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On an unusually sunny fall morning in Seattle, lawyers and staff bustle about the main office of Perkins Coie, dressed as if they’re ready to climb snow-capped Mt. Rainier. Even the most casual firm on Wall Street can’t out-grunge Seattle, where lawyers bearing Starbucks coffee cups often sport anything from suede sneakers to fleece vests. Perkins even has vests embroidered with the firm’s name. Like their New York counterparts, however, few lawyers at Perkins will get out of work in time to see daylight. The shiny marble lobby of the towering Washington Mutual building and the long ride up the elevator to the 48th-floor reception desk give it away — the 500-lawyer firm is the largest in the city, and some say increasingly sweatshop-like as it grows in lawyers and in revenue. The only Seattle-based firm to make the 1999 Am Law 100 chart, Perkins brought in nearly 40 percent more in revenue in 1999 than its nearest Seattle competitor, Preston Gates & Ellis. (That said, the smaller firm’s profits per partner figure — $405,000 in 1999 — is higher than Perkins’ $355,000.) Yet, if the marble halls represent Perkins’ past, a new office showcases the firm’s future. Perkins has been under growing pressure, and the last thing it wants to do is act like some jaded traditional firm. Even before the market turned in the second half of 2000, the firm was positioning itself to compete for hot startup and Internet clients, especially since Silicon Valley firms, with new offices in Seattle, were snagging those clients left and right. Perkins has countered by building a smaller, Silicon Valley-style office just two stops south of headquarters by Metro. In late November, 15 Perkins corporate, e-commerce, and intellectual property lawyers moved into the new building in Seattle’s Pioneer Square, an area that is home primarily to software companies and dot-coms. Perkins occupies the sixth floor. Beyond the decidedly funky, tomato-colored reception area are walls of acid green, bright orange, and slate blue. All of the associate and partner offices are the same size — the single corner office serves as a rec room for punchy late nights and pickup Foosball games. A former partner and veteran of a startup, Albert Gidari Jr. has an office in the new building, and he consults clients not as a lawyer, but as an entrepreneurial guru. It is hardly the image of a stodgy, old-line firm. Remember, Perkins was motivated by threat as much as opportunity: Back when dot-coms were still booming, its stellar corporate department became ripe for cherry-picking. In-house jobs and Silicon Valley competition spurred wave after wave of painful defections, including the head of the new Valley office, a newly named partner who left to represent Amazon.com, Inc., CEO Jeff Bezos, and several others to Internet companies. In all, 16 partners left the firm last year. (The firm says it still grew in 2000, hiring 31 laterals.) Before moving into the new office, three Perkins partners toured the sixth floor in early November. Sidestepping a busy team of electricians, corporate partner Scott Gelband declared the visit “the first time I’ve been here without a hard hat.” Gelband, 40, has done M&A work for Seattle-based clients such as Amazon.com and RealNetworks, Inc. As that day’s tour would prove, the new space boasts more than a flashy paint job. In the lobby, Gelband and his partners, Steven Yentzer and Stewart Landefeld, bumped into two venture capitalists from Northwest Ventures Associates, a fund that shares the floor. The lawyers worked the moment, making introductions and promising the VCs to brainstorm later about a possible project. Gelband hopes that the proximity to Northwest, and to VC giants Mohr, Davidow Ventures and Maveron, will spark impromptu meetings just like this one, whether in the halls or in the Starbucks downstairs. “Moving out of the tall tower is very helpful from a marketing perspective,” he says. “It’s easier to drop by.” In absolute terms, Perkins is doing well: Revenue jumped by 25 percent from 1998 to 1999, and profits per partner, for the most part, have steadily risen over the past decade. Lawyers bill top dollar for The Boeing Company, the world’s largest commercial jet maker, and Amazon.com. But in 1996, Silicon Valley-based Venture Law Group opened in Seattle; Cooley Godward and Wilson Sonsini Goodrich & Rosati followed in 1998; and Gray Cary Ware & Freidenrich and Orrick, Herrington & Sutcliffe opened up shop in 2000. Each focused heavily — or in some cases, exclusively — on the then-booming startup market. All but Gray Cary beat the firm in 1999 in terms of revenue, and all bested Perkins in profits per partner. Perkins faced an identity crisis. It was used to being the big fish in a small pond; now big-city-associate salaries threatened its retention rate. According to current and former Perkins lawyers, it took the patient efforts of managing partner Robert Giles