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Even against the backdrop of a precarious technology market, the life span of Irvine, Calif.’s Spectrum Law Group rates a mention for brevity. Technically formed in November, the tiny boutique with dreams of mining profit from Orange County, Calif.’s high-tech corporate deals announced its arrival in early February. By the end of the month it had agreed to merge with a New York firm. But Keith Rosenbaum, the firm’s founder and principal partner, isn’t complaining. In fact, he says he’s looking forward to running the local office of an East Coast firm, if not eager to give up the vision of an independent practice, a kind of anti-firm for the tech startups he says are too often ill-served by megafirms. Rosenbaum, 42, has practiced for about 16 years in Orange County with several firms, including the defunct Lazof & Swanson and one of its spinoffs. Most recently, he spent a couple of years as head of the corporate practice for Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone. After leaving Berger Kahn in August, he talked to New York’s Dunnington, Bartholow & Miller, with whom he had worked, about operating an Orange County office for the firm. But when they couldn’t reach that deal, they agreed to an affiliation and he struck out on his own. The market was already tightening, but Rosenbaum says he saw a niche to fill. For tech startups in Orange County, there are few alternatives to local offices of such Silicon Valley giants as Brobeck, Phleger & Harrison and Morrison & Foerster. Even the homegrown tech veteran Stradling Yocca Carlson & Rauth has grown to more than 100 lawyers. Rosenbaum saw small tech clients who needed experienced lawyers but couldn’t afford large firms’ fees, as well as middle-market companies whose executives were tired of their business being shuffled off to an associate. And as he saw it, the Orange County economy was still healthy enough. “The money is out there,” he says optimistically. “It’s just that they’re not throwing it at anything with dot-com after the name anymore.” Rosenbaum still swears by his vision for Spectrum Law Group, but concedes to feeling pressure to alter it: most significantly, the drastic change in the market. Those with capital are venturing more carefully into the technology spectrum, decreasing the supply of corporate clients from where it was even last fall. At the same time, the number of lawyers working in corporate departments at the big firms hasn’t changed significantly, says legal recruiter W. Lawrence Watanabe, resulting in more small firms looking for merger partners. “The dynamic now in the corporate arena has changed in that a lot of these [small] firms were able to keep themselves busy because the bigger firms could not handle all the work out there. That the big law firms are not in that same situation changes that equation,” says Watanabe, who specializes in placing partners and practice groups across California and says there are few corporate boutiques focusing on the tech market. Despite the downturn, Rosenbaum signed a three-year lease for himself and three other lawyers, choosing a name for the firm that reflects his location in the Irvine Spectrum technology center and his ambitious emulation of Silicon Valley’s Venture Law Group. His small group would hustle for its clients, accommodate startups’ financial immaturity with discounted, task-based billing, while investing in emerging growth clients, through cash investments and partial equity-for-fees arrangements. Just talking to Rosenbaum, you get the idea he’s intimately familiar with the term “hustle.” Open and clearly passionate about his work, with a slightly self-promotional bent, he talks about picking up referrals almost anywhere, from former students he’s taught as an adjunct professor at Western State University College of Law and in deals made with teammates on his ice hockey team. “I’m not actively selling, but everybody out there is a potential client,” he says. Most of the firm’s current clients came with him. He says Spectrum’s work is about three quarters in mergers and acquisitions, startups and general corporate and business representation, with the remainder focusing on health care transactions, malpractice and tax and estate planning. David Nguyen, chief financial officer of Consumer Direct Link in Irvine, says he hired Rosenbaum about a year ago to incorporate his wireless computer network startup. Since then, he’s done the legal work on a $5 million round of funding and handled CDL’s acquisition of another startup. Nguyen says the way Rosenbaum structures his fees, a flat rate for each deal, was crucial. “We’re a startup — to control cost is our number-one priority,” Nguyen says. “[Rosenbaum] has given us a price cut and when the time committed is more than he expected, he usually will absorb it. Most of the other law firms charge by the hour.” Another client, Superlative Inc., is a four-year-old, family-run company that builds real estate-oriented Web sites and has developed wireless technology so salespeople can download real estate databases to cell phones or personal digital assistants. Its chief financial officer, Michael Olson, says he has happily retained Rosenbaum for almost 20 years in business and on personal tax matters. Olson, whose son founded Superlative, says Rosenbaum recently helped nail down a contract with 6,000 members of the L.A.