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When it came time for Silicon Alley-based MaxManager Corp., an online shopping organizer, to hire an outside law firm, chief executive Mordechai Beizer knew who he wanted. “Our very short list included Brobeck and MoFo,” he says, referring to the New York offices of San Francisco-based Brobeck, Phleger & Harrison and Morrison & Foerster. But his pitches to the Californians fell flat. “MoFo said it was too busy, and Brobeck never returned our phone calls.” So he marched straight to the New York office of Morgan, Lewis & Bockius, a firm not exactly known for its work with fledgling companies. There Beizer found his match. “They were impressed with us, and we were really struck by their knowledge of the space,” he adds. The company recently landed $4.4 million in venture financing and is speeding toward its product launch. Says Beizer, “To put it mildly, we’ve been happy with our choice.” Until now, choosing outside counsel for a New York tech startup has been a reasonably simple job. Alley executives have sought the immediate credibility that comes with Brobeck, MoFo, or the New York office of San Francisco’s Orrick, Herrington & Sutcliffe. And for good reason. For years, the Big Three have done the lion’s share of the high-end technology work in New York. And they have stolen much of it out from under the noses of the somnolent New York natives. But the Californians are no longer the only players in town. Some of New York’s most venerable firms are finally figuring out how to cozy up to the Alley. And there are signs that the Alley is hugging back. “More and more big firms are having success in the tech game,” says Alice O’Rourke, the executive director of the New York New Media Association. “The gap between some of them and the California firms is definitely shrinking.” Ironically, the shrinking gap is partly a testament to the Californians’ continued dominance. “We simply can’t handle all of the clients that knock on our door,” says Rubi Finkelstein, a partner in Orrick’s New York-based emerging company practice group. “There’s a ton of overflow work that others are picking up.” Overflow work? Wasn’t the April market slide supposed to decimate the Alley’s flimsy e-commerce and media ventures? Maybe, but beside a significant drop in IPOs, the overall effect has been minor. “The Alley is still an extremely robust tech market,” says Jay Hachigian of Menlo Park, Calif.-based Gunderson Dettmer Stough Villeneuve Franklin & Hachigian. “And it stretches farther than lower Manhattan.” Hachigian sees hot spots in infrastructure, telecommunications, and optical networking percolating in New Jersey, Connecticut, and Long Island. Gunderson opened a small New York office in April. And Palo Alto, Calif.-based tech juggernauts Wilson Sonsini Goodrich & Rosati and Cooley Godward are thinking about following suit. But if the arrival of even stronger e-commerce brand names is scaring the New Yorkers, they’re not showing it. Wilson Sonsini and Cooley’s arrival “underscores that there’s a lot of activity here,” says Ira White, the coordinating partner of the technology group at Morgan, Lewis’s New York office, “and will probably just generate more buzz and activity.” Which brings us back to the phrase that must stick in a New Yorker’s craw: overflow work. Are the corporate law giants of the industry really living off of leftovers? That’s not how they see it, and, in fact, there are strong indications that they are becoming tech industry experts in their own right. Take New York’s Milbank, Tweed, Hadley & McCloy. A few years ago, Milbank wanted to leverage its expertise in technology outsourcing. So it launched its global technology transactions group. “We brought in attorneys that have the skill set to represent new companies and venture capital firms,” says Daniel Mummery, the department’s head. The firm mixed new attorneys with its existing attorneys and presto, a department was born. The department now has 20 attorneys and boasts a client list that includes startups like Intelysis Corp., Katrillion, Inc., Cool License Corp., and TechSpaceXchange LLC. The firms making the biggest splashes are Milbank; Morgan, Lewis; Proskauer Rose; Skadden, Arps, Slate, Meagher & Flom; and Shearman & Sterling. They’ve all devoted groups of attorneys, if not formalized departments, to cultivating and working with technology clients. “There’s always the possibility that today’s startup will become tomorrow’s prized client,” says Arnold Levine, one of the attorneys leading Proskauer’s technology push. “But some are generating significant amounts of business today.” Playing catch-up has required some New York firms to recast their strengths. When William Kelly, the general counsel of ScreamingMedia Inc., a New York-based content provider, found himself “getting totally ignored” by his lawyers at a certain large firm from Palo Alto, he started shopping for a firm that “wouldn’t take a week to return my calls.” He chose Skadden, hardly known as the neighborly mom-and-pop of New York firms. “But they convinced us we’d get more personalized attention,” Kelly says. “And so far we have.” Of course, the New York megafirms can’t deny who they are. And that’s a plus, given that the booming Alley is increasingly calling for specialized legal services. Deltathree.com, a telecommunications startup that’s thinking globally, chose Skadden partly because of the firm’s presence in Europe, Asia, and Israel. Proskauer’s Parisian presence saved the day for garment business-to-business exchange Closeoutnow.com. “We were doing a deal with a Saudi sheikh and needed some immediate help in Paris,” says Steven Lubinski, the company’s chief executive. “Within minutes, Proskauer’s Paris office got us what we needed.” Nearly all the New Yorkers tout the “full-service” nature of their firms. As Salem Katsh, the head of the intellectual property group at Shearman & Sterling, boasts, “We’ve got everything a company could possibly need right here in New York.” It’s an old ploy, but it still works. Warren Struhl, the chairman of several e-commerce ventures, including Awards.com and Poster.com, was sold on Morgan, Lewis’s ability to “handle everything — from startups to more established acquisition needs to employment issues.” Jay Zises of Smallworld.com, a fantasy sports site, says he tapped Proskauer for largely the same reason. As the Alley evolves, New York firms can capitalize on existing relationships and the experience they get handling e-commerce for established clients. When Neal Goldman needed a lawyer for CapitalKey Advisors, Inc., his business-to-business startup for investment bankers, he went with Proskauer because he “wanted Arnie Levine.” Goldman met Levine when he was a young investment banker, and the two have stayed close. “Truth is,” he says, “I really didn’t want to work with anyone else.” Flooz.com’s Johanna Werbach had worked in Morgan, Lewis’s New York office before becoming the general counsel of the online gift currency provider. So choosing Morgan, Lewis “was an obvious, comfortable choice,” she says. In short, New Yorkers finally sound like they have a clue. “For us, the learning curve for this market niche has already smoothed out,” says Shearman’s Katsh. “And it did so quickly.” Another New York lawyer makes a Silicon Valley-style boast about how quickly he closed a private placement for an Alley client. “I did it much differently than I would have for one of our major corporate clients,” he says. The attorney freely concedes that a level of detail was ignored. “But we needed to get it done.” The California firms are hardly turning and running. There’s no way, they say, that New York newcomers can help early-stage clients the way a Brobeck or Cooley can. “The New York firms just don’t provide the service we do,” sniffs MoFo’s new-media cochair John Delaney. Delaney insists he’s looking forward to the arrival of Wilson and Cooley. “We’d like the space to be well represented,” he says. “And most of the New York firms are just waking up to this market.” Big Three attorneys also play the “overlawyering” card, accusing New Yorkers of needlessly bogging down straightforward transactions. “I watched a lawyer from a very established New York firm use 55 pages to draw up a simple million-dollar bridge loan,” says one lawyer. “It took forever and cost the client a bundle.” Some Big Three clients still talk about the comfort level of dealing with firms that have long known “this space. It’s the Internet equivalent of the old saw that no one — at a Fortune 500 company, at least — ever got fired for hiring Cravath. The upstart New Yorkers, says MoFo’s Delaney, have a ways to go. “Over time, some of these firms will add value,” he says. “But they’re not there yet.” Maybe not. But don’t tell their clients. They might just disagree.

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