The fabric of Heller Ehrman is showing some wear and tear.
Just weeks after 65 staff were laid off across the firm, two leading and loyal partners have left for rival firms.
Patricia Gillette, a co-chairwoman of the labor and employment practice who lived and breathed Heller Ehrman for 17 years, has jumped to Orrick, Herrington & Sutcliffe along with another labor partner and four associates. Her exit in San Francisco comes at the same time that Jerry Marks, Heller's Los Angeles managing partner and a well-known securities litigator, is jetting for Milbank, Tweed, Hadley & McCloy.
Known for its collegiality and top-flight litigators, the 700-lawyer San Francisco firm has hit a rough patch this year. Heller lost half of its San Diego corporate practice in the spring and has warned partners that profits may be less than projected at the beginning of the year. Last month, 65 support staff were cut, though the firm said the layoffs had nothing to do with the business slowdown.
Some observers say the latest departures may indicate that the stitching of the tightly knit firm is coming loose.
"These are some of the first departures of people who really bought into the Heller Ehrman culture of camaraderie and collegiality, and the money didn't seem to be the be-all end-all," said Alan Miles, a Los Angeles recruiter with Alan Miles & Associates who didn't work on the deals. "They could've left for the money a long time ago."
Chairman Matthew Larrabee said he wishes the departing lawyers well, but downplayed the effect, calling it the "nature of the beast of the industry right now."
Longtime Executive Director Phyllis Gardner retired in August. The firm brought Brad Scott from Weil, Gotshal & Manges earlier this month to fill the slot.
Larrabee said the firm is poised for the future: "I would say, if you look forward from where we are now, there's a tremendous amount of positive that's happening," he said. He declined to comment on the firm's financial health before year-end results are posted.
The firm opened an office in London with emerging technology lawyers from Wilmer Cutler Pickering Hale and Dorr at the beginning of the year and has plans to open a new office in Shanghai, Larrabee said. The firm has also added partners in both New York and Washington, D.C., in recent months.
Industry insiders say that while the losses are significant, the firm will be fine in the long run.
"Anytime a senior partner who is a leader in a practice area makes a change, it certainly draws attention and has to be viewed as a loss," said Chuck Fanning, a recruiter with Major, Lindsey & Africa. "But I don't have any dire predictions about it leading to anything else."
Gillette has defended big-name clients in employment class actions as well as wrongful discharge and discrimination litigation. Her clients include Bank of America, Genentech and Gap. On Monday, Gillette said she "expected the majority" of her clients will be coming with her.
Labor and employment partner Andrew Livingston and four associates -- Brook Andrich, Sarah Coats, Kristen Jacoby and Greg Richardson -- will all follow Gillette to Orrick.
Gillette said Heller has a "terrific" labor and employment practice, but she was attracted to Orrick's "destination" practice. "You have to have numbers," she said. "You can do that organically or you can reach out for that, and we came to the conclusion we that had to reach out to another firm for that."
At Heller, Gillette also served as head of the gender diversity committee and led the "Opt-in Project," which studied ways to keep women from leaving the profession mid-career. Gillette was also a member of the firm's policy committee from 2000 to 2005, the year Larrabee succeeded Barry Levin as chairman.
Gillette said Heller's recent hardships had nothing to do with her departure, adding that the firm will continue to be successful.
"I think the firm is really committed to having a bright future, and I think Matt is working with all the right people to make that happen," she said. "There's no doubt in my mind that it will be fine -- I think all firms go through tough times."
Law firm consultant Peter Zeughauser of Newport Beach, Calif.'s Zeughauser Group called Gillette a "top-flight" labor and employment lawyer, but noted that the practice is "not a core practice for Heller in the long term."
Marks, who joined Heller in 1998, has represented clients in securities litigation, internal investigations, and SEC proceedings. In recent years he's represented Enron and Xerox in securities litigation, and Xerox and Tenet Healthcare in SEC investigations. Marks was unavailable for comment Monday. Larrabee said a new Los Angeles managing partner has yet to be named.
Zeughauser called Marks' move a "big deal" for Milbank and Heller.
"For Heller to lose a top securities litigator, it shows how tough it is to compete against the top New York firms for firms like Heller, whose profits per partner are probably half of Milbank's," Zeughauser said. Last year, Heller posted PPP of $1.035 million, while Milbank had $2.165 million and Orrick was at $1.43 million.
"That puts pressure on them to be more profitable," Zeughauser added. "Heller is a talent-rich firm and other firms are after them all the time."