to build consensus on how to raise salaries and retain lawyers in the face of fierce competition. Giles, a likable and popular leader, has played the role of optimist-in-chief during the firm’s times of struggle. Although former partners and associates fault the firm for deciding not to raise associate salaries across the board to match the San Francisco Bay Area — Perkins uses an hours-based discretionary bonus that ramps up corporate and IP associates at a faster rate than other associates — they nevertheless commend Perkins, and Giles, for trying to innovate. The hipper office in Seattle is just one initiative. Perkins also opened Bay Area offices in 1998 — a bit of a PR coup. And last year the firm created a new marketing team, hired a new public relations company, and drafted a strategic plan to compete nationally. The question is whether those changes are enough. Nestled in the Puget Sound, the Emerald City is now a Silicon Valley satellite. Only a quick flight away from the Bay Area, it’s closer than other tech centers, such as Austin. And there’s more to Seattle than drizzle and grunge rock — Microsoft’s former and current employees account for about a third of the area’s some 60,000 millionaires. The Northwest, including Portland, only accounted for 2.5 percent of venture capital investments in the third quarter of 2000, compared to the Bay Area’s nearly 40 percent. But at $435 million, it’s a sweet niche. The wealth has drawn venture capital investments and law firms — and has hyperinflated housing costs and associate salaries. The hemorrhaging began when Craig Sherman left Perkins in 1996 for Venture Law Group. He was the first partner to leave for a Bay Area firm’s Seattle office. As many Perkins lawyers recall, Sherman was the first partner of consequence to leave for any firm, and his departure signaled trouble. Sherman had come to Perkins in 1995, a bright young fifth-year from Davis Polk & Wardwell in New York and Paris. He loved New York’s fast pace, but had moved to Seattle to be closer to family. Perkins Coie was his first choice: “In 1995, they owned Seattle. They did everything.” Sherman, now 37, was nominated to become partner in early 1996 in the corporate securities group. But even by then the Silicon Valley bug had bitten. Craig Johnson’s Venture Law Group, a Silicon Valley firm of 120 lawyers that services startups, had leased space east of the city in suburban Kirkland, and it had begun to look for talented corporate securities lawyers. Johnson found Sherman by networking. One morning in the winter of 1996, he returned to his office refreshed from an inspiring breakfast meeting with Johnson, who wanted to hire him. This was before the firm’s casual dress policy, and since he’d worn khakis and a polo for the meeting — VLG style — he was changing into his suit when two Perkins partners walked in on him, catching him “literally with my pants down.” It was an awkward moment, says Sherman, but not because he was caught half-dressed: The partners were there to announce that he’d made partner. Sherman weighed his options. He was attracted by the startup feel of VLG — and the potential to take equity in clients. But he also respected his mentors. A week or so later, while Sherman mulled over his decision, a first-year associate, John Robertson, announced that he’d accepted a job at VLG. Ruffled corporate partners called an emergency meeting. Sherman was invited as a newly elected partner. Sitting around a conference table, about 20 Perkins Coie corporate securities partners, he says, were abuzz with gossip about VLG, and wondering how to compete. And moreover, they asked themselves, should we also take equity in clients? Sherman sat silently and listened. “I thought, that’s exactly the right question,” he recalls. “I sat there hoping they’d convince me [to stay].” But that meeting, which, according to former partner Stephen Graham, was one of several “hand-wringing sessions” about Bay Area firms and equity, didn’t go anywhere. Perkins, in effect, flinched. And shortly after that meeting, in December 1996, Sherman jumped to VLG. (Perkins didn’t start taking equity in clients until two years later, when it opened its Silicon Valley office.) Perkins’ initial response to VLG was weak, at best. Earlier that year, Perkins ran an ad in the weekly Puget Sound Business Journal, declaring, “When Choosing a Venture Law Firm, Venture No Further” — a play on Venture Law Group’s name. When Robertson left, friends presented him with a Lucite cube containing a shrunken version of the ad. Robertson, now a happy senior attorney at VLG, displays the cube in his office. But despite the costs of competition, Perkins also benefited from the arrival of VLG and the Bay Area firms. As much as the venture capital money in the area attracted VLG, the firm’s presence in turn attracted more VCs. Perkins had already established a niche advising on the formation of VC. That work has taken off. Yentzer, the new