Partners at big law firms eager to hang on to cash-strapped clients and attract more amid this year's corporate belt-tightening are jumping to smaller firms where they can lower their billing rates and bump into fewer conflicts of interest.

Partners from DLA Piper, K&L Gates, Katten Muchin Rosenman, and Jenner & Block are among those who have made moves during the past four months to smaller firms that allowed them not only to protect their client bases but also to win new business on lower rates.

"A lot of general counsels have told me their legal budgets are being constrained, and they have to be more judicious about who they chose," said Mark Berkoff, a bankruptcy attorney who joined Neal, Gerber & Eisenberg in Chicago from DLA Piper in January and is pleased to be able to offer rates as much as 30 percent lower.

While such motives have always led some lawyers to switch to smaller firms, those considerations are playing a greater role this year as clients feel the economic pinch, legal recruiters said. In some cases, partners may be heading for the exit with the encouragement of firms seeking to eliminate lower income earners, but others are simply coming to the conclusion that their practices may be more lucrative at a smaller firm.

Corporate clients are looking for law firms to share their economic burden by offering some rate flexibility, said Amy McCormack, who leads the Chicago recruiting firm McCormack Schreiber. Some firms are trying to meet that need, but others are not, she said.

"At a certain point, there is a realization among some partners that they just can't accommodate those rates anymore," McCormack said. "Lawyers are recognizing that their safety net is their own portable business."

A GOOD THIRD DAY

Bankruptcy and restructuring is one area where lawyers are most certainly not being pushed out the door by firm management. The rise in such work this year has increased demand for lawyers across the country who specialize in it.

On his third day at Neal Gerber, Berkoff and the team of lawyers he brought with him from DLA beat out seven other firms to land a new assignment representing the creditors committee in the bankruptcy proceedings of the men's clothing maker Hartmarx Corp.

The committee told him that his firm's lower rates and its more limited conflicts of interest were the deciding factors, said Berkoff, who is chairman of Neal Gerber's financial restructuring and bankruptcy practice group. Berkoff believes that some midsize firms, once expected to wilt in the face of competition from behemoths, may now see a revival as they gain a cost advantage over larger rivals struggling in the downturn to pay the higher expenses of a big firm.

Several partners who moved from big firms to smaller ones criticized their former firm's high costs, including $160,000-per-year associates and worldwide office overhead, which pushed up rates for everyone.

Neal Wolf, a partner at Katten Muchin, left the firm last November to become a partner at the smaller Butler Rubin Saltarelli & Boyd in Chicago because he knew conflicts at Katten would keep him from winning a large new piece of debt-restructuring business. His new rates, which are $150 per hour lower than the $800 he was charging at Katten, have also helped him win new business, Wolf said.

Although big law firms are likely to keep major corporate customers, such as General Motors Corp., they may stumble when it comes to midmarket clients that are more sensitive to billing rates in this economic environment, Wolf said. He expects to more than offset the decline in revenue resulting from his lower rates at Butler with the increase in work he's attracting.

To be sure, some partner moves may be prompted by big firms' efforts in recent years to leave behind lower-rate practice areas and focus on higher-rate work. Large firms have been moving in that direction for years and must sustain those rate structures to achieve the profits that attract more top rainmakers, said Mark Jungers, the Midwest partner practice group leader for the legal recruiter Major, Lindsey & Africa. Still, that model becomes a riskier bet in these difficult economic times, he said. "It is fair to say that, for some period of time, there is less premium work around than there used to be," Jungers said. "So, the battle for that premium work is stiffer."

As a partner at K&L Gates, Fred Ufkes said he was required to get firm leadership approval for any reduction in billing rates of more than 10 percent. He began to realize last year that the policy was making it impossible to adjust rates to the Los Angeles market in which he was performing toxic tort defense work. While the firm was pulling in such work at lower rates in Pittsburgh and Dallas, the higher rates it wanted to charge in Los Angeles were pricing him out of the market, he said.

Ufkes left K&L Gates in January to join the Los Angeles office of Chicago-based Hinshaw & Culbertson, where he has been able to reduce his rates by 15 percent to 20 percent, he said. "The flexibility on rates makes it much easier for me to compete."

Mark Vrla, a patent prosecution lawyer who was formerly a partner in the Chicago office of Jenner & Block, said he started to have more conversations with clients about the "kind of pain they were feeling" after Jenner's rates went up last year. "The rates just kept going up, and my clients aren't of limitless means," said Vrla, in reference to his practice at Jenner.

Vrla, who was an equity partner at Jenner, also felt that the firm wasn't supporting his practice area as much as it had in the past, he said. So, in January he moved to the Chicago office of Barnes & Thornburg, where he is of counsel, and his rates are about 10 percent lower, he said.

Sang-yul Lee, a labor and employment lawyer who was formerly a nonequity partner at Seyfarth Shaw in Chicago, began to appreciate the advantage of lower rates in the current market when he told clients he was mulling a move to another law firm. After he broached the issue with clients, he said they all asked, fearfully, whether he was going to a larger firm with higher rates. "I began to realize I could expand my client base with more flexibility in the rates," Lee said.

Lee moved last month to Polsinelli Shughart, a Kansas City, Mo.-based firm where his standard rates are 20 percent lower than the $500 to $600 per hour he charged at Seyfarth. He said he was surprised that clients he thought would only ever be interested in his labor and litigation services started asking him what Polsinelli had to offer in other areas, such as intellectual property.

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