Branches, Boutiques And Client Conflicts

As analyzed in several A&FP articles, a major strategic goal of many law firms is to attain and maintain dominance for specific practice areas in a legal market. One downside of dominance in a practice area, however, is that a firm may increasingly need to turn away work in other practice areas due to client conflicts.

Compared with the growth of a firm's client list, the growth potential for client conflicts is exponential. Published advice on conflict avoidance for solo practitioners and small firms amounts to making a list and checking it twice. By contrast, the conflict avoidance systems marketed to large firms seem to find it necessary to promise automated assistance for reviewing multiple digital and imaged data streams of engagement letters, waivers, billing records, etc.

While the problem of client conflicts does not seem to be limiting overall firm growth, it has motivated some firm-hopping by practice areas, and opened up ecological niches for boutique firms. In lieu of overall team depth, the latter provide highly specialized expertise at a reduced-cost.

From the following excerpts of recent news analyses from A&FP's ALM affiliates, it seems reasonable to conjecture that conflict-related attorney movements between firms help maintain a healthy level of competition in legal services that excessive dominance might otherwise undermine.

Julie Kay describes how conflicts led a practice group from one firm to jump to another firm. Meredith Hobbs, by contrast, describes how the absence of significant conflicts made it possible for a boutique to merge with a larger firm. Finally, Petra Pasternak describes how several IP boutiques successfully compete with and complement the services of larger firms.

Small Miami Firm Raids Ruden McClosky
By Julie Kay, Daily Business Review

In a blow to Ruden McClosky, seven lawyers at the large Fort Lauderdale, FL-based law firm ' including the leaders of the white-collar and bankruptcy practices ' left to open a new Broward County office for Miami-based Genovese Joblove & Battista, a 25-lawyer firm.

Key departing lawyers say the reason for the move was that Ruden McClosky, which represents nearly every bank and financial institution in Broward County, presented too many conflicts.

Thomas Messana, the head of Ruden's bankruptcy practice; Marc Nurik, the head of Ruden's white-collar practice; and Theresa Van Vliet, a white-collar partner, said they lost clients because they could not represent anyone who was in an adverse relationship to Ruden's bank clients. 'We were forced to turn down clients,' said Nurik, who worked at Ruden for 8 years. 'We are making this move to allow our practice group to thrive without conflicts.'

Also moving from Ruden to Geno-vese are associates Patsy Zimmerman and Lara Reiss in the white-collar group, and of counsel David Stern and associate Scott Underwood in the bankruptcy group, as well as a number of legal staff.

At Ruden, Messana said, he was able to 'cobble together a pretty good practice' representing creditors, buyers of assets, trustees and government agencies like the Federal Trade Commission and 11 state attorneys general. But, due to conflicts, he was able to represent debtors in only two Chapter 11 bankruptcy cases during his years at Ruden, since debtors are adversial to banks. 'That's the stuff that's the most creative and fun.'

Some large corporate law firms that represent many banking financial services industry clients either do not offer bankruptcy services because of the conflicts or else must ask their banking industry clients to waive conflicts of interest, Messana said.

Reflections on the Move

Carl Schuster, managing partner of the 192-lawyer Ruden McClosky, said he's already interviewing candidates to replace Messana and his group but will need more time to hire a white-collar, criminal defense attorney.

'We cannot have a Fort Lauderdale office without a bankruptcy practice,' Schuster said. 'We will eventually hire a criminal defense attorney, but we will check to make sure there are no conflict issues first.'

Schuster said he understood why the lawyers would leave if they were losing business due to client conflicts.

John Genovese, managing partner of the Genovese firm, said the decision to open an office in Fort Lauderdale was made spontaneously. Nurik and Messana are long-time friends of his.

'We don't have a fixed growth plan,' partner Michael Joblove said. 'It wasn't our plan to be in Fort Lauderdale. But we've been friends with some of these lawyers for years, and the opportunity presented itself to bring them on board.'

Messana, a former co-chair of the Florida Bar bankruptcy judicial liaison committee and former president of the Bankruptcy Bar Association of the Southern District of Florida, said he plans to expand his new practice at Genovese and hire two associates immediately. 'This feels very comfortable to us,' he said. 'This is an opportunity to practice with friends and do high-end work.'

Sutherland Asbill Merges With Construction Boutique
By Meredith Hobbs, Fulton County Daily Report

After 26 years as a construction law boutique, Griffin Cochrane & Marshall has combined with Sutherland Asbill & Brennan.