office head, represented clients with $1.2 billion of capital under management in 1999 and the first half of 2000 — which even former partners concede is the bulk of fund-forming work in Seattle. Opportunities abound for a large, full-service firm in a sea of IPO-hungry firms. Perkins is positioned to grab important work for regional public companies. And, in a down market, Perkins keeps busy and profitable for more traditional clients. For that reason, says Giles, Perkins will outlast this downturn, where others may not. “It will be interesting to see who’s around in two years or so,” he says. But who will be left at Perkins? The difference in partner compensation is mind-boggling. Last year, Perkins’ full equity partners averaged $355,000, compared to Wilson Sonsini’s $835,000 and Cooley’s $665,000. (Figures do not include equity income.) And although Perkins’ Seattle associates generally make more than their counterparts at other indigenous firms, they do not keep up with the Silicon Valley transplants. Tensions heightened when Gunderson Dettmer Stough Villeneuve Franklin & Hachigian ratcheted up its associate salaries (including bonus) to $145,000 early last year. Perkins matched the base salary — $125,000 — for its first-year associate salaries in its Bay Area offices within days. In Seattle, however, the firm bumped up first-years from $85,000 to $100,000 with the discretionary hours-based bonus meant to placate corporate securities and IP lawyers, who have a higher billable requirement. Here’s how Giles sells it to associates: You can bill 1,850 and make less, or bill over 2,000 and go for the big money. The fact is, Perkins couldn’t raise salaries across the board to match the Bay Area firms. “We can’t price ourselves out of the market in labor or litigation,” says the 51-year-old Giles. “But we can’t lose our high-tech lawyers to the competition.” The stratagem was only partly successful. “They were trying to accommodate people who said, ‘Hey, I didn’t sign on for 2,200 hours a year,’ ” says Leecia Welch, a litigation associate in Seattle who left Perkins last year for Morrison & Foerster in San Francisco. The question among associates, says Welch, was, “ Are we going to be Seattle, or are we going to be Silicon Valley?” Part of Perkins’ struggle to define itself comes from the loss of high-profile financing work. When Wilson’s Patrick Schultheis came up from the Valley to start an office in December 1998, he and his partners almost immediately picked up InfoSpace, Inc., a Seattle-based Internet content provider. Perkins was InfoSpace’s issuer’s counsel for its IPO, which closed in December 1998 at $75 million. Wilson represented the underwriters. But in February 1999, Schultheis handled InfoSpace’s follow-on offering as issuer’s counsel, and has since steadily encroached on what years earlier would have been Perkins work, doing a number of M&A deals for the company. Similarly, although Perkins represented the underwriters for RealNetworks in its $37.5 million IPO in 1997, and handled the purchase of a technology company, RealNetworks now primarily calls on Wilson for corporate and M&A work. Says Robert Kimball, associate general counsel at RealNetworks: “Wilson came up here and aggressively looked to really give us what we want.” When it comes to deals, he says, Wilson’s aggressiveness is good: “Coming from the Valley, they sort of get that [mentality].” Other firms are eating Perkins’ lunch as well. In August 1999 Perkins had to share its role as main outside counsel to Amazon with Los Angeles’ Gibson, Dunn & Crutcher in San Francisco. Kenneth Lamb, a 40-year-old corporate securities partner, scored that work after a former executive at Intel, another of Lamb’s clients, put him in touch with Amazon’s general counsel, Michelle Wilson. (Wilson, a former Perkins partner, had left earlier that year for Amazon.) Lamb did a small transactional deal for the company, and since then the firm has worked on a number of securities disclosure matters. Amazon’s informal Securities and Exchange Commission inquiry, for example, which began last fall, is handled out of Gibson, Dunn’s Washington, D.C., and San Francisco offices. Perkins may have several former attorneys at Amazon — including Wilson — says Lamb, “but I think Michelle realized that we had some terrific resources to offer.” Those resources included a team of former SEC enforcement lawyers who now work in that office. It’s common, of course, for maturing public companies to use more than one or two firms, in order to find the right lawyers for a particular job, and to avoid conflicts. In-house counsel are quick to point out that Perkins has not been scratched off their lists. Edmund Belshein Jr., the new general counsel of InfoSpace, and a former Perkins corporate partner, says, “I see our relationship [with Perkins] increasing,” especially for local work. For corporate work in the Valley, the company calls more frequently on Wilson, he says. And