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Sedgwick, Detert, Moran & Arnold’s San Francisco office seems to scream “old-school law firm” with its dark wood paneling and thick carpeting. Veteran partners have computers, of course. But Sedgwick Detert is still the kind of place where one finds a decidedly dated Pitney Bowes Dictaphone on the chairman’s desk because he doesn’t like typing long e-mails. Sedgwick Detert’s reputation seems almost as impervious to change as its offices. Ask most local lawyers about the firm, and they’ll tag it as an insurance defense shop. And insurance defense — with its high-volume, low-profit caseload — is a bit out of fashion. But Sedgwick Detert contends that the image no longer reflects reality. The firm is in the midst of a long-term business makeover aimed at transforming it into a high-end litigation powerhouse. It has been shedding some of its less profitable insurance defense work, has hired marketing and headhunting help, is increasing associate salaries and trying to pull in talent to compete for high-stakes work like class actions and unfair competition cases. “Part of our success is the ingenuity of the plaintiffs bar making big cases out of little cases,” said Kevin Dunne, the firm’s chairman. So far, the changes appear to be good for the bottom line. After years of declining to make public basic financial information, Sedgwick is openly touting its gross revenues and profits per partner. Dunne said the firm raked in nearly $130 million in 2002 and that the average profits per partner reached $600,000. In 2001, Recorder affiliate The American Lawyer magazine reported that Sedgwick grossed $104 million and had profits per partner of $490,000 — though those numbers were never officially confirmed by the firm. “I see them as a national boutique, and I don’t know that anyone else has that model,” said Michael Lucey, the managing partner of Gordon & Rees, another former insurance defense firm that now competes for some of the same litigation work in California. “Most national firms go full-service, but Sedgwick seems to thrive with complete focus on litigation. They subscribe to the school of thought to ‘do what we do best.’” Yet the firm still has some distance to go before it can claim a spot in the pantheon of litigation gods. Robert Lieff, a partner at plaintiffs-side Lieff Cabraser Heimann & Bernstein, acknowledges that Sedgwick Detert has increased its profile. However, big corporate defense firms in New York and Los Angeles aren’t likely quaking at the increased competition. “Their competitors are gone, so they must have done something right,” Lieff said. “They’ve adjusted to economy, which is in contrast to so many insurance defense firms, like Bronson, Bronson & McKinnon, that went out of business. But they haven’t achieved the [national recognition] like the major New York City firms, like Shearman & Sterling.” TALENT SEARCH One of the keys to Sedgwick Detert’s strategy is hiring talent. It now has a headhunter and is offering $7,500 bonuses to any employee who refers a lawyer who is eventually hired by the firm. The firm picked up both an administrator and controller from Brobeck, Phleger & Harrison and has hired Brigitte Herschensohn, formerly of Gibson, Dunn & Crutcher, to handle marketing. Associate salaries are also on the rise. Sedgwick Detert refused to follow suit when most large Bay Area firms raised first-year base pay to $125,000 in 1999-2000. Instead, it held the line at $90,000. This year, however, partners are hiking first-year salaries to $100,000 and are providing a $25,000 bonus package. Despite the salary increases and recruiting efforts, Sedgwick Detert has struggled in the last year to maintain its lawyer headcount. At the beginning of 2002, the firm counted 315 lawyers. By August, the number had declined to 285. The highest-profile departures came in July when Lane Ashley, the former managing partner in the Los Angeles office, bolted for Lewis Brisbois Bisgaard & Smith. Partners Kristin Meredith and Michael Velladao, and about eight associates, all from the insurance defense group, left with Ashley. But the numbers, Sedgwick Detert partners say, don’t tell the whole story. The firm has been actively shedding insurance defense work, and that has prompted some lawyers to head for other firms. Sedgwick Detert has also made some significant hires — like the October acquisition of nine lawyers from the San Francisco insurance coverage boutique Celebrezze, Harrison & Berg. For Bruce Celebrezze, the move to Sedgwick Detert was a homecoming. Celebrezze had left Sedgwick Detert in 1991 for Sheppard, Mullin, Richter & Hampton before founding his own firm in 1993. Celebrezze said he left Sedgwick Detert because his practice had outgrown the firm. “At the time, Sheppard was bigger, and I felt a bigger firm would be better for a thriving practice,” he said. In 2001, Celebrezze approached a few firms to see if they were interested in working out a deal to acquire his firm. Then Dunne came calling. “Kevin’s a persuasive guy,” said Celebrezze with a chuckle. “He hired me as an associate 20 years ago and now he brought me back.” Celebrezze said the firm now has the capacity to handle his practice. He brought over his entire book of business and his whole staff. As a result, Sedgwick Detert’s insurance coverage group in San Francisco grew from three to 12 attorneys. ONE LAWYER AT A TIME Despite the deal with Celebrezze, Sedgwick Detert appears to be less than excited about a large-scale merger. Dunne acknowledges that the firm was in merger negotiations last year with a national, 600-lawyer firm. Ultimately, however, Sedgwick Detert decided against the move, Dunne said. He declined to name the firm. Dunne said he wants to add 50 lawyers to the firm as soon as possible — yet “we prefer to grow the old-fashioned way, hand-picking the lawyers we hire,” he said. Sedgwick Detert is particularly interested in growing its regulatory team to help handle a stream of product liability work, which includes cases involving latex gloves, asbestos, lead paint and pharmaceuticals. These cases demand contact with federal agencies like the Food and Drug Administration — thus the need for regulatory expertise. “We have been talking to a regulatory firm back in D.C. [about a possible merger],” said Dunne, who again declined to name the firm. Dunne said Sedgwick Detert has settled large asbestos and pollution cases in the past year and also has worked on high-profile litigation involving a Kansas City, Mo., pharmacist who diluted chemotherapy drugs. The firm represented the pharmaceutical company that made the drug and reached a settlement mid-trial. The firm has also launched an online training business on the Health Insurance Portability and Accountability Act after receiving a flood of requests from clients about the law. Sedgwick Detert hopes to turn its new online training program into a revenue generator, Dunne said. Dunne, a 61-year-old litigator, acknowledges Sedgwick Detert is attempting big changes. He said the firm traditionally competed with regional players like Crosby, Heafey, Roach & May (which recently merged with Pittsburgh’s Reed Smith) and Gordon & Rees. These days, he’s hoping to be compared to firms like Chicago’s Kirkland & Ellis and Cleveland-based Jones Day. Yet for all the new business and plans for growth, Dunne said he and his partners hope to retain some of the old Sedgwick Detert style. “I don’t know that we have a big-firm culture. We don’t have an eat-what-you-kill philosophy,” Dunne said. “It’s a meritocracy.”

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