughing some support staff. Venable, which last year reported having 191 attorneys in Maryland, has also postponed the start date of incoming associates from this fall to early next year, McCormick stated in an email.

“Because the extent and duration of the disruption and its impact remains uncertain, we have taken steps to tailor staffing needs to the current environment and prudently prepare the firm for the future,” McCormick stated in an email.

Barry C. Greenberg, managing partner at Rosenberg Martin Greenberg LLP in Baltimore, said his firm began belt-tightening early in the pandemic by cutting out spending on travel, entertainment and parking. He added that parking costs were easiest to cut because the firm’s attorneys were working remotely.

The firm has also halted planned renovations and will reevaluate its need for so much square footage in light of the success of its attorneys working remotely, Greenberg said.

“We’re going to take another look at how we use that space in light of the pandemic,” he added. “It is much more difficult to have an open collaboration when you are working on Zoom, but you can do it.”

These cost-reduction efforts have spared the firm the need to furlough anyone, Greenberg said. One staff member left and will not be replaced, to save costs, Greenberg added.

“Law firms are no different than any other service business,” Greenberg said. “We’ve been pretty aggressive about keeping our expenses down and working pretty thin.”

Rosenberg Martin Greenberg last year reported having 40 attorneys in Maryland.

Edwards, of Baker Donelson, agreed with Greenberg that a lesson of the pandemic might be that law firms do not need such big offices with the high rental costs because their lawyers and staff can work quite effectively from home.

All law firms will “re-examine their space needs,” Edwards said. “That’s a big expense.”

But Edwards said firms should be cautious about keeping their attorneys off site once the threat of COVID-19 has passed. Lawyers work best in a collegial setting, where they can meet in person, share strategies and brainstorm legal arguments, he said.

“What makes it (the practice of law) special is practicing with your colleagues,” Edwards added.

COVID-19 COVERAGE

READ: COVID-19 stories
CHART: Confirmed cases over time | LIST: Map: cases by county