Tech-focused law firm Cooley is laying off 150 employees in the US including 78 attorneys, blaming the move on a market downturn that is expected to continue into next year.

The move was revealed by chairman and CEO Joe Conroy in an internal memo yesterday, which was obtained by Above the Law, in which he conceded that the firm’s aggressive hiring during 2020 and 2021 had backfired in light of an 'unexpected economic downturn'.

Conroy put the lay-offs - that also included 72 paralegals and business professionals alongside the lawyers - down to the need for the firm to ‘better align with current and anticipated demand across a number of our practice areas’.

He said ‘an aggressive and highly successful talent recruitment strategy’ had been needed to ‘ease unsustainable workloads throughout 2020 and 2021’ but now meant that ‘some of our practice groups and administrative functions are substantially overbuilt’.

He added that a ‘prominent’ factor behind the decision was a compromising of the firm’s ability to provide ‘sufficient professional development opportunities’. He also promised ‘comprehensive severance benefits and other services to help ease the transition’.

While the US legal market has been awash with talk of so-called ‘stealth cuts’ in recent months whereby associates are axed under the radar for performance reasons, this is the first example of largescale lay offs by a large law firm.

Palo-Alto based Cooley was one of many firms to feast off booming deal markets fuelled by the US technology sector having advised a record number of US public company clients in 2021, closing more than 385 fundings to raise $46bn in capital, and advising on more than 1,400 financings with an aggregate value of more than $93bn.

Bloomberg Law reported that a majority of the reductions had come from the corporate team.

The cuts echo a sharp cooling of the tech market epitomised by mass layoffs at Twitter last month following Elon Musk’s takeover of the social media platform which is also reported to have resulted in Cooley being dropped as an adviser.

Last month, Crunchbase reported that more than 85,000 workers in the US tech sector had been laid off so far in 2022.

It remains to be seen whether Cooley’s move is the start of a trend, or an outlier based on the extent of its hiring and its particular market focus.

Robert Bata, founder and principal of consultancy WarwickPlace Legal, said: “These layoffs are really just the other side of the coin when viewed from the perspective of law firms’ record high performance during the pandemic years.  

“The good times spurred a hiring and spending frenzy, and now that the wheel is turning the splurge is looking much less sustainable. But it’s also important to note that there is a strong demand for talent in many practice areas, such as restructuring, administrative and regulatory law, health care and litigation generally.”

The start of the eagerly awaited New York year-end bonus season paints a more positive picture with Baker McKenzie kicking off proceedings on 21 November by setting the same rate as last year, with its scale ranging from $20k for the class of 2021 to $115k for the 2015 class.

Cravath Swaine & Moore, the usual trend centre, published its rates yesterday (30 November) and also set the same rate as last year, although this year it didn’t publish a set rate for eighth-year associates in the class of 2015. Its rates mirrored Bakers’ except for a lower starting figure of $105k.