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The deal is back on. As many as 21 partners will be leaving Brobeck, Phleger & Harrison to set up a Clifford Chance office in San Francisco. Clifford Chance’s 650 partners in all 28 offices completed a two-day vote Wednesday, agreeing to extend offers to former Brobeck chairman Tower Snow Jr. and 21 Brobeck partners, who immediately began submitting their resignations. By late Wednesday, those who had done so included James Burns Jr., who was firmwide managing partner until he stepped down in November, and Michael Torpey, head of the securities litigation practice group. Wednesday’s vote caps a dramatic shift in Brobeck’s fortunes, and alters the competitive landscape for Bay Area big firms, which suddenly face in Clifford Chance an aggressive player with plans to have 100 lawyers in San Francisco within a month. The defecting group primarily consists of securities litigators, but also includes IP litigators and corporate attorneys. Under Brobeck’s partnership agreement, partners must give 30 days notice. Negotiations between London’s Clifford Chance and the Brobeck team became public two weeks ago, but just before a scheduled partnership vote on the acquisition Clifford Chance announced May 16 that talks were off. The following day Brobeck partners voted to expel Snow from the firm in retribution for his attempt to take partners with him to Clifford Chance. Clifford Chance did not return several phone calls Wednesday, and Snow declined to comment. But a source familiar with the negotiations said the deal had stalled over the composition of the group, which initially included about 50 Brobeck partners. “The big issue was who was in the group and who wasn’t,” he said. “Clifford Chance needed to get a group they could vote on.” While that group was whittled down, the list of people Brobeck may lose in the future is much longer. The source said Clifford Chance expects to pick up 60 to 80 associates — including many Brobeck attorneys — within the next month. Brobeck has been embroiled in controversy since October when Snow decided not to run for a third term as chairman and left the post a month before his term ended. Partners who disagreed with his management style and decisions had moved to replace Snow with longtime partner Richard Odom. Odom was elected chairman and Richard Parker was named firmwide managing partner in November. Sources say the firm is split into two camps, one in support of Snow and the other critical of his style and strategy. The differences became very public when the Clifford Chance deal came to light. But one of the securities litigation partners who is jumping to Clifford Chance said his decision to leave was motivated by a desire to stay with his colleagues rather than any animosity toward Brobeck. “Being able to work with Tower and other folks here is a strong pull,” he said. “It’s gut-wrenching for me and I think that’s true for a lot of people.” The partner, who spoke on condition of anonymity, said Clifford Chance was particularly attractive. The firm is “pretty far ahead on globalization and where the legal profession is going to evolve in the next decade,” he said. “It’s a great platform and a great opportunity for people to stick together.” Parker said the departures reflect “the rift that developed between at least a significant number of this group and the rest of the firm,” and added: “It’s probably better we parted company.” As to the impact on Brobeck, he said that financially the firm would have a short-term increase in profits per partner. He added that some of the increase would be used to offset indirect costs from the departures, such as empty offices, desks and unused computers. “This group didn’t generate much profits beyond their distributions,” Parker said. He added, though, that over time this is generally true for all partners. Parker said about half of the work the departing group did was for clients of the firm — and he expects some of those institutional clients will remain with Brobeck. FAIRLY UNCOMMON The defection of a large group of partners from one major firm to another is fairly uncommon and has at times led to litigation. The now defunct Graham & James, for example, sued Oppenheimer Wolff & Donnelly in 1999, saying Oppenheimer had tried to raid its Palo Alto, Calif., office. And Brobeck itself was sued by the now-defunct Santa Monica, Calif., boutique Dickson, Carlson & Campillo after two partners jumped to the firm in 1995 and took millions in breast implant litigation with them. Asked if Brobeck was considering legal action against Snow or Clifford Chance, Parker said, “I’ve not had that discussion with anybody and it won’t be a public discussion if it does occur.” Legal consultant Peter Zeughauser, who represented Clifford Chance on the deal, said the loss of partners is “a catalytic event and it’s going to force Brobeck to clearly articulate its view of the future in a credible way for partners. And when they do that people will say ‘yea’ or ‘nay.’” Zeughauser expects Brobeck will continue to struggle with shoring up its ranks. “The economics are soft and other firms are circling like sharks,” he said. “This is a tough game and there’s blood on the water.” Consultants say Clifford Chance’s move into the Bay Area will have a dramatic effect on other local firms as well. “Clifford Chance is the first non-U.S. firm to attack head-on the U.S. litigation market outside of New York City, outside of Wall Street,” Zeughauser said. “That’s a big step. It says to [the Lathams and Skaddens of the world] ‘the table has been reset.’” “I think it will have a significant impact on recruiting” since Clifford Chance will be able to draw top-flight attorneys, added consultant Gerry Holt. “And it will have a tremendous impact on the ability of firms to retain clients in California.” Alan Hodgart, Hildebrandt International’s European director, said Clifford Chance and the other Magic Circle U.K. firms will have the same effect in the U.S. that they have had in Germany, France, Italy and Spain, where they have swept in and moved to the top end of the market. While moving to markets like California is not a priority for other U.K. firms now, Hodgart said, it is part of their 10-year plan to be in locations other than New York. The 3,600-attorney Clifford Chance had $1.4 billion in revenues in 2001 and average profits per partner of $1.1 million. Hodgart said the firm is among the best run professional firms in the world. “It is said that the firm has 100 business analysts analyzing the market, competition and clients,” he said. “When they come into a place like San Francisco it will be powerful and cause pain to people,” Hodgart said. “I’ve told U.S. firms ‘you better watch those guys. They will start to eat your lunch quickly.’”

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