RealNetworks’ Kimball adds that although Perkins is not handling acquisition work now, the firm and several others may get that business in the future. Meanwhile, he says, Perkins represents the company in other areas. Amazon general counsel Wilson says that Perkins “understands our business,” and that he will continue to use them as much as possible. She looks to Perkins for a number of matters, among them complex privacy litigation, a field in which Perkins excels. Losing work to healthy competition is one thing; losing it to former partners is a different story. When Graham, a corporate finance lawyer who had spent 24 years with the firm, left last March to start Orrick, Herrington & Sutcliffe’s Seattle office, his client work — and three corporate associates — followed. Graham, 49, represents Seattle biotech companies Immunex Corporation and Targeted Genetics Corporation, as well as SonoSite, Inc., Watchguard Technologies, Inc., and Onyx Software Corporation. Losing the dynamic partner was devastating to the department, according to lawyers at Perkins. In October, Graham, as an Orrick partner, handled Immunex’s $2.7 billion offering, the largest biotech equity offering ever, and the largest equity offering ever by an issuer based in Washington State. Immunex had been with Perkins since former partner Tom Alberg captured the work in the early 1980s. Giles’ optimistic refrain: “We’re sorry to lose Steve, but he wanted to run an office.” One defection, he says, isn’t going to make or break Perkins, and the firm still handles some Immunex work, including a $450 million real estate deal. Other departures are disheartening, but “it goes with the territory,” says Giles, of being the dominant indigenous firm. “It’s going to happen.” A handful of former Perkins corporate lawyers followed Michelle Wilson when she left for Amazon.com in 1999. Chuck Katz, who is married to former Netscape GC Roberta Katz, left recently for Loudcloud, Inc., after helping Perkins start its Menlo Park, Calif., office. In December, Belsheim left for InfoSpace. The list goes on. The roster includes the head of the Menlo Park office to At Home Corporation (whose brand is [email protected]), and Greg Gorder, a young corporate partner, in the Seattle office. The departures drove away good associates who might otherwise have stayed. “I wasn’t horribly unhappy [at Perkins],” says Richard Sohn, a former associate who left for Wilson in Kirkland. “I was concerned if the firm would stay competitive,” he says. Sohn met Wilson Sonsini’s Schultheis during the InfoSpace IPO in December 1998 and was impressed with Wilson’s more business-oriented style. Four months later, Sohn left for Wilson. Perkins took the fight to the Valley itself in October 1998, when it merged with a 13-lawyer firm called Hosie, Wes, Sacks & Brelsford on Menlo Park’s Sand Hill Road. It didn’t exactly leave its Valley competitors shaking in their boots — Perkins is clearly a second-tier firm there, and big players say they rarely see them in beauty contests — but clients such as Amazon.com give Perkins high marks for effort. In other words, that an outsider has lasted in the Valley — and attracted laterals from VLG, Fenwick & West, and Gunderson Dettmer — is something of a victory. Although several partners in the Menlo Park office have left, the Bay Area offices are good for Perkins as a whole. Perkins is the only outsider on Red Herring magazine’s list of the best Bay Area firms in 2000. In the process of integrating its Seattle and Bay Area offices, Perkins has learned a little something from Silicon Valley. The Menlo Park office’s emerging companies practice is now headed by Ralph “Buddy” Arnheim III, a 33-year-old partner and former Gunderson associate. Arnheim sits on the executive committee, and comes up to Seattle to help train lawyers in the Seattle office on financings and M&A work. Whenever he can, he brings Perkins associates from Seattle or the firm’s 33-lawyer Los Angeles office in on deals in the Valley, so they can see what it’s like. The firm has even changed the forms it uses on venture finance deals — at the urging of Arnheim and others, it switched last year to document templates that were streamlined and similar to other Valley firms. Ultimately, the legal market in Seattle is still shaking out — nobody knows if Silicon Valley firms are going to get much bigger in Seattle or remain powerful. In a recession, perhaps only full-service firms will thrive. Says former partner Alberg, who now heads a venture capital fund: “[Silicon Valley firms] will get a lot of work, but they’ll stay lean.” That said, although he applauds his former firm for being able to change with the times, he says the key is to hold on to its talent. “Perkins is challenged because they’ve lost many people … all real stars. The real challenge,” he adds, “is to bring in those younger people and keep them.” Lord knows, Perkins is trying.

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