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San Francisco-based Brobeck, Phleger & Harrison is telling its associates, of counsel and staff they will most likely be out of work by Feb. 28. In an internal memo issued Tuesday by firm Chairman Richard Odom and Richard Parker, the firmwide managing partner, lawyers and staff were told they were welcome to leave prior to that date if they were able to find a new job. “At this point, you should assume that your employment will end by Feb. 28, 2003, although it is anticipated that it may end earlier, and you should not hesitate to depart earlier should another employment opportunity arise,” the two partners wrote. Parker and Odom said Brobeck’s bank is requiring the firm to reduce operating expenses immediately. Lawyers and staff are being asked to use their vacation time as the workload diminishes over the next several weeks. A few employees will be asked to remain beyond Feb. 28 to help with a few remaining client matters, the two said. A firm spokesman said 190 staff are expected to be let go by the end of the week. The one piece of good news for employees in the memo was an assurance from the bank that it would advance funds sufficient to cover a significant portion of health care premiums. Employees have worried they would immediately lose health care coverage offered by the firm. However, the memo paints a bleak picture of a firm under extreme financial pressure from its bank. Brobeck currently owes Citibank — its primary lender — as much as $50 million, and at one time owed nearly $90 million. It also includes one bit of phrasing the firm’s partners and public relations staffers have been unwilling to use. Odom and Parker clearly say the firm “will be ceasing operations.” Though it was clear Brobeck was disbanding, firm managers have described it as a “winding down” of operations. That kind of reticence has been evident in managers’ discussions with partners, as well. A number of partners have said over the past several days they are miffed at Brobeck’s top brass for apparently violating the firm’s partnership agreement in announcing the firm’s collapse last week. Former partners say that under the agreement, 60 percent of the firm’s partnership must vote for dissolution by written ballot. A current partner said he had not heard of the agreement being changed in recent weeks. But he added that he had not had time to review the document. “Whatever happened, happened,” the partner said. “You can’t put it back in the bottle.” The attitude may reflect the general consensus of Brobeck partners. Although many are angry that managers made the decision to disband without informing their colleagues, they are now focused on finding a new home. On Tuesday, Brobeck competitors were still trying to hammer out deals with Brobeck partners. New York-based Weil, Gotshal & Manges is interested in corporate partner Curtis Mo, for example. And Philadelphia’s Morgan, Lewis & Bockius — which broke off merger negotiations with Brobeck last week — was trying to pick up a big chunk of the firm’s San Francisco and Los Angeles offices. Yet lingering questions remain as to how much liability might stick with partners after Brobeck disbands. The biggest financial burden, they say, is the debt owed to Citibank. Citibank has liens on all accounts receivable, including work in progress that has not yet been billed, and on all hard assets, a former partner said. However, former partners believe the firm has sufficient assets to cover its debt. Brobeck partners also may be responsible for capital contributions not paid out to former partners and other claims against the firm that are pending or may evolve in the wake of the firm’s demise. “This has been a fairly secretive management,” a former partner said. “I don’t know if there are other claims against the firm,” such as employment or arbitration claims. “There will be some craziness in all this,” the former partner added. It’s “not a clean severance. It’s possible there are going to be lawsuits like that from the former firm of Debra Pole.” In the Pole case, former partners at the now defunct Santa Monica, Calif., firm Dickson, Carlson & Campillo sued colleagues Debra Pole and William Fitzgerald for breach of fiduciary duty when the two jumped to Brobeck in 1995. They also sued Brobeck for interference with contractual relations and unfair competition for stealing Dickson Carlson’s top client when it lured away the two litigators. It’s uncertain what will become of that case with Brobeck’s dissolution. Dickson Carlson was seeking $32 million from its former colleagues. A Los Angeles Superior Court judge ruled in December that Dickson Carlson had a right to revenue from some of the business Pole and Fitzgerald took with them to Brobeck. Another claim pending against Brobeck is that filed by former Brobeck chairman Tower Snow Jr. and the 16 other partners who defected to Clifford Chance. In December they filed a $10 million arbitration claim against Brobeck for breach of fiduciary duty, breach of partnership agreement and defamation. Latham & Watkins partner Robert Long — who represents Brobeck in the matter — said the two sides had a mediation session for one day in December before Robert Rosenfeld, a partner at San Francisco-based Heller Ehrman White & McAuliffe. They did not reach a resolution, however, and Brobeck filed a counterclaim of $10 million against Snow and six of the other partners for breach of fiduciary duty. Long said the parties are now seeking an arbitrator. Long said all the partners but Snow have received their capital contributions; the Clifford Chance group says it is still owed some funds. Snow declined to comment, but it’s believed his share may be close to $1 million. Meanwhile, more details continued to emerge about the final days of Brobeck. Sources close to the deal between Brobeck and Philadelphia’s Morgan Lewis said Morgan Lewis partners had actually voted in favor of a merger early last week. But sometime between Wednesday night and Thursday morning they decided to call the deal off. Brobeck’s nine-member policy committee then made a decision to “wind down” the firm, effectively disbanding. Former partners say that two partners — John Larson and Warren Lazarow — were the driving force behind the decision. Susan Beck, Senior Writer for The American Lawyer , contributed to this report.

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