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Lloyd “Rusty” Day Jr. was in Florence when the news broke. Craig Casebeer heard about it on the radio as he was driving to work that April morning. Their client, Sun Microsystems Inc., had suddenly reached a truce with Microsoft Corp., which agreed to pay Sun nearly $2 billion to settle Sun’s antitrust suit. The deal, crafted by in-house counsel, was momentous for Day Casebeer Madrid & Batchelder. Since the firm’s founding six years ago, it had devoted a huge chunk of its resources to the Sun case. Partners were jubilant about the settlement, but they also found themselves with a much lighter workload. “Most firms in our position may have panicked a little bit to have a case occupying half our attorney time settle,” said partner James Batchelder, who was in Seattle the day before the settlement taking a deposition from a former Microsoft executive. “I wasn’t worried at all. We’ve had consistent messages from our clients that they would like us to take on more work.” The firm promptly picked up additional assignments from Qualcomm Inc. as well as a new client it had previously been forced to turn away. Day Casebeer has always known that it would need more than one marquee client — or lawyer. It was founded in July 1998 when Day and four other partners split from Cooley Godward, in large part over disagreements on how to staff Sun matters. The firm of eight partners and 19 associates is one of the premier litigation boutiques in the country, focused exclusively on high- tech intellectual property disputes. In addition to Sun and Qualcomm, its clients include Amgen Inc. and Lilly ICOS LLC. The firm has 26 active cases. Day Casebeer doesn’t disclose financials but said that its revenue has increased 15 – 30 percent each year since the firm was launched. One consultant who has worked with the firm said its profits per partner are on par with Latham & Watkins, whose profits reached $1.2 million last year. The firm’s great challenges — partners and legal observers agree — are growing at the right pace and training lawyers to succeed the 52-year-old Day, who is synonymous with the firm. “The big question is, can others come up to Rusty Day’s reputation and make it a second-generation firm?” said Bobbie McMorrow, of the Santa Ynez-based consulting firm McMorrow Savarese. � I FOUND MYSELF ALONE’ Tucked away in a suburban office complex in Cupertino, Day Casebeer operates in a quiet, spacious atmosphere. Though times are flush for the firm, Day draws inspiration from times of struggle. The 1974 book, “The Uncomfortable Learning” has been a strong influence in his life, said Day, who noted that during college he participated in a program set up by the book’s author, Robert Lee Gaudino, the one-time head of the Peace Corps in India. “He concluded that real learning, deep change in life” comes from experience that tears at the fabric of assumptions and prejudices, Day said. As part of Gaudino’s program, Day spent his sophomore year from 1971 to 1972 living with five different families around the country. In Detroit he worked at a Chrysler auto factory on the night shift. And in San Angelo, Texas, he worked at a local newspaper. The most moving experience was his time with a family in Appalachia that had no phone or electricity and lived 20 miles from the nearest road, said Day. The head of the family was an 84-year-old man who had been married three times and had 32 children. “It gave me a deep respect for experience and people with experience,” Day said of the program. “It caused me to retreat from judging people based on their credentials.” The venture, he said, has also helped him relate to clients “where there is a lot on the line for them.” Day acknowledged that his life as a Silicon Valley litigator is far removed from Appalachia. But he continues to ask big questions of his life. He quoted a line from Dante’s “Divine Comedy”: “Midway through this life of ours, I found myself alone in a dark wood — the straight way lost.” “Life is full of contradictions,” he said. “I’m slowly trying to work some of them out.” One of the contradictions he’s working on — unsuccessfully, from the sound of it — is finding a balance between work and life outside the firm. Lawyers at the firm bill an average of 2,200 hours a year. “In one sense we’re consumed by a world that is very demanding and leaves little room for anything else,” Day said. “To give clients anything less than that would be to dishonor the commitment to them.” the man who would be supplanted Day’s biggest task, though, is building a firm that will succeed him. And for that he relies on the lessons he learned from another mentor, Edwin Huddleson Jr., a former name partner at Cooley Godward who built the firm’s venture capital and emerging growth practice. Beloved by his partners, Huddleson, who died in 1995, was in his late 60s when Day joined the firm in 1980. “His business model was: Come work with me, provide better services to my clients, and supplant me,” recalled Day, who said that all his partners are poised to step into his position. “How do we continue to implement the Huddleson model without defaulting to unbridled growth,” Day said. “That’s the challenge we confront.” Day said some successful firms in Silicon Valley had grown in order to provide opportunities to young lawyers. As a result, he said they have been transformed from a partnership to a corporation where partners are more like shareholders. To maintain a true partnership, Day said the firm probably would not grow beyond 100 or 200 lawyers. Partners and associates say the firm’s collegial, close-knit environment is one of its defining characteristics. Day Casebeer hasn’t hired lateral partners, preferring to promote associates within the firm. The