NEW YORK: You know things are bad when even lawyers are getting laid off.

In downturns of years past, law firms exploited corporate failures and bitter, protracted lawsuits to keep busy and keep billing. But in this still-unfolding crisis, the embittered and the bankrupt have been relatively slow to appear, at least in court.

American law firms in turn are feeling the strain. Thelen and Heller Ehrman, two firms whose deep San Francisco roots extend back decades, have collapsed outright, in part because of the business slowdown. Each firm left several hundred lawyers out in the cold. Many others, including Sonnenschein Nath & Rosenthal and Katten Muchin Rosenman, two Chicago firms ranked among the nation's 100 most profitable by American Lawyer magazine, and an international giant, Clifford Chance, have jettisoned dozens of associates.

Still others, like Powell Goldstein, a firm based in Atlanta with more than 200 lawyers, are merging with larger rivals in deals that may be bid