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Luthra Lit retroactively ‘defers’ 15-35% salaries, EPs promise to take home 0

The de facto cuts are taking effect retrospectively from 1 April

L&L lit is the largest of the big firms to defer fee-earner salaries due to Covid
L&L lit is the largest of the big firms to defer fee-earner salaries due to Covid

L&L Partners’ litigation partnership, which is one of four separate partnerships that the firm operates under one brand name, has effectively cut fee-earner salaries by at least 15% and 35% via deferrals of retainers, which would operate retrospectively from 1 April, according to two sources with knowledge of the measures.

Meanwhile, the five senior partners at the litigation firm have internally said they would not draw any profits from the litigation firm, which consists of more than 100 fee-earners and in which they are the only equity partners.

The deferrals, which will operate with retrospective effect but be blended and spread out over the coming months, will not affect any fee-earners earning less than Rs 1 lakh per month, which would include all newly-qualified lawyers at the firm.

However, after that at least 15% of retainer fees paid to fee-earners will be retained by the firm, potentially to be repaid at a future date when the slump in litigation work due to Covid-19 has eased, though we understand that no concrete date or metrics have been communicated to that extent internally.

That percentage would increase with seniority, with the largest cuts-cum-deferrals hitting the more 30 salaried partners in the litigation partnership, who may face up to 35% of their retainer fees being deferred.

Several of the firm’s equity partners, including corporate firm managing partner Rajiv Luthra and senior partner Mohit Saraf, and litigation senior partners HS (Bobby) Chandhok and Vijay Sondhi, declined to comment when contacted or did not respond to requests for comment since yesterday.

A tale of 4 partnerships

L&L Partners is an unusual firm in that united under one umbrella there are at least four partnerships with quite different ownership and management structures.

Correction 9 July 2020: There are four partnerships, not three as originally reported.

At Luthra - as it was formerly known - the corporate partnership that specialises in transactional work is in many ways the business that has put the firm into the category of the full-service corporate Marquee Firms. Managing partner Rajiv Luthra and senior partner Mohit Saraf are presumed to be the sole holders of equity in the corporate partnership.

We understand that the corporate partnership has paid out full salaries to all fee-earners, including all salaried partners, on time and not announced any measures to date.

We also hear from sources that internally, the corporate partnership management has been cautiously gung ho about the potential opportunities for business in a Covid-world, though billings have obviously been hit at L&L corporate, as they have been at every firm.

The other three Luthra firms are the litigation partnership, which has as strong a brand as corporate in its own right as a litigation powerhouse, as well as a separate partnership that deals in intellectual property (IP) and one that does tax.

Luthra and Saraf are equity partners in both of those partnerships too, alongside litigation equity partners HS (Bobby) Chandhok, Vijay Sondhi and Sudhir Sharma.

Those three non-corporate partnerships, in contrast to the corporate one, have been having detailed deliberations at least since April about whether deferrals and cuts are required.

Early murmurs

Salaries in L&L’s IP and tax firm partnerships, for instance, had been due on Friday 1 May 2020, much like the corporate partnership but an internal announcement at the IP and tax partnership from senior partners, ahead of the 1 May date, had caused some early flutters amongst fee-earners that there might be cuts.

The email had announced that only 50% of retainer fees would be disbursed for now over the weekend, while those earning less than Rs 1 lakh would be paid in full over the weekend.

The balance would be credited after a town hall meeting, the email had noted, without specifying an exact date.

The email had added that “whilst we are certain that we will emerge well, and God Willing, soon, out of these difficult times, until then, the Firm seeks your cooperation and patience for delays in addressing any of your issue/s and concerns”.

We understand from several sources that the delay had in part been caused by the passing away of a family member of a senior litigation partner, with the traditional several-day mourning period having meant that the firm’s senior partners’ committee could not meet to sign off on releasing the full disbursements.

However, those issues were eventually sorted out on Monday 5 May, after a crisis meeting of the senior partners’ committee, which includes Luthra, Saraf and the three litigation equity partners, and full monthly retainerships were then paid out to the around 15 fee-earners each in the intellectual property (IP) and tax firm.

While there were some concerns back then that litigation was also considering a deferral, retainers there were eventually paid when they were due (which is on the 7th of every month in Delhi).

Discussions continued

As is to be expected (and has been happening in law firm management all over the country and, indeed, the world), such internal deliberations never did end though.

Specifically, evaluations of revenues had been ongoing amongst the firm’s equity partners, coupled with discussions about whether and what kind of cost-saving measures the litigation partnership would take, if any.

In part, the decision to now defer salaries in litigation had been made in light of the continuing cost of business of Covid, particularly on the litigation practice, which has meant pretty much a complete eradication of more profitable “outstation” work, except for in very urgent matters, for instance.

As many different strokes as folks right now

L&L litigation is not the first firm to feel and make the pinch.

First was near-pureplay advocate-on-record (AOR) Supreme Court powerhouse Agarwal Law Associates, which very early on had seen filing work fall off a cliff with shut-down courts, and had announced 30% cuts for fee-earners on retainers of more than Rs 40,000 per month, as we had first reported on 27 March 2020.

Many other top corporate firms followed, with the depth of cuts and measures varying considerably in each case:

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