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Jenkens & Gilchrist is paring about 25 lawyers from its San Antonio office, including many with an insurance-defense practice, apparently because they aren’t bringing enough money into the firm. “The billing rates of some people in San Antonio are not keeping pace with the rates that are expected firmwide,” says shareholder Charles L. Smith of San Antonio. “The firm is taking a different direction than some lawyers in the San Antonio office; therefore, they aren’t as relevant as they used to be,” says the 69-year-old Smith, who will stay at Jenkens as an of counsel lawyer until 2003, when he turns 72 and must retire. David Laney, chairman of the 600-lawyer, Dallas-based firm, says no one has been asked to leave. But he says about half of the lawyers in the San Antonio office on Jan. 17 were presented with some options, including the opportunity to regroup at a new firm. “They were given an opportunity to evaluate whether they really wanted to set up or begin an operation of their own firm, independent of our firm. That was the principal piece of the offer,” Laney says. “I think it will allow them to sort of set up shop and get cooking and in a few months be sort of self-sufficient … . [It's] mainly focused on a practice area, or a couple practice areas that are quite productive and the lawyers are very, very good, but a practice that does not fit well into our structure because of the overhead,” he says. Laney says discussions are ongoing with a number of the lawyers, and he could not say for certain by press time on Feb. 1 if some of the lawyers from the firm’s San Antonio office would accept the firm’s offer of financial and operational assistance with establishing a new firm. He says other options for the lawyers include accepting a severance package or negotiating a new position at the firm, for instance by changing from equity or income shareholder to of counsel. Laney says equity shareholders who will remain at the firm include J. Scott Rose, a bankruptcy lawyer who manages the office; David Cibrian, who does international law; Alan Thiele, an intellectual property shareholder; and Philip Freeman, a corporate lawyer who joined the firm in late 2000 from Haynes and Boone. Among others, Robert Sosa, an income shareholder who handles litigation, also will stay on, Laney says. Laney declines to identify others who will stay, but says that by mid-February the firm is likely to have only about 25 lawyers in San Antonio. Laney says it’s not simply a problem of billing rates. He says the compensation system at Jenkens and the firm’s overhead make it difficult for insurance-defense lawyers and some others to have flexibility with their billing rates and with the clients they accept. He says those lawyers could have more flexibility at a firm with lower overhead. “Trying to operate a low-hourly-rate practice in a high cost-of-operations practice makes little sense,” says Howard Mudrick, a firm consultant based in Dallas. “You’d have to do such a huge volume to make that work profitable.” Two San Antonio-based shareholders in Jenkens who did not want to be identified allege that the firm’s announcement in mid-January blindsided them. Laney says that shouldn’t have been the case, although he acknowledges the contents of the proposal and its timing may have been surprising. “It’s been something we’ve been wrestling with for a long time, to try to shape the practice within our firm,” he says. “From a bird’s-eye view, we are just basically repositioning our office in San Antonio and focusing on a strata of industry that looks a lot more like the rest of the firm.” The firm is not making similar cuts at other offices, he says. Profits per partner at Jenkens were $530,000 in 1999 on revenues of $502,000 per lawyer, according to Texas Lawyer‘s annual report on firm finance. Financial results from 2000 will not be published until June. BILLING RATES Jenkens is slashing an office it’s been building for eight years. The firm moved into San Antonio in 1993, and had only 10 lawyers in the office by 1996. But it took a leap in numbers and influence in San Antonio in 1996 when it merged with 34-lawyer Groce, Locke & Hebdon, one of the Alamo City’s oldest firms. A year later, Jenkens acquired five-lawyer Wheatley & Onion and its prominent commercial-litigation name partner Seagal V. Wheatley came on board. Neither Wheatley nor John Franco Jr., president of Groce Locke at the time of the deal with Jenkens, returned telephone messages by press time Feb. 1. Jenkens has branched out considerably since 1993, when it added San Antonio to its offices in Dallas, Houston, Austin and Washington, D.C. Since then, it’s added Los Angeles, Chicago — in a deal in 2000 with lawyers from the former Arnold, White & Durkee of Houston — and most recently, New York. Laney says Jenkens is not leaving the San Antonio market. “The anchor is dropped,” he notes. He says the planned cuts in San Antonio are not linked to the firm’s Jan. 1 merger with New York’s 125-lawyer Parker Chapin, a deal that gives the firm entr�e into the New York market but also adds the overhead of its office in Manhattan. While Laney says there’s no quid pro quo between the New York deal and the remake in San Antonio, it’s clear that lawyers in San Antonio may not be able to command billing rates as high as those in New York, or even Dallas or Houston. While San Antonio is Texas’ second-largest city, it is home to only five Fortune 500 companies — SBC Communications, Ultramar Diamond Shamrock, United Services Automobile Association, Valero Energy and Tesoro Petroleum. Billing rates in San Antonio are lower than in Houston and Dallas, according to Texas Lawyer‘s annual “Salary and Billing Survey.” In 1999, equity partners in San Antonio and Austin charged an average of $208 an hour, compared to $271 an hour in Dallas and $281 an hour in Houston, the survey reports. Michael Black, president of the San Antonio Bar Association, doesn’t expect a rash of other firms in San Antonio following Jenkens’ lead by paring lawyers. Black, a partner in trial firm Burns, O’Gorman, Black & Weyand, says he hasn’t noticed any decline in business in San Antonio. Neither has Cecil Schenker, the partner in charge of Akin, Gump, Strauss, Hauer & Feld’s 91-lawyer San Antonio office. Notes Schenker, “As far as the local market is concerned, we are very, very busy. Our clients are buying and raising capital.”

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