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Among Silicon Valley firms, Cooley Godward seemed to be withstanding the high-profile partner defections that have plagued its competitors. But in recent months, several longtime partners have left Cooley’s Palo Alto, Calif., office — showing that even a firm that touts a congenial culture isn’t immune to the pressures of a red-hot legal market. Since January, the Palo Alto office has lost nine partners and two special counsel. Three partners jumped to Internet companies, two joined competing firms, one became an independent consultant, two took teaching positions and one retired. Both current and former Cooley attorneys acknowledge disagreements over staffing of deals and the termination of long-standing client relationships. They say the hectic pace and associate attrition have hurt morale, and at least one of the departing partners complains that the firm hasn’t been aggressive enough in taking an equity stake in clients. “I was burned out,” said former partner Diane Savage. “I decided you couldn’t pay me enough to keep doing it.” Cooley firmwide managing partner Lee Benton downplayed the departures as “part of the turnover that you have to expect in a firm like ours.” He acknowledges, however, that turning away clients has been stressful for the firm’s partners. “We haven’t been able to take in anywhere near the number of clients who wanted us to represent them,” Benton said. “That’s a hard situation in which to practice.” In addition, he said many attorneys or their spouses have made a lot of money in the stock market, which “enabled them to look at alternatives they wouldn’t have previously considered.” HIGH-PROFILE DEPARTURES The departure of 27-year veteran Alan Mendelson to Latham & Watkins last month was the firm’s most visible loss. Former Cooley attorneys say Mendelson’s mercurial temperament and sharp disagreements with partners, over matters such as the firm’s decision to cut long-term clients for more profitable ones, led to his exit. Mendelson said “it would not be appropriate” for him to comment on his decision to leave the firm. Savage left the partnership in March, though she continues to serve as of counsel through mid-June while she wraps up deals for clients. She blames the relentless pace and client demands, which were made more difficult by the continual loss of associates. “It’s gotten to be crazed,” Savage said, noting that there were attorneys in her group who left after just four or five months. Savage was regarded by her colleagues as a key partner who helped build the firm’s information technology practice from five attorneys in 1994 to 70 today. Recruited from Gray Cary Ware & Freidenrich in 1994, Savage has been touted by firm management as one of its most valuable lateral hires. For now, Savage said she plans to continue teaching part time at Stanford University. She has taught two courses in the graduate school of business and plans to teach another class in the fall. Other Palo Alto partners who have left Cooley this year include IP litigator Darryl Woo, who jumped to Palo Alto-based Fenwick & West in April, and fellow IP litigator Michelle Galloway, who left the partnership in April to take on adjunct positions at Santa Clara University School of Law and Stanford Law School. On the corporate side, Patrick Pohlen and Timothy Moore joined Internet start-ups, and 17-year veteran Andrei Manoliu launched his own consulting business. The patent prosecution group, specifically the electrical engineering sector, has been decimated over the past year following the retirement of John Girvin Jr., who held an of counsel title, and partner Willis Higgins. The last remaining partner in the group, Craig Opperman, joined a software company last week. Benton said departures from Cooley have fluctuated over time. For example, in 1999 the Silicon Valley office lost two partners when Cooley terminated its health care practice, and in 1998 it lost nine partners. The defections of two years ago were largely due to disagreements between star litigator Lloyd “Rusty” Day Jr. and other partners. Day and five partners left Cooley to form Cupertino-based Day Casebeer Madrid & Batchelder. Despite its rapid growth over the past five years, Cooley has tried to hold on to a small-firm atmosphere. Many former Cooley attorneys say the firm offers a friendly and supportive environment. But they also agree that the demands of Silicon Valley life have inevitably had an impact on the firm. “I think we went through a very difficult time as the pressure got highest in Silicon Valley,” Benton said. “We ended up in a situation where [more] business was chasing us than we were able to handle, and that has a negative impact on partner morale.” POWER SHIFT Cooley now is taking steps to bolster the leadership in its Palo Alto ranks. The week Mendelson left, Mark Tanoury, the head of Cooley’s business department, moved to Palo Alto from the firm’s smaller Menlo Park, Calif., outpost. Two partners and a half dozen associates came with him. As the department chairman, Tanoury said “it made sense [for me] to be in our larger office.” Benton said the move will make Tanoury more accessible to associates and young partners. Tanoury has “the best, strongest mentoring relationship in the corporate securities practice in the firm,” Benton said. Tanoury’s presence may also set a different tone in the office. Known