firm brings attorneys in “with the objective to develop long-term partners to practice here for the bulk of their careers,” said partner Paul Grewal. Former associate David Estrada, who is now in house at Yahoo Inc., said Day Casebeer “provides an atmosphere for people who have energy to dig in and take on responsibility.” However, another former associate said partners don’t get the chance to serve as first chair at trials since clients prefer to have Day take the lead when a case reaches that point. “Rusty is the driving force of the firm,” the associate said. “The reality is when a company hires the firm, they want Rusty” to argue the case. Day has been first chair in disputes that have gone to trial — for clients Sun and Amgen — but other partners have played the lead role in cases that have not reached trial. Batchelder, for example, is lead counsel for all Qualcomm matters, and partner David Madrid has been in charge of the Lilly ICOS work. It’s uncertain whether clients would ask Day to jump in if their cases ultimately went to trial. As for a succession plan, Casebeer, managing partner of the firm, said he and Day give younger partners the opportunity to preside over large cases “so clients appreciate their skills and judgment” and turn to them to tackle their next disputes. Casebeer, 56, spent 24 years at Cooley before striking off with Day. He splits his time between managing the firm and overseeing litigation. He’s currently lead counsel for Amgen in a licensing dispute with Johnson & Johnson. And he is part of the team defending Sun against a patent infringement suit by Eastman Kodak Co. that is set to go to trial in September. Batchelder said it had been good for the firm that Day was on an extended vacation when the Sun settlement came through since it gave other partners the opportunity to drum up new work. Several clients dismissed the idea that Day is the firm’s sole star. The firm “is more than just Rusty Day,” said Steven Odre, who recently retired as general counsel of Amgen. “They are strong across the board.” Ticking off the names of several partners, Odre said, “I don’t think that many firms have as deep a bench.” one thing well If Cooley Godward’s Huddleson provides a role model for Day, Brown & Bain serves as the firm’s cautionary tale. Day said he’s learned a great deal from the travails of the Phoenix-based firm, which was recently acquired by Perkins Coie. Brown & Bain set up a litigation shop in Silicon Valley in 1979 and handled several historic IP wars, including Apple Computer Inc.’s unsuccessful copyright infringement suit against Microsoft. The firm built a roster of who’s who attorneys in its Palo Alto office, but in the early 1990s they began defecting, and in 1999 the firm closed the outpost. Brown & Bain founder Jack Brown “was a very dynamic, successful, magnanimous, gracious trial lawyer,” Day said. “Everyone I knew liked Jack Brown and respected him.” Day attributed the firm’s failure in Silicon Valley to its attempt to diversify its practice and a failure to provide opportunities for its lawyers to grow. “What did I take away from their experience?” he said. “The importance of focusing on what you do well” and training lawyers to supplant you. Day Casebeer’s narrow focus, competitors and consultants say, is one of the keys to its success. “They have a vision of what they want to do and they don’t deviate from it,” said A. William Urquhart, a partner at Quinn Emanuel Urquhart Oliver & Hedges. “I think they are terrific.” “We call it a strike force firm, like the army with its Delta elite troops,” McMorrow said. They do one thing, charge a lot of money for it, and win, she said. Some competitors at large firms say the firm’s small size could be a disadvantage in tackling big cases. Day Casebeer hires other firms to help with the influx of work. In Sun’s antitrust suit against Microsoft, for example, Day Casebeer was backed by four other firms and hired 50 to 60 outside contract document reviewers. “They have very finite resources, and high-stakes litigation takes a lot of resources,” said Vernon Winters, one of the founding partners of Day Casebeer who is now at Weil, Gotshal & Manges. While Day Casebeer has to hire outside talent, he said, large firms can tap their own ranks. But, he added, “if anyone can make [the boutique] model work, it’s that group.” Casebeer said collaborating with other firms has been a way to keep Day Casebeer lean. “We didn’t want to grow in response to the demand for our services,” said Casebeer. By keeping the size of the firm down, “we’re less vulnerable to changes in the economy.” Batchelder added that big firms often bring in non-specialists to take on work when cases heat up. Current clients say they don’t think Day Casebeer is hindered by its size. “Day Casebeer is the best by far of the high-tech litigation firms out there,” said Lee Patch, Sun’s vice president of legal affairs. “I would do every piece of work I have with them that is of their subject area. � There is little comparison between how they service clients and how others do.” Patch said Day has worked through the night every time there has been a significant development in one of Sun’s cases. In preparation for an argument on a preliminary injunction motion against Microsoft last year, Patch said Day pulled three all- nighters back to back. Patch also pointed to the firm’s efforts to rein in Sun’s legal costs. When the company was going way over its budget in discovery, Day called Patch and said he’d found a way to save the company several hundred thousand dollars on its bill that month. “The client clearly comes first, ahead of the firm’s interest,” Patch said. Day Casebeer “surprises us positively again and again.”

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