The Griffin Cochrane firm, including 10 lawyers and their staff, has moved from the Candler Building in Atlanta to the 22nd floor of Sutherland's offices at 999 Peachtree St. Jennifer W. 'Jenny' Fletcher, who joins Sutherland as a partner, will lead the newly expanded Sutherland construction practice.

Sutherland's managing partner, Mark D. Wasserman, said his firm had been trying to recruit the Griffin Cochrane lawyers for 2 years. 'Even though we were doing some construction work, we did not have as deep a bench and could not do as much as we would have liked,' Wasserman said.

The Griffin Cochrane lawyers will more than double the size of Sutherland's construction litigation and arbitration practice and add experience in contracts and development. A construction practice will fit strategically with the firm's practices in energy, real estate and manufacturing, since those clients can use construction law services, Wasserman said.

Griffin Cochrane has a long history in Atlanta. The firm spun off from the old Trotter Bondurant Griffin firm in 1980 to focus exclusively on construction law.

Davis, who had been the president of the construction boutique, said he started thinking about merging with Sutherland after a busy period where he had to turn down work. 'I turned down a power plant in Taiwan because I was too busy. I turned down a $10 million matter in Puerto Rico because I was too busy. That'll make you sick,' he said.

Davis had spent his entire career at Griffin Cochrane after joining the firm in 1982.

Fletcher, who joined Griffin Cochrane a year later, in 1983, said when the two firms compared client lists, 'there were not significant conflicts, and I saw opportunities.' She said the merger will allow her and her partners to offer finance, real estate and corporate legal expertise to their clients.

Mini-Boutiques Carve a Special IP Niche
By Petra Pasternak, The Recorder

Two years ago, Palm Inc. General Counsel Mary Doyle spent 20 hours combing the Web for patent lawyers. Her target was the smallest of IP boutiques, with no more than three to six lawyers. Today, they are no easier to find.

While some of these mini-boutiques are so small they don't even have an online presence, what they have to offer is irresistible to GCs constrained by tight budgets: a highly specialized legal expertise, familiarity with the industry and cost competitiveness.

'Like most [Silicon] Valley companies, we look for exceptional quality at a good price,' Doyle said. 'We're looking to file as many patent applications as we can for our investment dollar. In our experience, big firms can't consistently compete on price in this area.'

Most are manned by computer scientists and engineers of all stripes who crowned their technical degrees with a law degree. Operating with low overhead and single-minded purpose, patent boutiques generally have no venture capital connections, no litigation or corporate capacity, and only limited licensing abilities.

Many IP boutiques rose from the ashes of medium-sized firms that shrank or folded after the Internet bust. Still others are big-firm refugees: lawyers who realized they could run their own practice without the hassles of a big firm while charging less and still making more money.

The Patent Law Group

Brian Ogonowsky and a handful of other lawyers founded the Patent Law Group in 2002 after leaving Skjerven Morrill Macpherson a year before the 62-attorney IP firm folded.

'We were tired of training the associates, tired of the instability,' Ogon-owsky said. 'We just wanted to do the work.'

The core of the group's work is writing patent applications and prosecuting them for high-tech clients such as Micrel Inc., Philips Lumileds Lighting Co. and National Semiconductor. Ogonowsky holds a degree in electrical engineering, while others at his firm have degrees in mechanical and chemical engineering.

There's surprisingly little overhead to the business, Ogonowsky said, and less hustle for more buck. 'At Skjerven as a senior partner I would make 50% of my billings,' he said. 'Here I make 75%, so I make a lot more money, and I don't work as hard.'

Part of the micro-boutique strategy is to pass the cost savings on to the client. The Patent Law Group's four lawyers, all senior-level, charge between $250 and $340 an hour. 'I have more than 20 years of experience,' Ogonowsky said. 'I would be billing $500 per hour at a large firm.'

Client Vince Tortolano, Micrel's vice president and general counsel, has worked with Ogonowsky for almost 20 years, following the lawyer after his departure from Skjerven. Tortolano said the 900-employee company's IP portfolio has been ramping up rapidly over the past 6 years, helping it to garner an estimated $250 million in annual revenue.

'Because we're a smaller company, it makes sense to try to find firms that we can get a little closer attention from ' [The Patent Law Group's] knowledge of our technology and the fact that they're very cost-effective make them a very good choice for us to use in our patent prosecution.'

