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Clifford Chance Headquarters: London U. S. offices: New York, Washington, D.C., San Francisco, Palo Alto, Los Angeles, San Diego International offices: Amsterdam, Bangkok, Barcelona, Beijing, Berlin, Brussels, Budapest, Dubai, Dusseldorf, Frankfurt, Hong Kong, Luxembourg, Madrid, Milan, Moscow, Munich, Padua, Paris, Prague, Rome, Sao Paulo, Shanghai, Singapore, Tokyo, Warsaw 2002 gross revenue: $1.5 billion 2002 profits per partner: $1 million Lawyers firmwide: 3,700 Partners: 657 San Francisco lawyers: 46 Palo Alto lawyers: 9 Los Angeles lawyers: 12 San Diego lawyers: 8 California clients: Intel Corp., Cisco Systems Inc., Nike Inc., eBay Inc., NVidia Corp., Insight Enterprises Inc., Trimble Navigation Ltd. London’s Clifford Chance marched into California in June 2002 with the kind of swagger that’s usually only associated with cowboy colonials. The world’s highest-grossing law firm hired one of the state’s biggest legal stars — securities litigation rainmaker and ex-Brobeck, Phleger & Harrison chief Tower Snow Jr. Snow, in turn, brought 16 Brobeck partners to the firm and 30 associates. With the influx of those lawyers and a couple of Clifford Chance transplants from New York, the firm almost immediately opened offices in San Francisco, Los Angeles, Palo Alto and San Diego. Hiring the Brobeck team was an audacious move that instantly put Clifford on the California legal map. Snow said he saw nothing but expansion for his new firm, predicting Clifford Chance would have 100 lawyers in the state by the end of 2002. He held a standing-room-only lunch with more than 20 recruiters and told them the firm had been flooded with resum�s and that there was plenty of recruiting work to go around. Even competitors in the San Francisco Bay Area conceded that Clifford Chance would be a force to reckon with. But 16 months after Clifford dived into California, the firm has yet to follow with another big splash. Despite almost constant recruiting, it has yet to pull in a single lateral partner and has pulled in only two lateral associates. Growth has been primarily with first-year associates, and even that has been less than what the firm proclaimed when it opened — 26 instead of the 40 pitched by firm leaders. James Burns Jr., managing partner of the West Coast offices, acknowledges that Clifford Chance must grow its ranks in California if it intends to become a top player. “Within California we want to be a power in ourselves, a substantial force,” Burns said. “We have our hooks out for people.” Setting those hooks hasn’t been easy. With the economy still weak, every major firm is looking for big-name laterals to boost their practices, law firm recruiters, partners and consultants say. And Clifford Chance has some baggage, they say. The firm has an almost exclusive focus on securities litigation in San Francisco, its largest California office; a laborious hiring process that requires a series of approvals from partners in London and New York; a lockstep compensation system that stifles earning power; and the aura of controversy that has lingered around the partners since their defection from Brobeck, exemplified by the lawsuits former Brobeck partners and staff have filed against Clifford Chance and individual partners. “The problem is they haven’t effectively told their story,” said Sandy Lechtick, of the Los Angeles recruiting firm Esquire Inc. “Second, they’ve raised the bar very high. When going after partners with multimillion-dollar books of business the rainmaker talent pool is shallow among those willing to change firms.” The Clifford team counters that it has a strong book of business representing major Silicon Valley companies in securities litigation, corporate and intellectual property matters. In addition to longstanding clients like Intel Corp., Cisco Systems Inc. and Nike Inc., the firm said it has pulled in dozens of new clients, including Gateway Inc., eBay Inc. and Insight Enterprises Inc. And it touts its international reach and competitive profit-per-partner numbers — which averaged about $1 million in 2002 — as a strong lure for laterals. PAYCHECK PROBLEMS Money, however, seems to be one of the key reasons potential partners have been turned off by the firm. Several recruiters cited the firm’s lockstep compensation structure — which links pay to seniority rather than the amount of business a partner brings in — as a reason for skittishness on the part of laterals. “If you’re unable to compete from a compensation point of view almost everything else is a non-starter,” another recruiter said. “Any sought-after candidate would say, ‘Why am I going to lockstep?’ How many people do you know who will take a very significant pay cut?” In June, Diane Savage, a top Silicon Valley corporate lawyer who was returning to practice after a stint teaching at Stanford University, chose Cooley Godward over Clifford Chance. Cooley may have had an edge in the race — Savage was once a partner there. But Clifford pays substantially more on average. Profits per partner at Cooley were $265,000 less than Clifford’s in 2002. Savage confirmed she had talked with Clifford Chance but would say only that she was very happy with her decision to rejoin Cooley. Clifford Chance also had extensive discussions earlier this year with another prominent rainmaker with a multimillion-dollar book of business. But that partner decided to go to a competitor after encountering Clifford’s complicated hiring process, which requires sign-off by the London and New York offices, said a recruiter who worked on the deal. “It’s a grinding process,” the recruiter said. “Momentum is everything in a deal, and it gets trounced in a situation like this.” Prospective laterals aren’t the only ones chafing at some of Clifford Chance’s policies. The firm’s compensation system, for example, has been a big irritant among the partnership since Clifford Chance acquired New York’s Rogers & Wells in 2000. Like other British firms, Clifford Chance has linked pay to seniority, while Rogers & Wells had an eat-what-you-kill tradition. The conflict came to the forefront two weeks ago when Clifford Chance lost its antitrust star Steven Newborn and three other partners in its Washington, D.C., office to New York-based Weil, Gotshal & Manges. Newborn was Clifford Chance’s highest-paid partner in the United States, pulling in around $3 million annually. Newborn, and fellow antitrust leader Kevin Acquit, who left Clifford Chance in December for New York’s Simpson, Thatcher & Bartlett, together generated more than $40 million in business