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Chart: Attorney headcount in New York Bay Area law firms have tried just about everything to make it in New York. “You don’t compete on a national stage unless you compete in New York, and clients know that,” said Morrison & Foerster Chairman Keith Wetmore. But even good timing, luck and savvy planning don’t guarantee success in this shark tank. Bay Area shops are generally less profitable, with less name recognition, than New York firms. Many are tagged as “laid back” by their Big Apple brethren, and most lack longtime relationships with New York’s financial community. Consultants say out-of-towners accustomed to attracting top talent at home often find it impossible to do so in New York. Plucking the best lawyers from elite firms and winning clients in this saturated market can be tougher than hailing a cab at rush hour. “Every day my partners in New York come up against not just some of the best firms in the country but virtually all of the best firms,” Wetmore remarked. Like some of their Los Angeles rivals, MoFo and Orrick, Herrington & Sutcliffe planted New York offices 15-20 years ago and watched them flourish during the go-go ’80s and the tech-boom ’90s. But Bay Area players who entered Gotham City in the last five years have faced a dramatically different landscape. More of the nation’s — even the world’s — biggest law firms have already moved in, while the strongest native firms have grown even stronger. The following is a look at three local firms — Wilson Sonsini Goodrich & Rosati, Pillsbury Winthrop and Heller Ehrman White & McAuliffe — who began chomping on the Big Apple in the last five years. For these firms, timing has been as important a factor as any. They’ve employed vastly different tactics and, so far, are seeing varied results. But this is a story in motion. WILSON: FROM SILICON VALLEY TO SILICON ALLEY Fueled by immense success counseling startups in Silicon Valley, Wilson Sonsini set out for Silicon Alley in February 2001. The firm launched its New York practice with a 15,000-square-foot outpost near Rockefeller Center. “The original business plan emphasized early-stage tech companies,” said Jeffrey Saper, Wilson’s director of strategic planning. “We created that plan at the tail end of the bubble when dot-coms and wireless were coming out of New York’s Silicon Alley.” By the time Wilson’s two pioneer partners unloaded their boxes, the tech economy was in meltdown. The firm stomached the fallout and has maintained its beachhead with a couple of partners and two associates. The original partners have left, but one of the current partners, Selim Day, was an associate when the office opened. Saper said he is pleased with the clients reeled in by the tiny group, including eight public companies, among them ScanSoft Inc. and Gartner Inc. Yet he concedes, “We’re statistically insignificant in that market.” True to the firm’s scrappy reputation, Saper and his team are re-jiggering strategy and holding onto their bet. Mirroring its firmwide strategy, Wilson is considering more emphasis on litigation in New York and increasing its focus on mature public companies. “We didn’t have countercyclical practice areas,” Saper said. “But we are not going to forsake startup work in New York. It’s a shift instead of a complete reversal.” HELLER: BUILDING UP A BASE Heller Ehrman moved to Manhattan two crucial years earlier than Wilson Sonsini. In April 1999, Heller acquired Werbel & Carnelutti, a 20-lawyer corporate, securities and litigation boutique with offices in New York and Italy. Nine of the 10 original partners still work at Heller Ehrman, including name partner Robert Werbel. The firm has added roughly 10 lawyers to its midtown outpost each year since it opened. The office seems to be gathering momentum. Joseph McLaughlin, managing partner of the New York office, said 28 lawyers have joined the office this year, bringing the total to 100. The New York litigation practice is the strongest in the firm, Chairman Barry Levin said. It accounts for two-thirds of the office’s business. McLaughlin said the New York office originally imported most of its litigation work from the West Coast, but that these days 75 percent originates locally. Asked about the New York practice, Levin touts the firm’s representation of Visa International in an antitrust class action brought by retailers in Brooklyn courts. Visa settled the case on the eve of trial last year for $2 billion. About one-third of the litigation team was based in the New York office — the client and most of the attorneys were based in California. Although the focus on litigation kept the office buoyant during the recession, corporate work has improved in step with the economy. New York partners handled non-U.S. corporate issues for Northrop Grumman Corp. in its $4.7 billion sale of TRW Automotive Inc. in May 2003. Still, one New York legal recruiter says Heller Ehrman, the newcomer, lacks the name recognition and competitive edge of the natives. And although the firm is moving into a new Times Square office built for 166 attorneys (with options to lease for 250), even Levin acknowledges that Bay Area firms’ lower pay scales can make it tough to recruit among the skyscrapers. Heller Ehrman had $835,000 in profits per partner last year — among the best in the Bay Area. But top New York firms such as Sullivan & Cromwell and Davis Polk & Wardwell offer $1.9 million or more. “We need to have a deeper bench,” Levin said. “Sometimes you feel like you’re competing with every law firm in the U.S. for talent.” PILLSBURY: HOME COURT ADVANTAGE? Pillsbury jumped into New York with the biggest splash. The firm, then known as Pillsbury, Madison & Sutro, merged with New York’s 132-year-old Winthrop, Stimson, Putnam & Roberts in January 2001. With this one maneuver, Pillsbury scooped up 186 attorneys in lower