Vierra Magen Marcus & DeNiro

Most tiny-firm lawyers say they have no interest in competing for work with the big boys. In fact, many partner with big-firm lawyers through informal networks, swapping client referrals and passing on work.

'We're slow growers,' said Burt Magen, a partner at seven-lawyer Vierra Magen Marcus & DeNiro. 'We intend to stay a boutique. If you're a multi-practice firm, there tends to be more friction among partners and more inefficiencies that translate to higher costs to clients.'

Magen, whose clients include SanDisk Corp. and Microsoft Corp., said his firm stays away from litigation because it requires more resources and instead partners with lawyers at big firms on an as-needed basis.

'We don't take clients from them, we make them look good,' Magen said. 'They refer clients to us, we do the work, we refer clients to them, everyone is happy,' he said. 'The important thing is to find a couple of good firms who you know will do a good job so the client is satisfied.'

Hickman, Palermo, Truong & Becker

Despite the competition for talent, there's so much work to go around that some IP boutiques are not only turning clients down, they are growing past the micro stage.

Founded in 2000, Hickman, Palermo, Truong & Becker has a single office of 15 lawyers in San Jose, CA. The firm handles transactional IP legal services, including patent prosecution and preparation, trademark prosecution and copyright registration.

HPTB partner Christopher Palermo said he's seen a 'significant increase in business since the summer of 2005, and his firm is in growth mode to support the growing business. Work is coming from large-cap companies, venture capitalists seeking help for their patent portfolio companies, and large and mid-sized startups, he said.

While Palermo closely guards the names of his clients, U.S. Patent and Trademark Office records show the firm has recently worked for TiVo, Netflix, Apple Computer Inc. and Cisco Systems Inc., among others. And his firm is hiring at every experience level, from law students to laterals.

So far, 2006 looks 'totally bullish,' according to Palermo. 'There's more work than anyone can do right now,' he said. 'It's not quite 1999, but I get many calls that I have to decline or can't take on.'

That may explain why Doyle, the Palm GC, says companies closely guard the names of their favorite hard-to-find mini-boutiques. 'There are no lists,' she said. 'You have to talk to someone who knows.'

As analyzed in several A&FP articles, a major strategic goal of many law firms is to attain and maintain dominance for specific practice areas in a legal market. One downside of dominance in a practice area, however, is that a firm may increasingly need to turn away work in other practice areas due to client conflicts.

Compared with the growth of a firm's client list, the growth potential for client conflicts is exponential. Published advice on conflict avoidance for solo practitioners and small firms amounts to making a list and checking it twice. By contrast, the conflict avoidance systems marketed to large firms seem to find it necessary to promise automated assistance for reviewing multiple digital and imaged data streams of engagement letters, waivers, billing records, etc.

While the problem of client conflicts does not seem to be limiting overall firm growth, it has motivated some firm-hopping by practice areas, and opened up ecological niches for boutique firms. In lieu of overall team depth, the latter provide highly specialized expertise at a reduced-cost.

From the following excerpts of recent news analyses from A&FP's ALM affiliates, it seems reasonable to conjecture that conflict-related attorney movements between firms help maintain a healthy level of competition in legal services that excessive dominance might otherwise undermine.

Julie Kay describes how conflicts led a practice group from one firm to jump to another firm. Meredith Hobbs, by contrast, describes how the absence of significant conflicts made it possible for a boutique to merge with a larger firm. Finally, Petra Pasternak describes how several IP boutiques successfully compete with and complement the services of larger firms.

Small Miami Firm Raids Ruden McClosky
By Julie Kay, Daily Business Review

In a blow to Ruden McClosky, seven lawyers at the large Fort Lauderdale, FL-based law firm ' including the leaders of the white-collar and bankruptcy practices ' left to open a new Broward County office for Miami-based Genovese Joblove & Battista, a 25-lawyer firm.

Key departing lawyers say the reason for the move was that Ruden McClosky, which represents nearly every bank and financial institution in Broward County, presented too many conflicts.

Thomas Messana, the head of Ruden's bankruptcy practice; Marc Nurik, the head of Ruden's white-collar practice; and Theresa Van Vliet, a white-collar partner, said they lost clients because they could not represent anyone who was in an adverse relationship to Ruden's bank clients. 'We were forced to turn down clients,' said Nurik, who worked at Ruden for 8 years. 'We are making this move to allow our practice group to thrive without conflicts.'

