The holidays are over, and the season of layoffs seems to have begun for law firms with deep practices in structured finance. Today, Cadwalader, Wickersham & Taft gave pink slips to 35 lawyers in its capital markets and global finance departments.

The announcement comes after more than a month of persistent rumors that the firm would be lowering the boom on layoffs. Cadwalader, a firm of about 730 lawyers with a Wall Street practice that dates back to 1792, turned to the public relations specialists at Hill & Knowlton to manage the damage.

A press release from Hill & Knowlton begins: "Unexpected and persistent volatility continues to disrupt sectors of the financial markets, and is affecting the capital markets, many of our clients and certain practices within our firm," according to the announcement of the "personnel reductions."

The release makes clear that performance was not the reason for the firings: "These actions affect some talented lawyers who have made significant contributions to the firm."

In an interview, Gregory A. Markel, a member of the firm's management committee, said another 20 to 25 of the 275 lawyers in its capital markets and global finance practices have been moved to the litigation, restructuring and corporate departments. Lawyers in the two groups affected worked on real estate finance deals and structured finance, such as mortgage-backed securities, tied to real estate.

"What has happened in the marketplace since July or August has obviously severely impacted those areas," said Markel, calling it "a sever and really unprecedented market."

Even so, Markel gamely ventured that these areas "will be profitable businesses in the long run, but we also believe that the levels of 2006 and 2007 will probably not be achieved again for a very long time."

Markel said the 35 lawyers will get to use their desks until the end of the month, will be paid through April 21, and receive health benefits through the end of the year. The firm is providing outplacement services for them.

One option the firm considered and rejected was using performance reviews with a higher bar to reduce its headcount. "We came to the conclusion that that is not a forthright way to do it: It injures those who leave....We want to be able to recommend them and help them," said Markel.

Meanwhile, more than 50 associates at New York's Thacher Proffitt & Wood, which specializes in structured finance, are in the process of taking buyouts offered in late November. The deal affects 24 associates, as well as 29 just hired first-year associates, a four-month severance package.

About six or seven of the 24 have already left for other firms, said Paul D. Tvetenstrand, Thacher Proffitt's chairman, who anticipates that the rest will also accept the buyout packages.

"These were good associates; people jumped to snap them up," said Tvetenstrand. "We are very happy." As for the first-years, two are already out the door, and "many of the others are interviewing," he said.

Tvetenstrand, for one, hasn't heard rumors of other firms facing this difficult decision. But expect more to come: "I would be surprised if there weren't other firms that had to face these issues," he said.

by Karen Donovan