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In one of the more unusual law firm split-ups, Oppenheimer, Wolff & Donnelly is putting its 40-attorney Palo Alto office on the auction block. The Minneapolis-based firm has been in discussions with a number of national firms about the sale of its Silicon Valley practice, said an Oppenheimer partner. It’s an ironic conclusion to a marriage that started with controversy. Oppenheimer acquired its Palo Alto office in 1999 by luring a group from the now-defunct Graham & James. The move resulted in Graham & James suing Oppenheimer for misappropriation of trade secrets and tortious interference with a contract. The decision to sell the Palo Alto group appears to be an acknowledgement that the Graham & James acquisition was not a good fit with Oppenheimer. “The firm and our office concluded that it would be easier for the attorneys in our office to grow our business if we were on a different platform than Oppenheimer provides,” said Palo Alto partner Michael Kalkstein. “That’s in part due to the fact that the technology market in Minneapolis is quite different from the technology market here in Palo Alto.” The planned sale, which could include attorneys, the office lease, client relationships and accounts receivables, is unheard of in the legal industry. Typically, a firm either shuts down a satellite office, or a group of unhappy partners in an office decamps to a competitor. “That’s a different way of doing it. You’ve got to applaud them for trying to get something for it,” said Los Angeles legal consultant Steve Barrett. But he said that most potential buyers would probably just as soon contact the individual partners they were interested in, avoiding any cash outlay. “There’s very little cash exchanged in a real acquisition of a professional services firm,” said Barrett. “There isn’t publicly traded stock or book value to get a price for.” Kalkstein acknowledged that the sale of a law firm’s regional office was a novel and untested concept and said that figuring out how to value such a deal was still unclear. One reason for selling off the entire group in this way, said Kalkstein, was to prevent Oppenheimer from getting stuck with a lot of empty office space. The Palo Alto lease, for 55,000 square feet of office space, still has 10 years to go, said one person close to the situation. It also makes an attractive package for an out-of-town firm looking to get a presence in Silicon Valley, Kalkstein said. While Kalkstein said the decision to part ways with Oppenheimer was mutual, he noted that the Palo Alto office was among the firm’s most successful. According to Kalkstein, average profits per partner and average revenues per lawyer in the office — which focuses exclusively on intellectual property with transactional, litigation and prosecution attorneys — were “much higher” than the firmwide averages. In 2001, Oppenheimer posted average profits per equity partner of $350,000, and average revenues per lawyer of $455,000 on gross revenues of $113 million. According to one person close to the situation, the fact that the Palo Alto partners were responsible for a large share of Oppenheimer’s revenue meant the group wielded a disproportionate amount of power within the firm and pulled in virtually all of the firm’s annual bonus pool. “My view is that that made the rest of the firm very eager to dump this office even though it was the most profitable one, because it meant that the ones in the other offices had no hope of getting a bonus,” the source said. News of the plan to sell the office comes a week after Oppenheimer disclosed that it would be shutting down its Los Angeles office. The back-to-back announcements signal that Oppenheimer is pulling back to its Midwestern roots after aggressively expanding into California and throughout the U.S. during the 1990s. Assuming the Silicon Valley office is spun off, Oppenheimer will have just six offices — including one in California, in Orange County — down from 12 in 1999.

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