Also moving from Ruden to Geno-vese are associates Patsy Zimmerman and Lara Reiss in the white-collar group, and of counsel David Stern and associate Scott Underwood in the bankruptcy group, as well as a number of legal staff.

At Ruden, Messana said, he was able to 'cobble together a pretty good practice' representing creditors, buyers of assets, trustees and government agencies like the Federal Trade Commission and 11 state attorneys general. But, due to conflicts, he was able to represent debtors in only two Chapter 11 bankruptcy cases during his years at Ruden, since debtors are adversial to banks. 'That's the stuff that's the most creative and fun.'

Some large corporate law firms that represent many banking financial services industry clients either do not offer bankruptcy services because of the conflicts or else must ask their banking industry clients to waive conflicts of interest, Messana said.

Reflections on the Move

Carl Schuster, managing partner of the 192-lawyer Ruden McClosky, said he's already interviewing candidates to replace Messana and his group but will need more time to hire a white-collar, criminal defense attorney.

'We cannot have a Fort Lauderdale office without a bankruptcy practice,' Schuster said. 'We will eventually hire a criminal defense attorney, but we will check to make sure there are no conflict issues first.'

Schuster said he understood why the lawyers would leave if they were losing business due to client conflicts.

John Genovese, managing partner of the Genovese firm, said the decision to open an office in Fort Lauderdale was made spontaneously. Nurik and Messana are long-time friends of his.

'We don't have a fixed growth plan,' partner Michael Joblove said. 'It wasn't our plan to be in Fort Lauderdale. But we've been friends with some of these lawyers for years, and the opportunity presented itself to bring them on board.'

Messana, a former co-chair of the Florida Bar bankruptcy judicial liaison committee and former president of the Bankruptcy Bar Association of the Southern District of Florida, said he plans to expand his new practice at Genovese and hire two associates immediately. 'This feels very comfortable to us,' he said. 'This is an opportunity to practice with friends and do high-end work.'

Sutherland Asbill Merges With Construction Boutique
By Meredith Hobbs, Fulton County Daily Report

After 26 years as a construction law boutique, Griffin Cochrane & Marshall has combined with Sutherland Asbill & Brennan.

The Griffin Cochrane firm, including 10 lawyers and their staff, has moved from the Candler Building in Atlanta to the 22nd floor of Sutherland's offices at 999 Peachtree St. Jennifer W. 'Jenny' Fletcher, who joins Sutherland as a partner, will lead the newly expanded Sutherland construction practice.

Sutherland's managing partner, Mark D. Wasserman, said his firm had been trying to recruit the Griffin Cochrane lawyers for 2 years. 'Even though we were doing some construction work, we did not have as deep a bench and could not do as much as we would have liked,' Wasserman said.

The Griffin Cochrane lawyers will more than double the size of Sutherland's construction litigation and arbitration practice and add experience in contracts and development. A construction practice will fit strategically with the firm's practices in energy, real estate and manufacturing, since those clients can use construction law services, Wasserman said.

Griffin Cochrane has a long history in Atlanta. The firm spun off from the old Trotter Bondurant Griffin firm in 1980 to focus exclusively on construction law.

Davis, who had been the president of the construction boutique, said he started thinking about merging with Sutherland after a busy period where he had to turn down work. 'I turned down a power plant in Taiwan because I was too busy. I turned down a $10 million matter in Puerto Rico because I was too busy. That'll make you sick,' he said.

Davis had spent his entire career at Griffin Cochrane after joining the firm in 1982.

Fletcher, who joined Griffin Cochrane a year later, in 1983, said when the two firms compared client lists, 'there were not significant conflicts, and I saw opportunities.' She said the merger will allow her and her partners to offer finance, real estate and corporate legal expertise to their clients.

Mini-Boutiques Carve a Special IP Niche
By Petra Pasternak, The Recorder

Two years ago, Palm Inc. General Counsel Mary Doyle spent 20 hours combing the Web for patent lawyers. Her target was the smallest of IP boutiques, with no more than three to six lawyers. Today, they are no easier to find.

While some of these mini-boutiques are so small they don't even have an online presence, what they have to offer is irresistible to GCs constrained by tight budgets: a highly specialized legal expertise, familiarity with the industry and cost competitiveness.

