SAN FRANCISCO — Orrick, Herrington & Sutcliffe and Pillsbury Winthrop Shaw Pittman won’t be merging after all.

The two firms said Monday that they couldn’t resolve conflicts between Orrick’s public finance clients and Pillsbury’s tax, environmental and real estate practices. “Pillsbury’s client interests are sometimes adverse to the state and municipal interests that we represent. It’s a positional conflict,” Orrick Chairman Mitchell Zuklie said in a joint call with Pillsbury Chairman James Rishwain.

The merger talks, acknowledged by both firms last month, would have created a firm with more than 1,600 lawyers around the world, including more than 500 in the Bay Area.

Zuklie and Rishwain said they anticipated the conflict from the start. “We’ve been working on a path to resolve this conflict for two months,” said Rishwain.

The firms had not signed a letter of intent or put the potential merger to a partnership vote.

“We were still at the conversational stage,” said Rishwain. He and Zuklie said partners at their firms had expressed excitement and enthusiasm for a combination.

“With anything that’s transformational, there’s complexity, and that complexity includes conflicts,” said Rishwain. “And those conflicts were not ones that could easily be solved.”

Peter Zeughauser of Zeughauser Group said firms typically address conflicts “in the first or second meeting and resolve them before proceeding with further talks, which leads me to believe the talks never advanced past preliminary stage.”

He said that although both firms have greatly evolved from their San Francisco roots, “crosstown deals are the hardest deals to do.” Additionally, he said the “firms’ financial performance is quite disparate.”

Legal consultant Brad Hildebrandt, who advised Orrick on the proposed merger, said it was a “tough decision” to end the talks, but that complicated conflicts involving long-standing clients made it too difficult to go forward.

“It’s unfortunate,” Hildebrandt said. “The worst problem is resolving conflicts. Sometimes you can resolve them, sometimes you can’t. When you realize you can’t, the best thing is to call it off.”

Legal recruiter Sandy Lechtick said that as the industry becomes more global, more deals are falling apart because of client conflicts.

“If leaders know about a definite conflict then they really do what they can to dissolve it in the early, early stages, especially if it’s a show stopper,” he said. “The fact that this popped up late in the dance suggests that there was more to it.”

The firms have agreed not to recruit from each other for one year, according to Orrick’s chief communications officer, Jolie Goldstein.

Hildebrandt said both firms will likely look for other merger opportunities down the line. “I just think everybody has to take a deep breath and relax a little, and then move on,” he said.

But both chairmen said a merger was not necessarily in the cards. “We’re very comfortable going forward as we had prior to any discussions with Pillsbury,” said Zuklie.

Am Law Daily reporter Sara Randazzo contributed to this report.

Contact the reporter at npierrepont@alm.com.