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Two years ago, when many top San Francisco Bay Area firms were raking it in from the tech sector, Heller Ehrman White & McAuliffe looked like an old fogy. But now its old-economy ways seem to be paying off. While tech firms are scrambling to cut costs and trim their associate ranks, Heller Ehrman is expanding. Since January, it has hired 73 attorneys and opened a new office to tap Wisconsin’s biotechnology community. And its bread-and-butter litigation practice is booming. The firm is handling a number of high-profile antitrust cases for Microsoft Corp., Visa U.S.A. Inc. and Philip Morris Inc., as well as a dispute over rights to embryonic stem cells for the Wisconsin Alumni Research Foundation. The firm did some soul-searching, of course, at the height of the dot-com craze. In the spring of 1999 through the beginning of 2000 firm managers held a series of strategy sessions with partners, associates and staff to ask if the firm was focused on the right things. “We decided not to limit ourselves to technology, that it would be a mistake to tie our future to the technology market when we have so many strengths and clients,” said Heller Ehrman Chairman Barry Levin. That doesn’t mean the tech economy’s collapse hasn’t had an impact on the firm. Like just about everyone else in Silicon Valley, Heller’s emerging company practice has suffered. And the firm took another blow when its top Valley rainmaker — August Moretti — left the firm earlier this year. Heller, however, has the advantage of being a smaller tech player, which means the slowdown has less of an impact on the bottom line. Instead of pouring resources into technology, Heller Ehrman sought to build a national presence by focusing on its traditional strengths in life sciences, antitrust, complex commercial litigation and energy. “As we grew in each of our geographic markets we asked ‘what is it we have to sell … to compete for the best, most interesting, complex work,’ ” Levin said. “ Sometimes it’s not technology but things like complex litigation and intellectual property.” TOEHOLD IN TECH SECTOR Heller’s strategy has led to a slow and steady growth. The firm’s gross revenue climbed from $141.5 million in 1997 to $262 million in 2000, and profits per partner rose from $380,000 to $500,000 over the same period. At the same time, tech firms saw their income explode. Cooley Godward, for example, ranked below Heller Ehrman five years ago, grossing $114 million. Last year, Cooley grossed $345 million, with profits per partner of $905,000. “There’s always some short-term envy when you see someone across the street making more money,” Levin said. But, he added, “the enormous change in income at competitors was driven by a phenomenon, which may or may not return.” Heller’s practice mix is a boon for the firm, agreed law firm consultant Donald Oppenheim, a principal at Altman Weil Inc. “A lot of other firms could take some lessons from building a portfolio that doesn’t all ebb and flow in the same direction,” he said. Although Heller Ehrman did not become a dominant player it did establish a toehold in the tech sector, primarily through its Menlo Park, Calif., offices. Former partner Moretti founded Heller’s Sand Hill Road office in Menlo Park in 1983 to focus on emerging companies. In 1999 alone, Moretti closed more than 200 merger and acquisition transactions, more than 75 venture financings for private companies and about 50 public offerings. “The firm tried to emphasize emerging company work,” said Moretti, who left the firm in January to become chief financial officer of client Surromed Inc. Last December Heller Ehrman consolidated its 14-attorney Sand Hill Road office with its other Menlo Park office. The firm now has 97 attorneys in Silicon Valley. While Heller Ehrman has probably seen a decline in the amount of corporate formation and financing work, Moretti said, “I don’t think it’s had the same impact at Heller because the firm didn’t have the same scope of practice.” Menlo Park associates acknowledge that they have felt some pinch on the corporate side. George Colindres, a second-year associate, said he billed just under 200 hours a month last year and now averages less than 160 hours. To fill in the slack time, he said associates have been improving deal forms and producing educational materials. Heller Ehrman also made a couple of performance-based dismissals early in the year, Colindres said. “From what I could see, it was good-faith termination,” he said. “But I wonder if we were maxed out, if we would have let people go.” While associates involved in emerging company work may have time on their hands, Levin said other areas on the corporate side are very busy, including the real estate, financial services and life sciences groups. LITIGATION RULES But the backbone for Heller Ehrman remains its litigation practice. Litigators make up 60 percent of the firm, and they are running at full throttle. One thing that’s unusual “is the number of places where we’ve had very big high-profile cases,” said Matthew Larrabee, head of Heller’s litigation practice. “The breadth and depth has been different over the last two to three years. [This is] what’s fueled our growth as a firm.” Among its current caseload, the firm is representing Microsoft Corp. in more than 100 antitrust and unfair competition class actions filed in California state court. Heller Ehrman also represents Visa in three antirust suits. And in another high-stakes case, the firm is defending Philip Morris in a class action claiming the company conspired with other tobacco companies to fix the price of tobacco products. “To have two large cases for Visa and at the same time get retained by Microsoft and then to add a case for Philip Morris — that’s unusual,” Larrabee said. “That got eyeballs popping around here.” “Heller is a top-notch firm,” said Jesse Markham, an antitrust partner at Orrick, Herrington & Sutcliffe. “It has been involved in some very important cases and has a top-notch antitrust practice.” On top of the antitrust work, Heller Ehrman is also representing Pacific Gas & Electric Co. in a securities action and other matters. “Litigation is the thing we believe gives us brand franchise,” said Stephen Bomse, co-chairman of Heller’s antitrust and trade regulation national practice group. “We didn’t share to the same extent as other firms in the dot-com boom, but litigation leaves us well positioned as we go into the new economic era for law firms.”

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