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Second of two parts Chart: Top Outside Counsel Contracts Chart: Contracts in Excess of $2 Million When United and other airlines started giving off warnings that they might file for bankruptcy, San Francisco’s airport cast a net for outside counsel, and a boutique in Denver responded. Jessop & Company wound up winning a piece of the business a few years ago, but it was no easy road, said Douglas Jessop. “We had to go through elaborate hurdles to qualify.” Though Jessop considers his firm “about as politically correct as anybody,” the six-lawyer firm’s policies were silent as to sexual orientation, or the transgendered. “We had to make it very clear in our policy that we don’t care. And that was fine with me, because I don’t,” Jessop said. He also had to promise to provide health insurance to employees’ domestic partners — something he’d never had to think about before. When it comes to landing San Francisco as a client, the city’s contract terms set it apart, according to lawyers with firms that inked contracts with the city from July 1, 2000, through June 30, 2004. San Francisco “is a major participant in the business market,” says William Doyle, a partner at Orrick, Herrington & Sutcliffe. “It has ways of accomplishing public policy goals just by using its economic clout.” In the last four fiscal years, the San Francisco city attorney’s office has signed outside counsel contracts or contract amendments with 60 firms, for work worth up to $19.8 million, according to a Recorderanalysis of contracts awarded by the city attorney’s office and obtained under a public records request. Most of the firms chosen had at least one office in the Bay Area or elsewhere in California, and many of the working relationships with the city date back years, even decades. Others, like Jessop & Company, have more recently come across the city’s business and its own brand of contract terms. On top of requiring that any city contractor — law firm or otherwise — give employees with registered domestic partners the same benefits as those with spouses, San Francisco also sets a bar for minimum wages and health insurance. Other terms, over the years, have provided more amusement than hassle. “Luckily, we’re not importing tropical hardwood,” Jessop joked — one of the no-no’s spelled out in some contracts over the four-year period. Some agreements, other attorneys pointed out, “encourage” companies doing business in Northern Ireland to abide by the MacBride Principles, a corporate code of conduct to combat religious discrimination. “Obviously, things change with the changing law here in San Francisco. So when we have new requirements, they get added,” said City Attorney Dennis Herrera. STABLE RELATIONSHIPS Lawyers said they’ve noticed little impact on their business with the city since Herrera took office in 2002, winning with predecessor Louise Renne’s endorsement. Some noted they most often interact with deputies below the office’s top tier, and that those personnel remained relatively stable when the torch was passed. “The folks that we’d been working with 10 years ago are the same folks we’re working with now,” said Robert Thompson, a partner in Sheppard, Mullin, Richter & Hampton’s real estate and land use group. Sheppard, Mullin’s contract to work through the approval process for the airport’s runway expansion project was amended twice under Renne, adding $450,000 to its fee cap. With the city, as with many of O’Melveny & Myers’ clients, familiarity generally breeds work, said Darin Snyder, who heads the firm’s San Francisco office. He traces the city’s familiarity with O’Melveny’s expertise to the movement of lawyers between the firm and City Hall, noting that partner George Riley served as special assistant to the city attorney before he joined the firm in 1993, and “the city continued to refer certain projects to him.” And when O’Melveny lawyers have gone to work at the city attorney’s office, Snyder added, they left knowing the firm’s lawyers and their expertise, “and understandably sought them out.” “There have been certain circumstances where, because of one’s tenure here, they did have specific expertise,” Herrera said, but the city attorney said there’s no direct correlation. Still, at least seven lawyers who signed contracts with the city used to work in the office. Geoffrey Spellberg, who spent about seven years at the city attorney’s office before leaving in 1996, has signed contracts over the last four years as he’s moved from his own law offices to be of counsel at Hanson, Bridgett, Marcus, Vlahos & Rudy, and finally to his current of counsel post at Meyers, Nave, Riback, Silver & Wilson. “The work has come with me,” said Spellberg, who used to head the construction team and pitch in on employment trials in the city attorney’s office. He says that a history with City Hall can make a lawyer more effective, but isn’t “so much of an advantage” when it comes to getting a contract. “The expertise of how the city government works and how the attorneys interact with city departments is a huge value,” but plenty of lawyers who never worked in the office get business, he said. “It isn’t like just because you used to work there you get work,” said James Quadra, former chief of general litigation under Renne. He and Moscone, Emblidge & Quadra’s other name partners left the city attorney’s office in 1998 to hang their shingle, and in the last four years signed one contract worth up to $150,000, plus two contingency agreements. But he says a deputy could know a firm just as well if it’s earned a good review from another client, or sat across the table on another case. “Many of the people we [worked] with aren’t there anymore,” he added. Jeffrey Sloan, who started doing labor-related work for the city around 1987, says he built a reputation over a number of years with Renne and her chief deputy city attorney, Jonathan Holtzman (both now his law partners), and the rest of the city’s labor team. So when