'Like most [Silicon] Valley companies, we look for exceptional quality at a good price,' Doyle said. 'We're looking to file as many patent applications as we can for our investment dollar. In our experience, big firms can't consistently compete on price in this area.'

Most are manned by computer scientists and engineers of all stripes who crowned their technical degrees with a law degree. Operating with low overhead and single-minded purpose, patent boutiques generally have no venture capital connections, no litigation or corporate capacity, and only limited licensing abilities.

Many IP boutiques rose from the ashes of medium-sized firms that shrank or folded after the Internet bust. Still others are big-firm refugees: lawyers who realized they could run their own practice without the hassles of a big firm while charging less and still making more money.

The Patent Law Group

Brian Ogonowsky and a handful of other lawyers founded the Patent Law Group in 2002 after leaving Skjerven Morrill Macpherson a year before the 62-attorney IP firm folded.

'We were tired of training the associates, tired of the instability,' Ogon-owsky said. 'We just wanted to do the work.'

The core of the group's work is writing patent applications and prosecuting them for high-tech clients such as Micrel Inc., Philips Lumileds Lighting Co. and National Semiconductor. Ogonowsky holds a degree in electrical engineering, while others at his firm have degrees in mechanical and chemical engineering.

There's surprisingly little overhead to the business, Ogonowsky said, and less hustle for more buck. 'At Skjerven as a senior partner I would make 50% of my billings,' he said. 'Here I make 75%, so I make a lot more money, and I don't work as hard.'

Part of the micro-boutique strategy is to pass the cost savings on to the client. The Patent Law Group's four lawyers, all senior-level, charge between $250 and $340 an hour. 'I have more than 20 years of experience,' Ogonowsky said. 'I would be billing $500 per hour at a large firm.'

Client Vince Tortolano, Micrel's vice president and general counsel, has worked with Ogonowsky for almost 20 years, following the lawyer after his departure from Skjerven. Tortolano said the 900-employee company's IP portfolio has been ramping up rapidly over the past 6 years, helping it to garner an estimated $250 million in annual revenue.

'Because we're a smaller company, it makes sense to try to find firms that we can get a little closer attention from ' [The Patent Law Group's] knowledge of our technology and the fact that they're very cost-effective make them a very good choice for us to use in our patent prosecution.'

Vierra Magen Marcus & DeNiro

Most tiny-firm lawyers say they have no interest in competing for work with the big boys. In fact, many partner with big-firm lawyers through informal networks, swapping client referrals and passing on work.

'We're slow growers,' said Burt Magen, a partner at seven-lawyer Vierra Magen Marcus & DeNiro. 'We intend to stay a boutique. If you're a multi-practice firm, there tends to be more friction among partners and more inefficiencies that translate to higher costs to clients.'

Magen, whose clients include SanDisk Corp. and Microsoft Corp., said his firm stays away from litigation because it requires more resources and instead partners with lawyers at big firms on an as-needed basis.

'We don't take clients from them, we make them look good,' Magen said. 'They refer clients to us, we do the work, we refer clients to them, everyone is happy,' he said. 'The important thing is to find a couple of good firms who you know will do a good job so the client is satisfied.'

Hickman, Palermo, Truong & Becker

Despite the competition for talent, there's so much work to go around that some IP boutiques are not only turning clients down, they are growing past the micro stage.

Founded in 2000, Hickman, Palermo, Truong & Becker has a single office of 15 lawyers in San Jose, CA. The firm handles transactional IP legal services, including patent prosecution and preparation, trademark prosecution and copyright registration.

HPTB partner Christopher Palermo said he's seen a 'significant increase in business since the summer of 2005, and his firm is in growth mode to support the growing business. Work is coming from large-cap companies, venture capitalists seeking help for their patent portfolio companies, and large and mid-sized startups, he said.

While Palermo closely guards the names of his clients, U.S. Patent and Trademark Office records show the firm has recently worked for TiVo, Netflix, Apple Computer Inc. and Cisco Systems Inc., among others. And his firm is hiring at every experience level, from law students to laterals.

So far, 2006 looks 'totally bullish,' according to Palermo. 'There's more work than anyone can do right now,' he said. 'It's not quite 1999, but I get many calls that I have to decline or can't take on.'

That may explain why Doyle, the Palm GC, says companies closely guard the names of their favorite hard-to-find mini-boutiques. 'There are no lists,' she said. 'You have to talk to someone who knows.'