Peabody & Arnold survived a 2002 reorganization that slashed its head count by two-thirds and emerged as a firm with a laser-sharp focus on defense work for a variety of clients.

Prior to the reorganization, Peabody & Arnold was one of many midsize Boston law firms with a broad range of practice groups, including corporate and real estate.

Peabody's head count dropped from about 95 lawyers to 30 after the restructuring, but it has since rebounded to 47 lawyers, with a clear identity as a defense shop, said managing partner Michael Duffy.

"Our feedback from the insurance industry is that they're happy to be with the firm focused on representing the insurance industry," Duffy said. "They don't feel like second-class clients like they would with other firms."

In addition to its long-standing traditional work defending insurance companies, construction companies and professionals, the firm expanded into toxic tort and medical device defense when it picked up a six-attorney health litigation firm, Sullivan, Sullivan & Nahigian, in 2003.

Peabody now defends pharmaceutical company Hoffmann-La Roche Inc. in cases across the country about its acne drug, Accutane.

A couple of years ago, Peabody deepened its legal malpractice defense bench with five lawyers from midsize Boston law firm Posternak Blankstein & Lund.

Yet insurance giant American International Group Inc. (AIG) remains Peabody's largest client.

MORE EFFICIENT

The firm's hourly rate is probably lower than it was five years ago, but the firm has enhanced its realization, or the percentage of work billed and, ultimately, collected. Duffy also said the firm is getting more work from existing clients.

"Before the reorganization, we struggled with issues of lawyer overcapacity," Duffy said. "Now the amount of lawyers fits the amount of work, so everyone is fully occupied."

Practice incompatibilities drove the breakup, said Duffy. Lawyers from practices generally considered to be higher margin, such as corporate and real estate, departed during the reorganization.

What remained was the insurance defense practice, which is, typically, considered a low-margin, high-volume legal practice.

Duffy recalled a deeply divided firm, where the partners were personally, but not professionally, compatible.

"Something was going to happen," Duffy said. "The fact that the reorganization was approved by a unanimous vote shows we were able to work cooperatively and plan for everyone."

NO REBRANDING

Despite the upheaval, the firm hasn't undertaken a significant marketing or rebranding campaign since the reorganization. Instead it devotes its energy and resources to enhancing existing client relationships, said partner John Connelly.

"It's been internally driven with respect to relationships with clients and trying to identify other opportunities that make sense to us," Connelly said.

One of those opportunities is helping to represent Brewster, N.Y.-based epoxy distributor Powers Fasteners Inc. in civil cases stemming from its work on Boston's Central Artery, or Big Dig, highway project.

Powers faces a separate involuntary manslaughter case brought by the Massachusetts attorney general for a death connected to a 2006 Boston tunnel ceiling collapse, but Peabody's work is on the civil suits.

One is a wrongful death civil case brought by the family of the woman who died in the collapse, and the other is a cost-recovery case brought by the state against a host of contractors. Del Valle v. Bechtel Corp., No. 06-03654, (Suffolk Co., Mass., Super. Ct.); Commonwealth of Massachusetts v. Bechtel Corp., No. 06-04933 (Suffolk Co., Mass., Super. Ct.).

"Defending them is an offshoot of our construction practice," Connelly said.

Peabody's reorganization was one of the most unusual breakups he's witnessed, said Boston-based legal management consultant Jeff Coburn of Coburn Consulting, particularly since the remaining practices were the less profitable ones, at least on the surface.

"They were able to start as if they were a boutique and then grow from there," Coburn said.

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