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Even during a normal week, Jason Karp’s planner is a mess. The high-tech attorney starts his week at New York-based Kelley Drye & Warren’s Tysons Corner office in Vienna, Va. He then shuttles off to Bethesda, Md.’s e-centives Inc., where he is general counsel, on Tuesdays and Wednesdays. Thursdays and Fridays find him back at Kelley Drye. Likewise, Jay Schifferli has two jobs. Once the full-time general counsel for Herndon-based telecom company NX Networks Inc., which filed for Chapter 11 bankruptcy protection two weeks ago, he now spends only one-quarter of his week at NX, with the remainder at Kelley Drye. These split schedules mark a curious move in Kelley Drye’s effort to build a technology practice, and double the size of its Northern Virginia office, at a time when many firms are scaling back. The firm has agreed to pay the full salaries for Karp, a special counsel, and Schifferli, a partner, even though it is not getting a full work schedule from either. With Kelley Drye’s profits per partner at $840,000 last year, according to a survey in The American Lawyer, Schifferli stands to make far more than the $136,000 base salary he earned as a GC last year. Karp’s salary could not be determined. Danny Adams, managing partner of Kelley Drye’s 22-lawyer Tysons Corner outpost, is counting on their track records — and the struggling companies that they bring to Kelley Drye’s portfolio — to help make the investments pay off. Adams says he’s willing to take that risk. Even if Karp’s or Schifferli’s company goes under, Adams says, the firm “knows that in a strong market, they’ll have no problem getting a book of business.” Such a part-time general counsel, part-time law firm attorney arrangement was not unusual at the start of the tech boom. Firms happily let associates, and even partners, spend some or all of their time with startups, hoping that they would end up with a loyal GC who would send plenty of work their way. Schifferli, a partner at Kelley Drye’s Stamford, Conn., office before he became NX Networks’ GC, was typical of the trend. But at a time when many tech companies are struggling, including e-centives and NX Networks, some wonder if Kelley Drye will find itself saddled with full-salary attorneys with dwindling books of business, and thus a decreased ability to keep associates busy. It is one thing to loan out an attorney; it is another to bring on one with a less than stable client. “I don’t know why you couldn’t spend your time with someone else” if you work part time at your law firm, says Harry Glazer, managing partner of Greenberg Traurig’s Northern Virginia office. “The fact that the law firm pays the full salary — that’s a unique twist.” Steven Meltzer, managing partner at the McLean outpost of Shaw Pittman, recalls that his office shared one of its partners with a client a few years back. It is not something it has done since. “Normally, we don’t send our people out to sit in companies or split our time,” he says. But, he adds, “law firms do lots of things to keep clients happy.” While Meltzer says that he does not fully comprehend Kelley Drye’s decision to add GCs from wounded tech companies to its roster, he points out that the answer may be as simple as keeping a company’s bankruptcy work or latching onto two good attorneys. Or it may come down to one of the simplest reasons of all: money. “If client X can pay our fees, we would do that on the downside,” Meltzer says. Legal recruiter Mary Adelman Legg of Firm Advice Inc. says Kelley Drye’s gamble may just work: “Sometimes companies can reorganize and still do pretty well when they come out of bankruptcy, and then [the firm is] representing that new company.” But if it doesn’t pan out, she notes that Kelley Drye may have to chalk up its work to “training and marketing … and a way to avoid layoffs.” FROM IN-HOUSE TO OUTSIDE COUNSEL For Karp, the general counsel/law firm venture began casually about a year ago. In-house since 1996, Karp had successfully maneuvered his way to the general counsel spot at his online marketing technology company after stints as a senior manager at MCI Communications (now WorldCom) and assistant vice president of legal and regulatory affairs at Net2000 Communications. Why, after finally reaching the top legal position at a corporation, did Karp consider leaving e-centives? “The seeds were planted at a lunch I had with [friend and Kelley Drye partner] Brad Mutschelknaus,” he says. Negotiations got serious over the summer, when Mutschelknaus and others lured Karp by saying they were looking to create an emerging-companies practice — now called the general counsel and legal management services group — founded by lawyers who knew what GCs at nascent companies needed. Karp says the move was less about the turbulence at e-centives, which included two rounds of layoffs, and more about what Kelley Drye could offer him. He insists that he is not using the arrangement with Kelley Drye as a steppingstone to leave e-centives. “We had gone through a number of ups and downs, as you would expect with a dot-com,” he says. “Frankly, I just saw an opportunity,” he explains. “In-house, the life is so hectic and fast. We needed [outside] lawyers who were able to respond to that challenge.” Before Karp could commit to joining Kelley Drye, he had to convince e-centives that it was a smart move for everyone. “I had the discussions with our management. It took a little convincing,” he says. But money talks, especially during a recession. Under the new arrangement, Kelley Drye pays the salaries of both Karp and Schifferli, and they become uncompensated officers of their companies. Meanwhile, Kelley Drye bills the companies for work that Karp and Schifferli — and the attorneys that assist them — do, such as the bankruptcy filing by NX Networks. “Since Kelley Drye was going to be compensated for the legal work,” says Schifferli, “it didn’t make sense to draw a salary” at NX Networks. Adds Karp: “The thought of potentially saving some money with a different-style arrangement was very attractive to [e-centives]. From that point, I think it was advantageous to the company to have that flexibility.” Before he joined, Karp also felt he had to put the firm to a test: He hired Kelley Drye for e-centives’ 40 million Swiss franc (about $24 million) round of financing, which closed last month. A planned U.S. public offering never got off the ground, says Karp. When that closed successfully, Karp moved into Kelley Drye’s office space next to the Tysons Corner shopping mall. The new arrangement started two weeks after Schifferli joined. Neither Schifferli nor Karp knew the other was coming on under the same part-time terms. BACK IN THE FOLD Schifferli had been a Kelley Drye partner until 2000. He thought he would be heading up a booming tech company when he left the firm, where he had spent more than a decade. But immediately after he made the leap, the bottom fell out of the market and NX Networks was hit hard. Layoffs ensued. Stock prices plummeted. The company racked up a net loss of more than $180 million at the end of 2000. Shareholders demanded answers. Schifferli’s job moved away from the M&A and securities work he was hired to do and more toward pure management of the struggling company. In an experience he labels a “trial by fire,” he even became the acting CEO for a few months after a shakeup. Comparing his company with e-centives, Schifferli says, “My ups were a little higher. My lows were a little lower.” He says he had begun to realize that NX Networks no longer needed a full-time GC and that “it was going to take a long time before [NX Networks] became the company that I joined again.” When Kelley Drye approached its former member, Schifferli says, they were “very open to splitting time. They knew that would be intriguing to me.” Like Karp, Schifferli says he has no plans to come on board full time at Kelley Drye. “With NX in the financial condition they are,” he says, “this was not a steppingstone to disengage.” Both Karp and Schifferli remain optimistic that their companies will weather the current recession, and Schifferli does not hesitate to point out that NX Networks is reorganizing, not liquidating its assets. But there are no guarantees, and since both men say their companies are their primary clients, a decision to shut down or dramatically downsize could hurt Kelley Drye’s bottom line. Adams, the office managing partner, brushes off any notions that their plans will be anything but successful. “It’s the continuation of a long-term strategy. We didn’t decide to do this on a whim, and we’re not going to change our minds on a whim,” he says. “We think tech isn’t dead. They will come back, and they will come back to Northern Virginia.”

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