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The $45 million defamation suit filed against Pillsbury Winthrop by one of its former partners is chock full of interesting details. But in addition to the allegations of sexual harassment and character assassination, the suit raises questions about the stability of Pillsbury Winthrop. Two years after the merger between San Francisco-based Pillsbury Madison & Sutro and New York’s Winthrop, Stimson, Putnam & Roberts, the suit brought by Frode Jensen paints a decidedly unflattering picture of a firm “facing serious financial challenges, and upheaval in personnel.” Jensen, a mergers and acquisitions partner who worked in the Stamford, Conn., office, says in the suit that he decided to leave Pillsbury in part because he had grown disenchanted with the firm’s direction, its obsession with the bottom line, and because of widespread morale problems. He also says that the firm has lost 70 partners since the January 2001 merger. These details about Pillsbury come on the heels of news this week that rainmaker Kenneth Chiate is leaving the firm for Quinn Emanuel Urquhart Oliver & Hedges. While Chiate said his departure had nothing to do with the Jensen imbroglio or any dissatisfaction with Pillsbury, his move marks the third time in recent months that a prominent partner who had served in firm management has jumped ship. Pillsbury maintains that Jensen’s claims and Chiate’s departure are not an indication that the firm is in a crisis in the wake of its merger. “The merger is one of the largest law firm consolidations and it has been documented in a number of publications as one of the most successful,” says firm spokeswoman Crystal Rockwood. Rockwood says that while some partners may have retired or left the legal field altogether, only 12 partners have left Pillsbury for competing firms since the merger. And according to Rockwood, Pillsbury’s average profits per equity partner for 2002 are currently estimated to exceed those of 2001. “I wouldn’t say it’s in a crisis,” says a former Pillsbury partner. “I think they’re probably doing better than most of the firms out there.” Like many firms in the San Francisco Bay Area, Pillsbury has felt the sting of the economic downturn and has laid off staff and associates over the past 12 months. According to the suit, this has resulted in widespread morale problems within the firm, particularly among the associate ranks. Many current and former Pillsbury attorneys acknowledge that morale has been low of late. One former associate blamed the morale problems on the firm’s high billing rates and its rigid billable hour requirements. “There’s not enough work and yet they have this pressure to make billable hours,” said the associate, who wished to remain anonymous. In an associate satisfaction survey published this month by Recorder and law.com affiliate The American Lawyer, Pillsbury ranked last among 13 California firms. According to legal consultant Peter Zeughauser, who says he hasn’t done any work for Pillsbury, the firm appears to be in better shape now than it was in the past. “I think 12 to 24 months ago — maybe even longer, one to three years ago — they were clearly in a crisis state. But I think [Chairwoman] Mary Cranston has stabilized Pillsbury,” said Zeughauser. Still, said Zeughauser, Pillsbury has a lot of work to do. Its average profits per partner, which were $665,000 in 2001, should be closer to $1 million, says Zeughauser. “Any firm that has their caliber of lawyers and their level of profits per partner is going to be subject to a lot of cherry picking,” he says. “They have got to continue to push their profits up in order to stave that off.” The latest partner to decamp is Chiate, a veteran Los Angeles litigator with more than 65 jury verdicts under his belt. Chiate is set to begin next week at Quinn Emmanuel, a Los Angeles-based firm that focuses exclusively on complex business litigation. According to Chiate, his decision to leave Pillsbury was based on the opportunity to practice at a firm composed strictly of trial lawyers, where he expects he’ll try more cases. Originally with Lillick & McHose, which Pillsbury acquired in 1991, Chiate’s role at Pillsbury went beyond being one of its most seasoned litigators. Chiate served several terms on Pillsbury’s executive committee, including the one that was in place at the time of the 2001 merger between Pillsbury and Winthrop Stimpson. Chiate’s move comes just a few months after Stephen Stublarec, another high-profile Pillsbury partner who had served on Pillsbury’s executive committee, moved to Latham & Watkins in June. Jensen says in his suit that he served on Pillsbury’s “management board.” While the departures of Chiate and Stublarec represent a significant loss to the firm, a former Pillsbury partner said the moves didn’t necessarily reflect a disagreement with the firm’s direction. “I wouldn’t read anything into it,” said the attorney. “These are just lawyers. Lawyers change practices all the time.”

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