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About a year ago, lawyers were working overtime trying to attract prominent and cash-rich Internet clients. In the last couple of months, the landscape has drastically changed, with Internet companies going out of business or downsizing as their stock prices plummet and their angel investors turn their backs. Lawyers from both large and small firms are keeping a wary eye on the situation and trying to stay flexible with the changing times. “This season, the harvest isn’t as lucrative as last season,” said Jon A. Dorf, who has his own five-lawyer firm in Mamaroneck, N.Y. Dorf explained that what he is doing is trying to anticipate the changes and to adjust. For example, his attorneys currently handle real estate, corporate, litigation and employment issues. But if needed, he could shift three attorneys to handle mostly litigation, he said. And in preparation for possible bankruptcies — although none of his clients have yet filed — he is already keeping an eye out for a qualified bankruptcy lawyer to join the firm. According to Dorf and other attorneys, much of their work a year ago involved acquisitions, expansions, hiring of employees and negotiating leases. Now, due to the failing dot-coms, they are focused on downsizing and shifting their clients’ management employees into different positions. TAX ISSUE Michael J. Franco, a corporate and tax sole practitioner in Manhattan, has been confronted with thorny tax issues. As his individual clients sell their stock options, those options are often worth much less than when they exercised them, creating high taxable income, although the stock sold at next to nothing. “That’s a result of the bad Internet economy,” he said. Otherwise, some of Franco’s clients are defending contract claims from their customers and a few are still trying to close a round of financing. “It’s not holding up my practice,” he said. Meanwhile, small firms are not the only ones in turmoil. Nixon Peabody, with 80 lawyers in Manhattan, has experienced an increase in litigation and in international arbitration just in the last two months. They are also anticipating a rise in bankruptcies in the near future. Specifically, they have seen more securities lawsuits, trademark suits, general commercial litigation and contract disputes, according to Frank H. Penski, head of litigation. He said that most of last year he never saw one order of attachment, while in the last 90 days alone, he has already had four. In addition, because of the global nature of many Internet and non-Internet businesses, international arbitration instead of litigation is on the rise, he explained. Some popular places to arbitrate are London and Paris, depending upon each company’s bargaining provision, he said. “You do sit here and worry. You look at your hiring plans for next year and you question whether they are sound or not,” said Penski. The firm is currently gearing up to hire a few bankruptcy attorneys to prepare for an increase in filings, he said. “We have some clients that are 1 percent of the value they were a year ago,” he added. And instead of handling IPOs and acquisitions, Nixon Peabody’s beefed-up corporate department is doling out much-needed advice to new businesses on how to shed their assets, how to downsize and generally, how to survive in the current marketplace. “It’s an implosion out there,” he said. But Penski is not necessarily predicting the gloom and doom is here to stay. “This business can turn very quickly,” pointed out Penski. “If interest rates fall and money is available to refinance debt obligations, some of these companies will recover,” he said. STILL GETTING PAID Dorf is also hedging his bets and waiting to see what will happen. But in the meantime, he has altered the subject of the seminars he presents to business leaders in Silicon Alley. Instead of talking about how to ride the flush times, he is focusing his content on how to tighten one’s belt without legal missteps. He has also seen an increase in general commercial litigation, such as breaches of contract and intellectual property violations. If the increase continues, Dorf said he might need to hire another litigation lawyer or paralegal. And although some clients are suffering, all lawyers interviewed said they are still getting paid. Neither Dorf nor Franco ever accepted stock options in lieu of payment, and thus are not holding worthless notes, they said. In fact, Dorf lost a client because he would not accept such a payment arrangement, he said. But Dorf admits that he has had a harder time collecting lately. He has managed to postpone payment and accommodate his clients more in the past couple of months. He claims that the way he has gotten paid during the hard times is by being understanding to his client’s needs. “The key to getting paid without litigation is communication,” he stressed.

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