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Negotiations by Clifford Chance to hire a team of partners from San Francisco-based Brobeck, Phleger & Harrison fell through this week, just before a scheduled partnership vote on the acquisition. The fate of the group, which may number more than 35 people and is headed by embattled former Chairman Tower Snow Jr., is unknown. No one involved in the negotiations will say whether the Brobeck lawyers — either individually or as a group — are looking elsewhere for a new home or are leaning toward staying at Brobeck. Two British publications — Legal Week and The Lawyer — reported Thursday that Clifford Chance had confirmed that talks with the Brobeck partners were off. Clifford Chance partner Peter Cornell is quoted as stating: “Both sides agreed there were practical challenges that were not likely to be overcome. We wish the group well for the future.” Clifford Chance officials could not be reached for comment Thursday. On Monday the British press reported that Snow and 10 other securities litigation partners were set to leave Brobeck pending a vote by Clifford Chance partners today. Snow, who has been out of town for the past week, could not be reached Thursday, and other Brobeck partners reported to be part of the group declined to comment. Legal Week also reported Thursday that Clifford Chance had been planning to take as many as 35 partners from Brobeck. But a source familiar with the negotiations said the number was “substantially more than 35.” The burning question, of course, is why negotiations fell through. “Compensation was not an issue,” the source said. Brobeck firmwide managing partner Richard Parker downplayed the impact that such a defection would have on the firm. But, he said, he was glad that discussions had broken off. The loss of the group would have been “more of a concern to me culturally than financially,” Parker said. “I was pleased to see reports that the deal fell through. I hope that means that the partners are going to stay here.” Parker said he has spoken to many of the partners who were reported to be part of the defecting team and encouraged them to stay at Brobeck. “Those thinking about doing it talked with me openly about their thoughts and feelings,” Parker said. “Others said they had been approached and said they were not interested.” Observers believe a mass defection of a big-ticket group would be such a harsh blow that Brobeck wouldn’t be the same. “It may pull through, but it will be a different firm,” one industry insider said. “I think it will lose specialty areas.” Parker dismissed such speculation. “The fundamental direction of the firm won’t change,” he said. “Nothing is going to change in our client mix. On the corporate side we will keep our focus on technology. We’ll continue to be on the East Coast and have a joint venture in Europe.” Some attorneys and consultants question why Clifford Chance would have pursued a team comprising only securities litigators. “Usually firms try to expand the business side as well as litigation,” said consultant Gerry Holt. Clifford Chance is the largest law firm in the world, with more than 3,000 attorneys. It was formed three years ago through the three-way merger of London’s Clifford Chance, New York’s Rogers & Wells and Germany’s Punder, Volhard, Weber & Axster. Brobeck has been in turmoil since Snow announced in November that he would not seek election to a third term. The firm appears to be split among those who were critical of Snow’s management style and those who favored his vision. The political differences have been further compounded by Brobeck’s sharp drop in profits in 2001, a dramatic decline in corporate work, a series of associate layoffs and the loss of several partners. Parker acknowledged in February that “a “few” partners have been moved to fixed income and “a few” moved to senior counsel status. Brobeck also is carrying more overhead since moving to its new digs in East Palo Alto, Calif. The firm is trying to sublease about a third of its new space, as well as rent out its former space in Palo Alto. The lease on the latter space doesn’t expire until October 2003, and area real estate agents estimate its lease load is $7 million for the next 18 months. In another development, Brobeck has decided to cut back salaries for first-year associates by $10,000 (to $125,000), while boosting the salary of third- and fourth-year associates by $5,000 (to $150,000 and $165,000, respectively) and fifth-years by $10,000 (to $185,000). The pay hikes go into effect June 1, while the decrease for first-years is effective July 1. The firm took the lead among San Francisco Bay Area firms last year in upping pay for first-years to $135,000. In January the firm froze associate salaries, so first- and second-years were receiving the same pay. After examining the going market rate, Parker said, the firm found it was “overmarket still in the first-year class and undermarket in the third-, fourth- and fifth-years, so we adjusted [salaries] to make sure we were delivering competitive compensation to everybody.”

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