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Companies sometimes fire their outside counsel, but it’s rarer for a law firm to drop a client. McGuireWoods did exactly that, however, when it announced in May that it was ending its relationship with Peoples Energy Corp. McGuireWoods, based in Richmond, had been earning around $9 million a year from Peoples Energy, a Chicago-based utility. What made the move especially striking was that the company’s GC, Theodore “Ted” Tetzlaff, was serving at the same time as a McGuireWoods partner. And that was a significant part of the problem. McGuireWoods felt that Tetzlaff was trying to control the firm’s relationship with Peoples Energy. Tetzlaff, who has since quit McGuireWoods, counters that he was just acting like any GC in demanding the best legal work for the lowest price. Tetzlaff moved to the Chicago office of McGuireWoods from Jenner & Block in 2001. At first it looked like both he and his new firm would benefit. Revenue and head count soared at McGuireWoods’s Chicago outpost with Tetzlaff as its managing partner. In 2003 Tetzlaff engineered an outsourcing deal with Peoples Energy in which McGuireWoods took charge of the company’s legal work and Tetzlaff became its outside general counsel. “It was a condition of them taking on this novel arrangement that I take [sole] responsibility for the relationship and be the GC,” says Tetzlaff. Under the arrangement, partner Mark McGuire (not the firm’s founder) was also named general counsel of Peoples Energy’s subsidiaries, and some of the company’s in-house attorneys joined McGuireWoods. The deal wasn’t the first outsourcing arrangement for Tetzlaff. From 1992 to 1999, while a partner at Jenner, he served as the outside GC to Tenneco Inc., which was also a client of the firm. The McGuireWoods/Peoples Energy arrangement didn’t run as smoothly, however. Tetzlaff says he was caught between his roles as GC and firm partner. He had committed himself to reducing the company’s legal costs, for example. Yet the former Peoples Energy attorneys who joined McGuireWoods were now billing the company at higher rates than when they had been in-house. There were also disputes over the handling of pending litigation. “I was expected [by McGuireWoods] to overlook certain things, to act more as a partner and not as a GC,” says Tetzlaff. He adds, “I have high standards. When dealing with tough problems that require first-class legal work, there is no room for sloppiness or lateness.” But the conflict between Tetzlaff and McGuireWoods was over more than just the relationship with Peoples Energy, according to five current and former partners who all declined to be identified. They say that Tetzlaff and the firm’s Richmond headquarters both engaged in micromanagement, and continually struggled over who would be the boss. Along these lines, Tetzlaff’s ambitions for the Chicago office rankled some at the firm. He says that his desire to pay Chicago rates to new hires was a “continuing irritant” with McGuireWoods’s management in Richmond. Then there was Tetzlaff’s own compensation at the fiscally conservative firm. His former colleagues say that he started at a salary of $2 million (twice that of chairman Robert Burrus), on top of which he enjoyed such perks as a rented private jet and a huge office that some colleagues called a “wing.” The strain between Tetzlaff and McGuireWoods’s management eventually spilled over into the relationship with Peoples Energy. The firm’s leaders encouraged Mark McGuire to position himself as the preferred go-to guy for Peoples Energy. McGuire was the firm’s original contact with Peoples Energy CEO Thomas Patrick. McGuireWoods chairman Burrus denies that the firm was trying to push Tetzlaff out of the picture. But Burrus says that clients belong to the firm and not just to a specific partner. “I think Mark [McGuire] agreed with that philosophy, and Ted did not,” Burrus says. Tetzlaff says that Peoples Energy did not appreciate these efforts to undercut his authority. In early May, CEO Patrick and the board designated Tetzlaff as general counsel of all company entities, eliminating McGuire’s job as GC of its subsidiaries. Patrick and McGuire did not return calls for comment. The finale came on May 24, when Burrus delivered a letter of resignation to Tetzlaff and the Peoples Energy CEO. Burrus feels the firm did the right thing: “We’re not willing to sacrifice our values for any one person or client.” Tetzlaff responds, “My sense was that they wanted to resign before they got fired.” Tetzlaff’s trek through the law firms of Chicago continues. In June he joined Ungaretti & Harris, bringing his Peoples Energy work with him. Says one colleague: “He’s a survivor.” Wherever he happens to be.

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