annually. While Newborn said he did not leave because of money, he said lockstep was not viable in the United States. He attributed his departure to frustration over being continually conflicted out of cases. ECONOMY TO BLAME Burns, however, dismisses the notion that Clifford Chance has had trouble attracting rainmakers in California because of its compensation system. Rather, he blames the economy. “The slump in corporate work in Silicon Valley has continued to deepen throughout the past year,” Burns said. “One of the interesting offshoots of that is the kind of people we’d be interested in have become more risk-adverse. We’re approached constantly by people who would like to join us but we’re highly demanding. We want people with reputations and practices of their own.” Burns acknowledged that the process for bringing in partners “is probably more elaborate than at other firms.” But he said it was a strength rather than a weakness since laterals got the chance to meet partners from around the world. Burns also contends that Clifford Chance’s lockstep system is actually one of the firm’s biggest selling points. Under a merit-based system “you have to protect yourself” and make sure your group gets credit, Burns said. The lockstep approach fosters teamwork, he said, since compensation “is not dependent on how many dollars are by your name.” Michael Torpey, co-head of Clifford Chance’s securities litigation group, said the top of the firm’s lockstep is high enough that “for most partners it wouldn’t matter to them. They’d make so much money they would be happy.” Torpey, who participated in a firm committee reviewing the lockstep system, said the practice is common among the top New York firms. He said about six firms have pure lockstep compensation, including Cravath, Swaine & Moore; Debevoise & Plimpton; and Cleary, Gottlieb, Steen & Hamilton. Another 10 firms have modified lockstep, he said, paying 10 percent or 20 percent of partners above the top lockstep level. “Lockstep in this day and age only works if [a firm is] making a lot of money,” Torpey said. Despite the positive pitch about lockstep, Clifford Chance is considering whether to provide more flexibility in the system, particularly in the United States. Burns said a vote is now under way among the partnership on the issue. Currently, a handful of partners are paid above lockstep, including some partners in California. THE BROBECK HANGOVER While compensation is clearly on laterals’ minds, recruiters said they’re also concerned about the connection between Clifford Chance’s California offices and Brobeck. Laterals, several recruiters said, might be wary about joining a clique of former Brobeck partners who are still mired in lawsuits brought against them by former landlords, partners and staff. Snow, in particular, has been bitterly criticized by former colleagues who blame him for Brobeck’s demise. Nine months after the partnership expelled Snow, Brobeck shut down. But Snow, who was one of the most outspoken and well-known law firm leaders two years ago, has pulled back from a management role at Clifford Chance. He has returned to his securities litigation practice, representing Cisco in one case and handling several matters stemming from New York Attorney General Eliot Spitzer’s investigations of alleged improper trading of mutual funds. And Burns said Snow is spending a lot of time traveling to promote Clifford Chance to clients and speak at law firm forums. Snow was in Vietnam this week giving a presentation to members of the firm’s litigation department on the Asian legal market and could not be reached for comment. But Snow’s shift from management to practice may signal a lower-key approach for the firm. Burns and others tout the firm’s work in several areas. Among its securities cases, the firm got two actions against client NVidia Corp. dismissed, including a $50 million shareholder class action, and recently got a plaintiff to drop a securities action against Intel. On the IP side, Clifford Chance is representing Lindows.com in a trademark infringement case against Microsoft Corp. and filed a patent infringement suit for Trimble Navigation Ltd. Corporate lawyers, meanwhile, are working on an initial public offering for a California company. And they’ve worked with the firm’s London and Frankfurt offices on various deals involving U.S. companies. Burns said it’s that extensive international reach which makes Clifford Chance unique in the local market. And clients also appreciate the firm’s global presence. “We use them extensively for litigation work because of their international offices in Russia, Paris, Geneva and Asia,” said NVidia general counsel David Shannon. “The fact that they are internationally based is something we as a Silicon Valley company need.” NVidia, whose primary outside counsel is Cooley, turns to Clifford Chance for tax, corporate and transactional work, as well as litigation. But some recruiters and partners at competing law firms say the San Francisco Bay Area is a more insular marketplace and clients and potential laterals may not see the advantage of having a London-based firm behind them. Companies in Silicon Valley “want to say [Wilson Sonsini Goodrich & Rosati Chairman] Larry Sonsini is their lawyer, not some guy in London,” a prominent partner at a Valley firm said. “The added pitch of saying you have people in London and Hong Kong isn’t going to move the ball.” Torpey laughed at that analysis. He said securities litigation work is shifting away from California and technology companies to investment banks and accounting firms, giving Clifford Chance a competitive edge. Torpey said more European companies may face more suits in the United States since their shares are traded on exchanges here. “We’re lucky to be connected with Clifford Chance because they have such a vibrant practice in New York,” he said. While recruiters, consultants and competitors said they were surprised Clifford Chance has not taken off in the Bay Area, some say it’s too early to tell whether the firm will become a bigger player. “The competition for hiring corporate partners in the Bay Area is intense,” said Joe Macrae, head of the Palo Alto recruiting firm Mlegal Consulting Inc. “You have to look at a five-year period instead of one year to judge whether a firm’s successful.” “It’s the early days yet,” said Kenton King, head of Skadden, Arps, Slate, Meagher & Flom’s five-year-old Palo Alto outpost. “It takes a while to start an office.” Lily Henning of Legal Times contributed to this article.

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