December 6, 2010
THE DAILY JOURNAL
By Sara Randazzo
SAN FRANCISCO – The San Francisco office of Skadden, Arps, Slate, Meagher & Flom will shutter by the end of June and the firm’s entire Northern California operations will consolidate in Silicon Valley, partner Kenton King confirmed Friday.
King, the longtime managing partner of both offices, came to San Francisco to inform associates and staff of the news Friday, giving all attorneys the option to relocate to Palo Alto. Some staff layoffs will occur once the move is finalized, King said, though he did not know how many will be affected.
Opened in 1987, Skadden’s San Francisco office has housed only litigators since four years ago, when firm leadership decided to move the entire corporate practice to Silicon Valley.
San Francisco currently has four partners – Raoul Kennedy, Jose Allen, James Lyons, and Timothy Miller – who will all be moving to Palo Alto, King said. Four counsel and 17 associates must decide whether they’ll make the longer commute to stay with Skadden.
“At this point it makes a lot of sense to combine the two and house everybody under one roof,” King said, adding that Palo Alto currently has three times the number of partners and twice as many associates as San Francisco. “Ultimately there are some cost savings involved, but frankly we would do this even if it cost us some money.”
The move points to a bigger question of how important it is for law firms to have a presence in San Francisco as well as Silicon Valley.
“A lot of clients have talked to us over the years about, do we need to be in both places?” said Gary Davis, a consultant with Patterson Davis Consulting in San Francisco. “More and more, the economy in the Bay Area has become more homogenous… You may want an office in each location for recruiting purposes, but it’s not the given that it’s as completely necessary as it might have been in the past.”
A few other firms have made similar moves in recent years. In 2009, Dewey & LeBoeuf tiptoed out of San Francisco, citing a desire at the time to create critical mass in East Palo Alto, and White & Case pulled out of San Francisco in 2006 to focus on its technology practices in Palo Alto.
San Diego-based recruiter Larry Watanabe said the move makes economical sense, especially for a firm with as strong a reputation as Skadden, since maintaining extra offices is expensive and overhead costs can run up to $300,000 per partner.
He said it’s also logical from a business-generation perspective, since, “The client base, it’s not growing or expanding in San Francisco.” The strength of traditional San Francisco practices like banking and real estate have waned, and most new companies, particularly in the technology industry, launch headquarters in Silicon Valley.
Watanabe pointed to several Silicon Valley-centric practices that have remained strong throughout the recession, such as intellectual property litigation and licensing, mergers and acquisitions, securities litigation, white collar work and general commercial litigation. He also noted that aside from firms snatching up attorneys from the now-defunct Heller Ehrman and Thelen, San Francisco offices of major firms haven’t seen much growth in the past few years.
The consolidation of Skadden’s offices will strain the firm’s existing office space in Palo Alto, King said, and Skadden will likely look for a larger location when its lease runs out early next year. The firm currently has 27,500 square feet at 525 University Ave.
In San Francisco, Skadden will sublease much of its 36,000 square feet of space at 4 Embarcadero, where the lease runs until 2016. King said the firm will keep some space to hold meetings and conferences.
King downplayed the news, saying the two offices have always operated as one and that “we literally don’t view it as closing an office.”
The combination highlights the fact that Skadden has twice as many litigators as corporate attorneys in Northern California, King said. “We’re known as a transactional firm, but in fact, we’re making significant investments in the litigation area,” King said, citing the recent addition of trial attorney Allen Ruby in Palo Alto, who joins already established trial veteran Kennedy as well as Richard Marmaro and Thomas Nolan, who both practice in Los Angeles.
Lyons, one of the partners currently in San Francisco, said he is enthusiastic about the move and “can’t think of anything but positive outcomes” that could come of it. He said he has always staffed cases with attorneys from both offices and hopes to keep as many of the associates he works with as he can.
King would not comment on whether or not the decision was influenced by the fact that Kennedy, a linchpin in the San Francisco office, is nearing Skadden’s mandatory retirement age. According to media reports, Skadden’s policy dictates partners begin winding down their practice at age 67 and retire at 70; Kennedy is 66.
King said Kennedy was closely involved in the recruitment of Ruby, who is 65, and that Kennedy will “remain a terrific and valuable contributor to what we’re doing in the Bay Area for the foreseeable future.”
Clients haven’t been told yet about the move, but King said he doubts they’ll take issue with getting calls from a number with a 650 area code instead of a 415.
“I know they will not care because we consolidated corporate into Palo Alto and that hasn’t made any difference at all,” King said. Current San Francisco-based clients include McKesson Corp., Visa, Calera Capital and Zynga.
King said he expects some associates and counsel will choose not to make the move, but he has one idea to lure them over: “The view of the Dumbarton Bridge is underrated,” he said. “While it’s not the Golden Gate Bridge, the Dumbarton Bridge view is not so bad either.”