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Leaders at smaller firms in California’s Bay Area say they’re trimming costs, but the hatchet’s staying in the shed. For now. Talks with managing partners at about a half dozen Bay Area law firms with fewer than 100 lawyers indicate that they’re hoping the turbulent economy, which is making some giants shudder, will actually present some recruiting and business development opportunities. Many are still hiring. But nearly all say they are keeping a watchful eye on expenses, with some holding firm retreats closer to home or re-evaluating equipment leases. Others are checking in more frequently with clients to gauge the impact of the lurching economy on their businesses. Fitzgerald Abbott & Beardsley‘s incoming managing partner, Michael Ward, said that while his firm has been extra careful in hiring associates lately, the market does present options for smaller firms like his. “There are opportunities right now for very good attorneys who are looking around because large firms are not hiring or are disappearing,” he said. The downturn has not yet hit the 34-lawyer Oakland, Calif., firm, he said. “It’s been busy,” especially in the corporate transactions, employment, commercial and IP litigation practices, Ward said. The firm is interviewing to hire two partners and one associate. Still, every expense is getting extra scrutiny. Freelance law firm administrator John Charnon, who helps lawyers launch and run their own firms, said that so far, firms he works with are not doing a lot to tighten their belts — and the options are limited. “Employee benefits, raises and bonuses are one of the few things the employer has control over,” he said. “There’s not much you can do about rent or insurance, unless you did something really radical.” That’s why some are looking at the nuts and bolts of operations. Brydon Hugo & Parker, based in San Francisco, is eyeing the cost of supplies, from computer equipment to telephone conferencing. The firm equips all 32 of its lawyers with laptops so they can work remotely on depositions and hearings. “We don’t buy these laptops — they become obsolete in six months. We lease them,” Managing Partner James Parker said. “We’re reviewing leases for everything.” A recent two-hour deposition of an East Coast expert witness via telephone conference cost the firm about the same amount that its partner could charge for two hours of time, Parker said. “With this economy, you certainly want to be even more careful with that sort of thing.” The firm also will roll out health savings accounts for lawyers and staff in January as an option for health insurance, a move that Parker expects will save the firm about $125,000 in premiums next year. Walnut Creek, Calif., attorney Angela De La Housaye, who opened a business transactional and litigation firm in 2000, said she added two associates this year, as well as a paralegal and a secretary. She said that the six-lawyer firm has not felt the full impact of the slowing economy yet, but that her clients, especially those who come from the ranks of micro-businesses and companies with 50 to 100 employees, are starting to show some trepidation. “Before, they may not have thought twice about preventative legal services on their budget sheets,” she said. “Now, they’re rethinking it.” She expects major changes in client needs, including considerable cutbacks on such legal services, in the next six months, she added. On the flip side, she expects more litigation out of the employment and contracts side of her practice. De La Housaye said she’s checking in frequently, to keep abreast of clients’ plans to tighten their belts and try to anticipate potential liabilities, for example. “If clients are facing changes because of the economy, such as cutting back or laying off, we want to be available to them so they can navigate it without doing something wrong.” Her firm also has made a few changes internally. In a move of solidarity with nonprofit organizations that are feeling the pinch, De La Housaye & Associates has decided to forgo its holiday party and instead donate that money to charity. While not going so far as to cancel Wendel, Rosen, Black & Dean‘s holiday party, lawyers held the firm’s retreat in Oakland, where the firm is based, instead of in Carmel or Monterey, its usual destination. “We had it down to one day, a wonderful dinner,” Managing Partner Daniel Rapaport said. “It’s perhaps not as much fun, but in these times it seems prudent to save when you can.” Many smaller firms are banking on their already lower rates to attract newly price-sensitive clients away from bigger firms. Lara Villarreal Hutner, who just added an associate to replace one who left her six-lawyer employment counseling and litigation boutique, said that in the last four months, three new Fortune 500 clients asked for legal help. She declined to name them publicly, citing confidentiality, but said: “Large corporations are looking at their legal spend[ing] like they never have before.” Fitzgerald Abbott’s Ward also said he believes his firm’s partner rates, which range from the mid-$300s to $400s, add up to an advantage over the competition. Brydon Hugo’s Parker expects an uptick in business next year, from companies that switch outside counsel. “People will try to finish the fourth quarter with what [firm] they have,” he said. “If there are shifts in that, we’ll see more of it in the first quarter of next year.”

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