September 18, 2006

THE DAILY JOURNAL

By Robert Iafolla

LOS ANGELES – The migration of labor and employment partners from large national firms to boutiques continues, with Brent M. Giddens leaving Sonnenschein Nath & Rosensthal today and Jack S. Sholkoff departing Holland & Knight last Wednesday.

Giddens, who was his former firm’s last labor and employment attorney, joined Carlton DiSante & Freudenberger’s Los Angeles office as a partner.

Sholkoff, who headed his former firm’s labor and employment practice, joined Ogletree Deakins’ Los Angeles office as a partner.

The moves highlight an entrenched trend that is driven in large part by changing law firm economics and priorities.

“As the larger firms continue to rise in profitability, billing rate structure for many labor and employment partners makes it difficult to compete for new business with regional or boutique practices,” said legal recruiter Lawrence Watanabe, whose firm Watanabe Nason Schwartz & Lippman brokered both deals.

Of course, not every large national firm is phasing out their labor and employment group, noted Jason Yuen, a partner recruiter at Alan Miles & Associates.

“There are firms like Paul Hastings; Morgan Lewis; Seyfarth Shaw; Thelen Reid; Proskauer – all of whom seem to build their very brand and reputation based on the labor and employment work they do,” Yuen said. “Often, employment lawyers are servicing the corporate department. Sometimes, the reverse is true.”

Although clients are still willing to pay premium rates for major class-action litigation, they prefer not to for the volume of their labor and employment needs, Giddens said.

He said growth of employment practices liability insurance, which companies purchase to protect against a host of claims, has increased the rate pressure.

Sonnenschein Nath decided to gradually wind down its Los Angeles labor and employment practice a year ago, said the office’s managing partner Edwin B. Reeser.

“Unless we created a second class of citizenship for partners where they make half as much but still work just as hard, we had to do it,” he said. “We found it better to focus on those areas where we can get higher rates and stay out of those areas that we cannot.”

Earlier this year, partners Donna D. Melby and Lloyd C. Loomis left the firm for Paul, Hastings, Janofsky & Walker and Lewis Brisbois Bisgaard & Smith, respectively.

Reeser called the departure of partners “gut-wrenching and difficult” but necessary as labor and employment has become “increasingly commoditized.”

He said Sonnenschein will deal with class actions and other high-stakes labor and employment issues at the firm’s other offices, and refer smaller local matters to Giddens.

Lori Bowman, managing partner of Ogletree Deakins’ 15-attorney Los Angeles office, said the trend began in the late 1990s and has gradually picked up momentum.

Partners from large firms often choose boutiques in part because they enjoy resources that aren’t available at full-service firms, she said.

“We have more than 300 lawyers [firmwide], and all they practice is labor and employment,” said Bowman, who left Orrick and joined Ogletree Deakins in 2004.

While they benefit from practice-specific resources at boutiques, they don’t have to pay for the overhead that comes with the international offices and the massive insurance policies of a megafirm that labor and employment attorneys don’t need, she said.

The reduced overhead allows for boutiques to charge the lower rates that clients are looking for, said Marie DiSante, managing partner of Carlton DiSante’s five-attorney Los Angeles office.

For example, she said Giddens’ new hourly rate is 25 percent lower than what he charged at Sonnenschein Nath.

DiSante left Latham & Watkins with three firm colleagues and joined with four attorneys from Paul Hastings to form the firm in 1994. Now at 35 attorneys, the firm has grown “even quicker than anticipated,” she said.

With large firms focusing on profit, “the trend of labor and employment partners migrating to regional or labor and employment boutique firms is highly likely to continue within California,” said Watanabe of Watanabe Nason.