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Brobeck, Phleger & Harrison — just two years ago the most profitable firm in the Bay Area — is dissolving following the collapse of merger negotiations with Philadelphia-based Morgan, Lewis & Bockius. Partners who spoke on condition of anonymity confirmed the decision, and a formal announcement is expected by the end of the day. While not confirming the dissolution, John Pachtner, Brobeck’s director of communications, said the firm is in meetings “that are relevant to a query” about the expected dissolution. The deal with Morgan, Lewis was regarded as a lifeline for Brobeck, which has lost more than 60 partners in the last year and seen its ranks shrink from a height of 921 attorneys in September 2000 to the current level of 518. While Brobeck had a heavy debt load and significant real estate obligations, its reputation as a premier San Francisco institution and leading technology firm made the firm appealing for 1,100-attorney Morgan, Lewis. Except for its Los Angeles office, Morgan, Lewis’s eight other domestic offices are on the East Coast. Brobeck took steps to get Morgan, Lewis to the altar. Last week the firm revealed that it had paid $26 million to reduce its debt to Citibank. A former Brobeck partner said the firm did so by withholding partner distributions for three months. The firm was also seeking to get key Brobeck partners to agree to stick with a merged entity. However, the payments may not have been enough. Sources close to the firm said Brobeck’s debt topped $90 million and that Citibank declared the firm in default. Morgan, Lewis Chairman Francis Milone flew Monday to Austin and met with partner Steven Zager, one of Brobeck’s top rainmakers and chair of the firm’s litigation department. Lawyers familiar with the firm suggested Zager’s compensation package was probably a key point of discussion. Zager, however, denied that Milone tried to get him to stay with Brobeck or that he was offered monetary rewards for doing so. “We talked about his vision of the combined firm and synergies,” Zager said. “There was no discussion of money or compensation.” On Wednesday, Zager left Brobeck for Akin, Gump, Strauss, Hauer & Feld. He said he plans to offer jobs to the 20 lawyers he worked with at Brobeck, as well as the secretaries and paralegals in his group. Other partners also continued to exit Brobeck. On Tuesday, 25-year Brobeck veteran Donald Brown confirmed that he was exiting the firm, though he wouldn’t say where he was going. And Thursday, San Diego corporate partners John de Groot and Steven Rowles jumped to Morrison & Foerster. At Brobeck’s offices on the 28th floor of San Francisco’s One Market tower, lawyers huddled in small groups in the lobby. They spoke in hushed tones and eyed visitors warily. Few would speak to a reporter on the scene as they waited for an afternoon meeting on the firm’s fate. Editorial Assistant Jason Dearen contributed to this story.

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