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With its U.S. expansion plans already hampered by a tide of East Coast partner defections, British legal giant Clifford Chance is facing the potential opening of a devastating Western Front. The San Francisco Bay Area legal community has been buzzing about the expected defection of the firm’s West Coast securities litigation group — which is virtually the entire San Francisco office — to another firm. London-based Clifford Chance entered the California market with much fanfare in June 2002, hiring former Brobeck, Phleger & Harrison Chairman Tower Snow Jr., who in turn brought along 16 Brobeck partners and 30 associates. Those defections crippled Brobeck, which closed its doors at the beginning of 2003. At the time, Snow predicted Clifford Chance would have more than 100 lawyers in California by the end of 2002. But the firm has so far been unable to recruit a single lateral partner on the West Coast, and last month partners began leaving. In recent weeks, antitrust partner Craig Waldman, who joined the San Francisco outpost from Clifford Chance’s New York office, left to join Palo Alto, Calif.-based Cooley Godward. Shortly thereafter, securities litigation partners Dean Kristy, Kevin Muck, Susan Muck and seven associates went to Fenwick & West, also based in Palo Alto. While the securities litigation group has reportedly talked to several Bay Area firms, Orrick, Herrington & Sutcliffe appears to be the lead suitor. Former colleagues of the group’s lawyers say they have heard that Orrick is negotiating to acquire the entire office. While the loss of the securities group would be a blow to Clifford Chance’s California operations, the firm is adamant that it intends to keep all of its offices open. “We don’t have any plans to close any offices,” said Clifford Chance spokesman Tom Orewyler. Orrick’s longtime chairman, Ralph Baxter Jr., has been eager to expand the firm with the aim of becoming a top national and international player. Orrick has had merger discussions with several firms, including Cooley and Venture Law Group, which ended up joining Heller Ehrman White & McAuliffe. As of last month, Orrick was negotiating with Washington, D.C.’s 177-lawyer Swidler Berlin Shereff & Friedman. Baxter was not available for comment. “We’re not going to be able to comment on any rumors about any conversations,” said an Orrick spokeswoman. The San Francisco office of Clifford Chance currently has nine partners — all securities litigators — two counsel and 21 associates. The Palo Alto office has two partners and four associates. Clifford Chance’s San Diego and Los Angeles offices have two partners apiece. FAMILIAR ISSUES The difficulties the firm is encountering in California mirror those it is already facing in the 420-lawyer New York and 80-lawyer Washington, D.C, offices. The firm, which merged with New York’s Rogers & Wells in 1999, has seen a string of departures from those offices in recent months, including several practice leaders. The departure of New York-based antitrust co-head Kevin Arquit to New York’s Simpson Thacher & Bartlett in December 2002 was the first sign of trouble. But partners began leaving in increasing numbers after Steven Newborn, antitrust co-head with Arquit, left with three other partners to join the Washington office of New York’s Weil, Gotshal & Manges in October 2003. Arquit and Newborn had been two of the firm’s biggest stars and its highest-paid partners. The firm subsequently lost several intellectual property partners, including group leader Leora Ben-Ami, who joined New York’s Kaye Scholer. In January, litigation chair Kenneth Gallo left to join the Washington office of New York’s Paul, Weiss, Rifkind, Wharton & Garrison. Banking group co-head Robert Finley joined the New York office of Atlanta’s King & Spalding, and former global securities head Kevin Kelley left to join the New York office of Los Angeles’ Gibson, Dunn & Crutcher. The firm has also added a number of partners, most recently Washington-based antitrust partner James H. Holden, but recruiting efforts have thus far failed to keep pace with the number of defections. Many of the departing partners cited the globe-straddling firm’s 3,000-lawyer size in explaining their departures. Newborn cited the conflicts engendered by the firm’s scale while Ben-Ami expressed a desire to practice at a smaller firm more focused on her practice area. One of the largest firms in the world, Clifford Chance dwarfs most major U.S. firms, though the vast majority of its partners are overseas in Britain, continental Europe and Asia. The firm’s management is also more corporate in style than most American firms, with key roles delegated to non-lawyer professional managers. Moreover, like most of its peers among London’s Magic Circle of leading corporate law firms, Clifford Chance is overwhelmingly focused on transactional work. A large proportion of the departing partners have been litigators. COMPENSATION Gallo noted at the time of his departure that litigators in particular, whose practices were limited to a handful of major U.S. jurisdictions, saw relatively little advantage in Clifford Chance’s global platform and felt more comfortable in U.S.-based firms. Though most departing partners have downplayed compensation as a problem, several have said it is an issue in the firm’s ability to both recruit and retain partners. Like most large British firms and a few leading New York firms, Clifford Chance has lockstep compensation, in which partners are paid according to seniority. Partners in U.S. firms are more apt to be paid according to their business origination. Arquit and Newborn were the only partners at Clifford Chance who were outside of the lockstep system. Over strong opposition among British partners, the firm narrowly voted last year to permit star U.S. partners to be paid at levels higher than the top of the lockstep system. Michael Torpey, who co-chairs the San Francisco securities litigation group, did not return phone calls. But in April he acknowledged to The Recorder, a San Francisco-based affiliate of the New York Law Journal, that the group was not entirely happy at Clifford Chance, though he also said lockstep compensation was not an issue. “We have some issues we’re talking to the firm about,” Torpey said at the time. “We hope to get them resolved and that everything works out.” Brenda Sandburg and Adrienne Sanders are reporters at The Recorder , a San Francisco newspaper affiliated with the New York Law Journal and law.com.

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