September 10, 2002
THE DAILY JOURNAL
By John Ryan
LOS ANGELES – San Francisco’s Brobeck, Phleger & Harrison has been hit with another financial and public relations blow as 11 of its intellectual property partners, led by firmwide practice chair James Elacqua, have agreed to join Dewey Ballantine.
“Dewey Ballantine is a very balanced and diverse firm and has weathered the economic downturn better than most other firms,” Elacqua said.
The New York-based firm boasted per-partner profits of $1.075 million in 2001, while Brobeck Phleger’s dropped 44 percent to $660,000.
Months of Speculation
The deal ended months of speculation that Elacqua’s group – widely reported to be one of the most sought-after practices in the country – would find a new home. Elacqua said that close to 30 firms contacted him about a possible deal in the past several months.
Sources familiar with the departing group say its book of business is $30 million and represents two-thirds or more of Brobeck Phleger’s intellectual property work.
“I believe that’s a significant overstatement,” said Paul Finigan, managing partner of Brobeck Phleger’s San Francisco office and a member of the firm’s operations committee.
Half Remain
Finigan noted that more than half of the partners in the intellectual property group, which has 85 attorneys, will remain at the firm.
The deal comes just a few months after 16 Brobeck Phleger partners, most securities litigators, followed expelled former Chairman Tower Snow to London-based Clifford Chance Rogers & Wells. That group took up to $50 million in business from Brobeck, according to sources close to both firms. Brobeck management, however, has said the estimate of the Snow group’s book is far too high.
Two New York-based securities litigators, Ronit Setton and policy committee member Gregory Markel, later left for New York’s Cadwalader, Wickersham & Taft.
Sources inside Brobeck Phleger have pegged securities litigation and intellectual property as the firm’s two most profitable practice groups in recent years – practices all the more vital during the protracted slowdown in corporate work.
Finigan insisted that both practice groups remain strong.
“And far more important than economics is the new attitude and feeling of optimism and collegiality among the partners that remain and the absence of negativism and disaffection,” he said.
Nevertheless, the departures should exacerbate Brobeck Phleger’s real estate woes resulting from layoffs and attrition. One former Brobeck Phleger partner estimated that the firm has 400,000 to 500,000 square feet of excess space – not taking into account space left by the 11 departing partners. However, the partner noted, most of that space is nonrecourse, meaning the partners are not personally liable for the lease obligations.
Elacqua said his group has enough work for 30 to 40 associates.
Finigan said that Brobeck Phleger is continuing efforts to sublease space and that the firm is confident its real estate situation will improve.
The 11 partners gave formal notice Sunday but are expected to start at Dewey Ballantine in a month or so.
Under Brobeck Phleger’s partnership agreement, partners must give 30 days’ notice before leaving. Partners departing for Clifford Chance were forced by Brobeck management to stay the full 30 days.
During that period, departing partners cannot solicit clients or associates to join them in their move to the new firm.
Elacqua said he expects to stay the full 30 days.
“Those issues are being looked at as we speak,” Finigan said.
Brobeck Phleger partners Stephen Rosenman, Craig Allison, Andrew Thomases and Jeannine Yoo Sano will accompany Elacqua to Dewey Ballantine’s Silicon Valley office, which will move from Menlo Park to Palo Alto.
Partners Cono Carrano and Anthony Shaw will join the firm’s Washington, D.C., office.
Partners Bryan Farney, Wayne Harding, James Smith and Kevin Kudlac will open an Austin, Texa s, office for Dewey Ballantine.
The acquisition is a major coup for Dewey Ballantine, which used legal recruiter Bill Nason of Watanabe, Nason & Seltzer on the deal. The 500-attorney full-service Dewey Ballantine has core strengths in high-stakes capital markets, mergers and acquisitions, corporate reorganizations, litigation and real estate. Its intellectual property capability was limited, however.
“This gives us an intellectual property presence and capability that not many Wall Street-based firms have,” said Paul Walker, managing partner of Dewey Ballantine’s Los Angeles office.
Elacqua said the small size of Dewey Ballantine’s intellectual property group was a major plus.
“We in essence will become their IP group, and there will not be any conflicts,” he said. “We wanted to go to a place where we could make a major contribution and become strategically important for the firm.”
Elacqua left Arnold White & Durkee in 1997 to join Brobeck Phleger, where he expanded the firm’s intellectual property group from 15 to 90 attorneys.
His decision to leave Brobeck Phleger was difficult, he said.
Brobeck managers made an effort to keep Elacqua once it became known that Clifford Chance was targeting him and other intellectual property partners along with securities litigators.
The Elacqua portion of the deal fell through because Clifford Chance was not interested in opening a Texas office, and Elacqua was not willing to part with his Austin partners. They practiced law together at Arnold White before joining Brobeck Phleger.
Brobeck Phleger, meanwhile, has yet to disentangle itself from the previous departing group. Snow’s Clifford Chance team and Brobeck Phleger managers have failed to reach an agreement about when, or whether, the departed partners will receive their capital investment into the partnership.
Elacqua said he was not anticipating any legal disputes.
“I think Brobeck is headed for a much more stable time,” he said.