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Before Swidler Berlin’s loss of its energy practice earlier this month, the firm was “bubbly and effervescent” about its plan to move ahead without the 57 New York partners who left in January, said its managing partner. Now, he is conducting a morale check among the ranks. “We have to take some hallway temperatures,” said Barry Direnfeld last week. “I think they were surprised.” With 136 lawyers, Swidler is about 60% of the size it was a year ago. The departure to Alston & Bird of 14 energy attorneys, a group that included one of Swidler’s founding partners, comes in the midst of Swidler’s restructuring plan that focuses on its “core competencies,” Direnfeld said. The firm was founded in 1982 as an energy boutique. The energy group’s defection, in addition to the January departure of the New York attorneys and eight other Washington attorneys to Dechert, puts the firm at a crossroads, say observers who are closely watching whether the Washington firm will avoid a fatal mass exodus. Direnfeld maintains that the firm’s headcount since the Dechert event and before the Alston & Bird move has remained steady. But some of the firm’s losses over the summer were not flattering. Two key partners and four associates from its white-collar and enforcement group in Washington went to McKee Nelson. In addition, three patent litigators left for Holland & Knight, and a partner from its energy group went to Kansas City, Mo.-based Blackwell Sanders Peper Martin. Swidler acquired most of its New York attorneys in 1998 when Washington-based Swidler & Berlin merged with New York’s Shereff, Friedman, Hoffman & Goodman. Swidler proved a solid money maker last year, when profits-per-partner equaled more than $1 million. Those results are a good sign that the firm may be able to refocus and pull out of any slump, said Ward Bower, principal of Altman Weil, a law firm consultancy. “It tends to provide some of the glue that can enable them to hold on to the nucleus,” he said. Direnfeld said he expects the firm to beat 2004′s profitability this year. But a former Swidler partner who now practices at another large firm said that its current attorneys are “papering the streets” with their r�sum�s. The attorney also said that the recent departures reflect a persistent sagging morale that stems from Swidler’s failed merger last year with Orrick, Herrington & Sutcliffe. Following the firm’s announcement that the Orrick merger had collapsed, management quickly told its attorneys that a merger agreement with Dickstein Shapiro Morin & Oshinsky of Washington was pending, the attorney said. That deal failed as well. Part of Swidler’s difficulty in finding a merger mate is due to its insurance coverage practice, which represents policyholders in disputes over coverage with insurance companies. The practice, though a strong one for the firm, makes it unappealing to potential merger mates that represent insurance companies on the investment side. Direnfeld said the insurance coverage work has created merger challenges, but that it is one of the firm’s core groups. One challenge the firm faces going forward is finding a way to boost its image, and that is no easy task, Bower said.

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