Manhattan. Pillsbury gained local lawyers with longtime client relationships — a home court advantage that cost less money and far less time than recruiting individually or by practice group. The office, though, has shrunk by more than 30 lawyers, or 17 percent, since the merger. Chairwoman Mary Cranston said some of those lawyers departed after “quality reviews,” and the firm — like many others the last few years — reduced the size of its incoming classes. Cranston said she is delighted with the results of the merger but acknowledged that it took a couple of years to integrate the two firms’ lawyers, information technology and billing systems. Simply learning who was doing what and where was a challenge. Legacy Winthrop partners say they’ve grappled with the contrasting structures of their practices. While corporate lawyers in California tend to have more generalized practices, New Yorkers’ are hyper-specialized. In California, Pillsbury has more company-side clients, with attendant labor, tax and other work. New York has very narrowly focused finance clients. “I think the practices are a little more different than expected,” said Kenneth Adelsberg, co-leader of Pillsbury Winthrop’s private equity practice team. The contrast resulted in varying approaches at Pillsbury Winthrop to everything from associate training to business development. In their quest to unify, both firms initially tried to develop similar practice structures, said Michael Schumaecker, leader of the firm’s finance practice section. Eventually, though, the firm realized “it’s OK to be different,” in order to serve their respective markets, Schumaecker said. Indeed, that variety was one of the key attractions of the merger, he said, noting for example that the West Coast has intellectual property and biotech expertise that was lacking in New York. Cranston, meanwhile, points out that in the wake of the market crash, New York provided access to debt markets. By Cranston’s count, 25 percent of the firm’s new initiatives couldn’t have been done before the merger. For example, Pillsbury Winthrop represented pharmaceutical outfit SICOR Inc. in its $3.4 billion acquisition by Teva Pharmaceutical Industries Ltd. in October. Twenty-eight lawyers worked on the deal, with San Francisco partners handling the biotech and tax matters and the New Yorkers managing the corporate, litigation and labor aspects of the case. Yet, the timing of the merger was not ideal. Just months after it became official, the Sept. 11 attacks forced Pillsbury Winthrop to shutter its downtown offices. While business in New York suffered shell-shock, Northern California’s already battered tech market short-circuited. Although Sept. 11 may have slowed initial revenue growth — New York partners say business was paralyzed for three months — it instantly bonded attorneys on both coasts. New York lawyers watched the second plane crash into the World Trade Center from their office windows, four blocks away. As phone and subway lines jammed, “It was really the folks in California who took the labor of tracking everybody down and making sure they were safe,” Schumaecker recalled. The firm’s cohesion was rattled a year later by a memo from Cranston trashing Frode Jensen, a Winthrop legacy partner who had left the firm’s Connecticut office for Latham & Watkins. New York lawyers say a settlement agreement with Jensen precludes them from commenting. However, Schumaecker said, in general, “When management makes a mistake and you have confidence in them, you do get on with it.” Reviews of the combined firm are mixed in New York. To start, the firm has had to contend with a new first name. And securities lawyers at top New York firms said they don’t view Pillsbury Winthrop as serious competition. One legal consultant who asked to remain anonymous called the firm “sleepy.” But Carrie Mandel, managing director of Major, Hagen & Africa’s New York office, says Pillsbury Winthrop’s outpost is, in fact, bustling, and its lawyers work collaboratively with their West Coast counterparts. “I think they’ve taken great pains to study themselves and figure out how to make each other more profitable,” said Mandel, who counts Pillsbury as a client. “Numbers are always in flux after a merger, but the economy is picking up now.” It may be too early to judge the success of this marriage, but internally lawyers are optimistic. “You don’t hear ‘legacy’ at all by anybody in the last six months,” Schumaecker said. “You measure success in small terms.” THE ADVANTAGE OF TIME In January, Pillsbury moved into glitzy new offices on Times Square — not far from O’Melveny & Myers’ 200-lawyer operation. Los Angeles players such as O’Melveny, Latham & Watkins and Gibson, Dunn & Crutcher all entered the New York market in the 1980s and have solid practices there. Consultants say Latham, in particular, is viewed practically as a native shop. Morrison & Foerster, meanwhile, has 129 lawyers in New York. “We are very happy that we made this investment because without New York, you’re nothing but a regional player,” Wetmore jabbed. Orrick, Herrington & Sutcliffe’s Big Apple branch is celebrating its 20th anniversary this year. The 187-lawyer office is the firm’s largest, and boasts one of the leading securitization practices in the New York market. Roughly 40 percent of the office is litigation, 60 percent transactional. “In the first three years, it grew very, very slowly,” said Chairman Ralph Baxter Jr. “We could have given up hope or decided to grow for growth’s sake but we’ve been disciplined and selective.” Orrick’s high profits per partner for a Bay Area shop — $945,000 in 2003 — clearly help with recruitment. By Wetmore’s calculus, then, Orrick must be a winner. “I believe the success of a firm’s New York office is a measure of its success at becoming a truly national firm.”

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