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LOS ANGELES � Alschuler Grossman Stein & Kahan occupies three floors in Santa Monica’s The Water Garden building, and each is commanded by one of the firm’s heavyweights. On the fifth floor, there’s Marshall Grossman and the corporate litigators; on the fourth, there’s Stanton “Larry” Stein and the entertainment practice; and on the third, there’s Robert Kahan and the transactional group. But not, it appears, for long. Grossman is pushing hard for a merger with Cooley Godward, which he’s been talking to off and on for a few months, or some other big firm. Stein and Kahan, meanwhile, are in advanced negotiations to launch a Santa Monica office affiliated with the New York-based Dreier law firm. What remains unclear is how many of the firm’s 100 lawyers will wind up where. Marc Dreier, the managing partner of Dreier, confirmed that he’s in the process of creating what he said would be a large West Coast practice. “Within the next 30 days, we’ll have a substantial group, maybe 60 to 70 attorneys,” he said Thursday, as he prepared to board a flight for Los Angeles. “We’re opening it up with what I think are people of real stature and reputation in the legal community.” But a source within the Alschuler firm said some of the lawyers who practice with Stein and Kahan would prefer sticking with Grossman and following him to a new home. For the past several months, talks about the firm’s future have created tension and uncertainty. A handful of partners have already left. And while nothing has been finalized, sources within the firm agree it’s unlikely it will remain intact at year’s end. “Bad stuff can happen when a firm starts talking merger,” said L. William Nason, the recruiter who recently placed several Alschuler partners at Steptoe & Johnson. “When people go into merger talks, what they end up doing is pleasing some, enraging others, and creating a fluidity that wouldn’t exist otherwise.” While Grossman would not comment on any ongoing talks, he acknowledged that merger talks can result in departures. “It’s common knowledge that any time a law firm is a potential merger candidate, what might be a good opportunity for the firm might not be a good opportunity for everyone,” Grossman said. Dreier’s firm, founded in 1996, counts about 100 lawyers and concentrates on commercial litigation, real estate, bankruptcy, employment law, corporate and securities, entertainment and intellectual property. A Century City office will likely house a real estate group, some litigators and a sports-related practice, Dreier said. The larger office will be in Santa Monica, and is expected to be anchored by Stein and Kahan’s entertainment and transactional practices. Stein declined to comment publicly, adding that “My partners and I have agreed not to make any comments regarding our current situation.” Alschuler Grossman is considered a top-shelf litigation and entertainment shop. Though Grossman won’t disclose details about its financial results, he said in March that the firm “would rank exceptionally high on the national list” for profits per partner and revenue per lawyer. “We are enjoying our most successful year,” he said Friday. The Chambers directory puts Grossman in the top tier of commercial litigators in California, and Stein in the top tier of entertainment attorneys. “They are a go-to litigation firm for big-ticket litigation and that was built on Marshall’s prowess in the courtroom,” consultant Peter Zeughauser said. “He is perceived to dominate that firm.” Alschuler Grossman Stein & Kahan formed in 1999 when Grossman’s litigation-heavy Alschuler Grossman & Pines combined with about 15 lawyers in Stein & Kahan’s entertainment and corporate shop. “I was pleased with the merger,” Grossman said Friday. In 2000, Grossman and Stein were profiled in a Los Angeles magazine piece entitled “Pit Bull Lawyers: Who are the Roughest, Toughest Attorneys in Town?” Stein has represented top talent in Hollywood, including Sean Connery, Madonna, Julia Roberts and Jennifer Lopez. Grossman has handled complex and class action litigation for the likes of Apple Computer, Arthur Andersen and Blockbuster. One former partner isn’t surprised that Grossman and Stein are at odds: “You have two massive egos. It was inevitable those two egos would bump up against each other.” Earlier this year, the Alschuler firm began merger talks with Robins, Kaplan, Miller & Ciresi. Grossman said Robins wasn’t “a good fit.” Though the talks went nowhere, they set off a round of departures that included rainmaker Mark Neubauer and three other partners who left to start a Century City office for Steptoe & Johnson. Another partner, Michael Heimbold, starts at Steptoe today. “I am very close with Larry and Bob,” Heimbold said Friday, “but I thought I would start looking at my options outside the firm while the firm was looking at its options.” Recruiter Nason said that starting talks with other firms is bound to bother someone and can set off a series of unintended consequences. “People go into merger talks saying it can be fairly innocuous, but you don’t want to lose a Mark Neubauer � he and his group are gone � and you don’t want to lose a Larry Stein � he and his group are now planning on leaving,” Nason said.

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