as an even-tempered and thoughtful leader, he has a style that stands in sharp contrast to that of Mendelson, who had been the dominant force in the Palo Alto outpost since it opened in 1980. “Mendelson was the power broker in the office,” one former associate said. “When it came to sharing associates, he was powerful enough and cranky enough that he always got his way.” Others were unable to grow their potential business because they didn’t have enough associates working with them, the former associate said. Manoliu, who left the firm in March, speculated that it was difficult for Mendelson to relinquish control over firm decisions. “Ten years ago, or eight years ago, whatever [Mendelson] said was the word,” Manoliu said. But that was not the case in more recent years. Mendelson was unhappy “if he got 70 percent of his proposals accepted,” Manoliu said, adding “30 percent is actually pretty damn good.” Manoliu acknowledged that the allocation of resources was a point of contention at Cooley. “Alan and I had flexibility in taking things on without asking the institution,” Manoliu said. But as more and more business flooded in, the firm set mechanisms in place to manage resources and this “created tension,” he said. About a year ago Cooley set up a committee in the corporate and securities practice to determine what new business to take on in the Palo Alto office. A few months ago, the four-member committee took on the task of deciding the intake of business for the Menlo Park and San Francisco offices. “Undoubtedly there were circumstances where an individual partner felt” he should pursue a business opportunity and the intake committee felt otherwise, Benton said. “When you turn down eight or nine of every 10 opportunities, you have to prioritize.” Another point of contention with Mendelson was Cooley’s decision to terminate client relationships. Tanoury acknowledged that the firm reviewed its client base and ended relationships that management felt were no longer working. “For the most part that meant clients who were not paying” or were too demanding and under-appreciative contributed to the associate retention problem, Tanoury said. Benton said that in other instances, the firm was too busy to take on work from clients it had represented for 20 years. This “created an atmosphere — not what I would call a fun atmosphere,” Benton said. Savage agreed with the firm’s decision to drop clients. “That had to happen,” she said. It would have been “unfair to clients and attorneys” to take on the additional work. However, a former senior associate said Cooley’s priorities have shifted. In the past, Cooley wanted a client because of the interesting work and the relationship dynamics, he said. Now, the question is “can this client produce excessive returns.” The associate said clients also have greater expectations, since they are being charged top dollar. For certain work, such as M&A transactions, clients are charged premium billing beyond the standard hourly rate. “It adds to the pressure that attorneys feel and the pressure that clients put on attorneys,” the associate said. LIFE AFTER COOLEY The increased pressures have, in part, prompted some partners to seek positions outside firm life. Like Savage, Galloway will be teaching courses at Santa Clara University School of Law and Stanford Law School in the coming school year. Galloway, who took an of counsel position at Cooley, said her move reflected a shift in focus. “I wouldn’t think of going to another firm,” said Galloway, who will continue to teach a litigation training course at Cooley. Among other defecting partners, Patrick Pohlen recently joined San Francisco-based Twelve Entrepreneuring Inc., and Timothy Moore became general counsel at Palo Alto-based Noosh Inc., a web-based service that connects print vendors. Manoliu launched his own consulting business. He said he was dissatisfied with Cooley’s traditional business model, which primarily ties attorneys fees to an hourly rate. He believes the firm should take more of an equity stake in clients, as do Menlo Park-based Venture Law Group and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian. “I found Cooley to be too large and diverse in practice and geography to accommodate that kind of practice and pricing model,” Manoliu said. The electrical engineering section of the patent group has gone through an upheaval of its own. In addition to retiring partners Girvin and Higgins, Richard Goldman and Peter Leal, both special counsel, went to Gray Cary Ware & Freidenrich in March. The sole remaining partner, Craig Opperman, joined Mountain View-based OpenTV Corp. as chief IP officer on June 1. While Cooley is going through some disruption, many attorneys believe it is the nature of doing business in the Silicon Valley. “The combination of the tough times in the Valley, the defections to dot-coms and the cultural shift at the firm makes Cooley a tough place to be,” a former associate said. “But it’s head and shoulders a better place to practice than other brand-name firms in the Valley.” Cooley expects conditions at the firm to improve. “For a two-year period there was pressure” on everyone and a high attrition rate because of the opportunities for associates, Tanoury said. But “we can start to see the light at the end of the tunnel,” he added. “It’s not as frenetic as it was.”

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