-area multiple listing service, a deal that will provide almost $100,000 a month in revenues to the startup and a platform for selling the technology nationwide. “He was instrumental in our landing the contract,” Olson says, describing Rosenbaum as “always a gentleman, but tough. Halfway through the meeting, he had totally won over the other counsel that we were interested in making a deal everyone would be happy with.” It’s exactly that kind of deal — M&A work from Orange County’s biotech, e-commerce, computer and medical device companies — that Rosenbaum sees as Spectrum’s best chance for growth. Typically, he says, his clients need incorporation, basic documentation, employment advice and a wise hand at board meetings. He also lines up board members and on occasion has found venture capital. He has invested seed money in clients occasionally and has taken equity in numerous companies, in addition to his fees. Rosenbaum says the firm has created a good identity and is developing new clients, mentioning a retainer agreement with a billion-dollar Taiwan-based venture capital company looking into Orange County that he thinks could produce $100,000 in fees this year, and a new contract for work with what he would only describe as “one of the biggest computer firms.” But when the New York affiliate, Dunnington, made him a merger offer last month, he says he was immediately open, especially with the direction the economy is going. “The pressures on a small firm are enormous,” he says. “The big firms are going after the same client base, and this makes me more competitive.” And, he adds, the liberal discount and deferred fee arrangements crucial to attracting startups are somewhat self-limiting. He estimates that to remain viable, he must keep deals with startups to 30 or 40 percent of the firm’s work. Those liberal fee arrangements have also been at the heart of the merger discussions with Dunnington, which, while not finalized, Rosenbaum says are nearly complete. “They’re a little nervous about that,” he says of his billing practices. “I think they’re OK if there’s a month here or there where we’re cash flow- or collection-slow, but are more concerned that it extends for several months and then comes in all at once. And that’s what we’re about.” When pressed, he concedes, “OK, it was a major concern.” That aside, however, his prospects for success sustained the interest of Dunnington, which otherwise seems fairly traditional. An 80-year-old firm of about two dozen lawyers doing estate and tax law along with corporate law and some litigation, Dunnington for years had Nabisco as one of its main clients and boasts on its Web site of loyalty among “fourth-generation descendants of many of its original individual clients.” The draw was a chance to get a foothold in the tech startups and middle-market companies Spectrum Law Group has targeted, Rosenbaum says. “They’re excited about the prospect of taking ownership positions in future clients,” he adds. “That’s something they have not done in New York and they’re excited to get involved in it in a bigger way.” Rosenbaum says he is committed to nontraditional billing and believes Dunnington’s management knows that Irvine is not New York and will give him a fairly free hand in running the office. Another sticking point in the merger talks is how the offices will split profits. So far, he says, they’ve agreed to divide future client investments, probably through a fund created with his new partners. He’ll retain the proceeds from the client investments he’s already made, though he concedes that they will not produce any significant return for at least 18 months. The plan as it stands is that Dunnington Bartholow will absorb the three attorneys who work at Spectrum Law Group, including two associates with whom Rosenbaum worked at Berger Kahn. The firm’s latest addition is Kristine Brooks, a former Western State student of Rosenbaum’s. Previously general counsel of Vision Solutions Inc., an Irvine company that provides industrial computer data protection services, she brought that company’s work with her to Spectrum. Also in the mix for the West Coast presence of Dunnington, Bartholow & Miller, will be that firm’s single California partner, Frederick London, and an associate. London — after moving to California about two years ago and going in-house with a client, security giant Pinkerton’s Inc. — returned to Dunnington and opened an office in Westlake Village, where he primarily serves Pinkerton’s as outside counsel, as well as other clients. London was out of town last week and did not respond to a message. While the market has changed the work-to-lawyer ratio, it has also provided some opportunities for small firms. “They can charge less and that’s where the nimble comes into play. And secondly, to be candid, their ability to recruit associate help is going to be a lot better than it was a year ago.” Indeed, Rosenbaum says he’s reached an agreement with a three-lawyer practice group from a firm, which he would not name, to join the office as a partner and two senior associates as soon as the merger is complete. For Rosenbaum, a future with eight lawyers around him and with the financial and staff support of Dunnington behind them, sounds pretty secure. “The New York firm is relatively small, so it fits with my vision for servicing my clients,” he says. “Also, the upside is huge; marketing to clients, telling them I am a partner in a New York law firm and I manage the Orange County office. I don’t look at it as giving up my freedom at all. … I will report back to my partners, but I will have the independence to run the office out here.” He says he and the Dunnington management agreed to re-examine their relationship in a year and “restructure the deal as necessary.” And if the economy continues its slide and the deals he’s making tail off or start going sour, he may be able to fall back on the talents of the trio he’s convinced to join up, all of whom are litigation specialists.

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