a significant labor case came in the door under Renne, he was confident he’d “be one of the first people that they think about.” Under Herrera, “I don’t have any expectation that they will, or will not, give me more work,” Sloan said. “New people that don’t have those relationships are more inclined to go out to bid.” Still, he’s gotten some work under the new city attorney, signing a contract worth up to $50,000 in April to help with union negotiations. A BALANCING ACT Across the state, the philosophies for when to hire outside counsel, and whom to pick, can vary widely, said Jennifer Henning, executive director of the County Counsels’ Association of California. Sometimes county counsels attempt to drive down their outside counsel costs by hiring more in-house help, if they see a steady stream of work. “You look at the entire employee cost,” from salary to benefits, from whether they’d bring in revenue to the cost to set them up with a computer, said Tulare County Counsel Kathleen Bales-Lange. Her 22-lawyer office hires outside lawyers who specialize in defending suits filed after motorcycle accidents, she said, because there’s not enough of those cases to merit an in-house specialist. On the other hand, in the last five years she did hire another lawyer for her tort defense team after doing her annual cost-benefit analysis. “That’s something that we always constantly evaluate,” said Herrera, noting that he’d hired a deputy with bankruptcy expertise since taking office. “Especially when PG&E was going hot and heavy, and when United started its problems, I really looked at what our capability was in the office, and tried to balance that.” Even if there’s enough work to justify a specialist, the right lawyers may command too high a salary to work in a government office, said San Diego County Counsel John Sansone. “If there’s a legitimate tax attorney out there, why would a tax attorney come to my office?” Once he decides outside counsel is needed, Sansone looks to familiar faces. “We’re pretty well established in terms of what we do and who we use,” he said, adding that a lot of his 75 or so lawyers came from private practice and know the firms in town. Sansone estimates his office spent about $400,000 on outside counsel last year. “We don’t get lobbied or marketed,” he said. “I’m pleased about that.” Santa Clara County Counsel Ann Ravel said she’s wary of appearing too cozy with firms, though her picks often rest on who’s done satisfactory work in the past. “I’m sensitive to that being a possible criticism, and a reasonable criticism,” said Ravel, whose 61-attorney office estimates it spent about $2 million on outside counsel each of the last two fiscal years. “I don’t want the legal community to feel that the only people who will get work from the county are people who have relationships with the [office]. So it’s very important for us to try to spread it out.” It’s a balancing act, says Renne. “You do want to have a known quantity, but you also want to have the ability to give other people a chance.” Spreading out bond work Under Renne and Herrera, the San Francisco city attorney’s office has spread out bond counsel work — worth up to $4.3 million over the four years, according to the Recorder’s analysis — often going out of its way to pair a larger firm with a small local or minority- or women-owned firm, to split the work and fees. “It was just one area where it was evident there was no diversity at play,” Renne said. “We just decided, ‘Whoa, this isn’t right.’” Many local governments frequently turn to the same firm for outside bond counsel work. But San Francisco is different. “As in many other things, the city is � innovative,” said Doyle, the Orrick partner. His 700-lawyer firm, along with the Law Offices of Leslie M. Lava in Sausalito and San Francisco’s Lofton & Jennings, have jointly served as the airport’s bond counsel since 1997. In 2002, they signed a three-year extension worth up to $3 million. Doyle says Orrick, which has one of the top public finance practices in the country, is capable of handling assignments single-handedly, but adds that his firm is among many that support the city’s policy. As he sees it, the city’s public policy goals have given local firms a competitive advantage, albeit a shrinking one. While a big firm headquartered in New York might be reluctant to change company-wide policies just to win one city contract, many San Francisco firms have long had policies in place that meet the city’s terms, Doyle said. Ten years ago, “other firms lost out, quite frankly, to us.” But as other firms have modernized their policies, and more cities have put out similar requirements, “it’s less of a competitive advantage now.” Expertise, cost and location are all part of the mix, Herrera said. “When you balance that all out, in many circumstances we find there’s not a need to go out of state.” Indeed, San Francisco’s contracts still most frequently go to Bay Area or California firms. But out-of-state law firms are getting a piece of the action. When the city considered joining a plaintiff suit against manufacturers of lead paint, for instance, Renne sought out Boston toxic tort firm Thornton & Naumes and suggested it put together a group to submit a proposal, said partner Neil Leifer, who’s been working on lead cases since 1987. His firm signed a contract alongside its frequent co-counsel, Motley Rice, which runs a lead-poisoning litigation practice out of Providence, R.I., and San Francisco’s now-defunct Wartnick, Chaber, Harowitz & Tigerman, a local firm they had previously worked with on asbestos litigation. Then there’s Dallas’ Thompson & Knight, which got 11 contracts worth up to $10,000 each to help San Francisco’s pension plan with energy-related investments. “A lot of people, when they think about high-tech, they think about Bay Area firms,” said partner Jeffrey Zlotky. “And when they think about energy, they think about little ol’ us, in Texas.”

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