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If anyone thinks Brobeck, Phleger & Harrison’s dissolution will be done any time soon, take a look at another failed San Francisco firm, Pettit & Martin. Nearly eight years after Pettit pulled the plug, in May 1995, attorneys are still working on the law firm’s business. Pettit must still maintain malpractice insurance, and, in fact, about a month ago, the firm’s lawyers settled a stubborn malpractice claim brought against the firm three years after it closed. Thelen, Reid & Priest partner Jay Margulies is a former Pettit lawyer and is still charged with winding down the firm’s affairs. He went to work at Thelen three days after Pettit voted to dissolve, but is the point man for David C. Duncan and Co., a business that specializes in managing law firm wind-downs. Pettit retained the company immediately after it collapsed to help with the wind-down. Margulies said he was tapped for the job because “I knew the numbers best, and everybody said do it.” He and Pettit’s former chairman, Theodore Russell, were the primary partners overseeing the dissolution. Russell died of a heart attack in 2001, leaving just Margulies. Pettit & Martin was a stalwart San Francisco legal player, beginning in 1955 as a government contracts firm. In 1990, its best year, the firm collected $70 million in revenue and logged profits per partner of $255,000, according to Recorder affiliate The American Lawyer magazine. By the early 1990s, the firm was losing partners, and some of its more lucrative practices — like real estate and work for the Resolution Trust Corp. — dried up. The firm went from 240 lawyers in the late 1980s to 125 in March 1995, when partners finally voted to shut down. The closing came 16 months after a shooting at the firm’s San Francisco office at 101 California St. when a disgruntled former client killed eight people and wounded six before killing himself. The shootings, Margulies said, actually helped the firm stay together longer than it would have otherwise because people felt connected and pulled together. In the end, partners simply decided those who remained at the firm couldn’t generate enough revenue to make the firm viable, he said. Margulies said the firm was very careful and orderly in the way it negotiated with its lender and landlords — and in collecting billings. For one thing, he said, Pettit hired a trio of outside firms and consultants to help. One firm negotiated with the firm’s bank and landlords, another handled client receivables and a third, David C. Duncan, managed the firm’s legal responsibilities and paperwork — including 100,000 boxes of client records. Pettit gave its employees 60 days’ notice and continued to pay people as long as they showed up for work. By the time the firm closed its doors for good on May 6, 1995, about 20 percent of the firm’s associates and a similar number of staff were still drawing a salary from the firm, Margulies said. The bank made that possible, agreeing to lend the firm money through its last days so partners could focus on their clients, he said. Pettit ended up collecting about 90 percent of billables that were current when it dissolved and about 75 percent of the old receivables, he said. The firm paid back just under $5 million to the bank within two months of closing, and the firm’s landlords got 80 cents for every dollar collected for the first two years after dissolution, he said. It was after the firm closed its doors that the real labor began for the Pettit lawyers who volunteered to represent the firm in its wind-down. “Once you got past negotiating with the landlords and paying people and straightening out things like retirement plans,” Margulies said, “the biggest issues are the records and unfortunately, [malpractice] claims.” Pettit has had to wrestle with about six malpractice claims since it closed, settling the last one earlier this year, Margulies said. The firm still has insurance, so it paid just the deductible for each matter, he said. “There is really nothing to do now but deal with the reality of the statute of limitations on malpractice,” he said. The statute doesn’t start running on malpractice until an error is discovered or should have been discovered, he said. That means it could be 20, 30 or 40 years after a document is drafted before the statute actually starts running, Margulies said. Pettit still has about $750,000 in the bank, and Margulies’ biggest task right now is finding a malpractice carrier to cover the firm after its current policy expires in 2005. That has proved to be a difficult task, he said, and the firm may have to use its remaining cash to pay any claims directly. “Someday before I die,” Margulies, 59, said, “we’ll figure out what to do with the money.”

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