Powerhouse Industry Firm Divorces

The moves cap a year of uncertainty kicked off by concerns within the firm about a succession plan. Grossman and Stein, both in their 60s, together accounted for almost half the firm's billings, according to some accounts. But in charting a new course for the firm, the two had very different ideas ' and, judging by their recent remarks, little fondness or respect for each other.

Stein, who represents the Olson twins, Hilary Duff, skater Tony Hawk, Marvel Entertainment, the World Poker Tour and Lion's Gate, wanted to grow by adding lawyers in ones and twos. Grossman, a fierce commercial litigator, wanted to move more quickly. At his urging, the firm entered merger talks with Robins, Kaplan, Miller & Ciresi early last year. But with Grossman and Stein at odds, along with other logistical concerns, the talks accomplished little beyond signaling to other firms that they could pick off nervous partners.

'When you discuss a merger with a large firm, then you're in play,' Stein said last week. 'All of your partners get attacked.'

The more Stein heard, the less interest he says he had with a big merger, citing both practical and ideological concerns. But Grossman plunged ahead with merger talks, making it clear he would move with or without Stein's blessing. So when Marc Dreier, head of the 100-lawyer New York firm that carries his name, approached Stein, he was receptive.

'Dreier is the antithesis of a large firm,' Stein said. 'We can be mid-sized without the conflicts that big firms have and without the infrastructure.'

Calling himself 'naive,' Grossman said he saw a merger as a way to resolve lingering differences he had with Stein about their approach to clients, case management and mentoring of young lawyers. 'My feeling was that if we merged firms, the issues we were facing could be dealt with by the management of the other law firm,' Grossman explained.

Historical Backdrop

In 1999, Alschuler, Grossman & Pines was eager to throw its litigation practice in with Stein & Kahan's entertainment and corporate boutique. Even then, observers questioned whether the new offices were big enough to house the dueling egos of the longtime friends. Grossman, who like Stein earns a top ranking in the Chambers guide, represents Blockbuster Entertainment in litigation with Netflix. He also
represents Grupo Televisa in litigation against Univision, and is the current chairman of the Commission on Judicial Performance.

A partner knowledgeable about the firm's finances said revenue grew from about $20 million-$25 million in 1999 to $60 million in 2006, with about half that distributed to partners. A recruiter familiar with the firm's finances put revenue at $62 million, and profits per partner in the $700,000 range.

Stein, who is 62, spent the early part of the year resisting Grossman's push toward a merger. When Grossman started talking seriously with Cooley Godward in May, Stein got more serious about Marc Dreier. 'Cooley was not interested in dealing with the internal issues we had to deal with,' Grossman said. That's when, he said, he resigned himself to dealing with them on his own. 'That provided the impetus for the change you have now seen take place,' he said.

Stein's talks with Dreier progressed on one floor while Grossman's talks with Cooley proceeded on another. But the firm was leaking lawyers. In July, four partners left the firm to open a Century City office for Washington, DC-based Steptoe & Johnson. Another partner followed soon thereafter. Recruiters tried to lure associates away from a firm in turmoil.

In September, Cooley called a halt to the merger talks, announcing it would instead combine with New York's Kronish Lieb Weiner & Hellman. 'Cooley asked us if we'd be willing to sit tight until end-of-year then see what things looked like Jan. 1, and we demurred,' Grossman explained. 'It's sort of, 'How do you go back to an old lover after you've broken off?”

Over the course of months, Stein, Grossman and Kahan would meet in the firm's conference rooms to devise a separation agreement, ironing out details such as a sub-lease for one of the floors. Eventually, they brought in a mediator to finalize the split. The firm's lawyers would be allowed to choose which partner to follow, they said, though other insiders say tensions arose when it came to courting new associates and staff members.

Over New Year's, a crew swept into The Water Garden and moved Dreier, Stein & Kahan into two floors below Alschuler Grossman.

Kellie Schmitt is a reporter for The Recorder, the San Francisco-based daily legal newspaper and an ALM affiliate of this newsletter.

Marshall Grossman and Stanton 'Larry' Stein may be in for some awkward elevator rides. The two heavyweights at L.A.'s Alschuler Grossman Stein & Kahan officially divorced Jan. 1, after a year-long tug-of-war over the future of the 90-lawyer firm they'd fused together seven years ago. Now they've got their own firms, but they're just one floor away in Santa Monica's Water Garden building.

The split leaves Grossman as the head of a 40-plus lawyer commercial litigation boutique with a shortened name ' Alschuler Grossman ' and with thoughts of making a quick marriage to a national firm. Stein, along with corporate partner Robert Kahan, has already moved on, launching an L.A. affiliate for New York's Dreier firm with about 35 Alschuler lawyers and other hires.

End of an Uncertain Year

The moves cap a year of uncertainty kicked off by concerns within the firm about a succession plan. Grossman and Stein, both in their 60s, together accounted for almost half the firm's billings, according to some accounts. But in charting a new course for the firm, the two had very different ideas ' and, judging by their recent remarks, little fondness or respect for each other.

Stein, who represents the Olson twins, Hilary Duff, skater Tony Hawk, Marvel Entertainment, the World Poker Tour and Lion's Gate, wanted to grow by adding lawyers in ones and twos. Grossman, a fierce commercial litigator, wanted to move more quickly. At his urging, the firm entered merger talks with Robins, Kaplan, Miller & Ciresi early last year. But with Grossman and Stein at odds, along with other logistical concerns, the talks accomplished little beyond signaling to other firms that they could pick off nervous partners.

'When you discuss a merger with a large firm, then you're in play,' Stein said last week. 'All of your partners get attacked.'

The more Stein heard, the less interest he says he had with a big merger, citing both practical and ideological concerns. But Grossman plunged ahead with merger talks, making it clear he would move with or without Stein's blessing. So when Marc Dreier, head of the 100-lawyer New York firm that carries his name, approached Stein, he was receptive.

'Dreier is the antithesis of a large firm,' Stein said. 'We can be mid-sized without the conflicts that big firms have and without the infrastructure.'

Calling himself 'naive,' Grossman said he saw a merger as a way to resolve lingering differences he had with Stein about their approach to clients, case management and mentoring of young lawyers. 'My feeling was that if we merged firms, the issues we were facing could be dealt with by the management of the other law firm,' Grossman explained.

Historical Backdrop

In 1999, Alschuler, Grossman & Pines was eager to throw its litigation practice in with Stein & Kahan's entertainment and corporate boutique. Even then, observers questioned whether the new offices were big enough to house the dueling egos of the longtime friends. Grossman, who like Stein earns a top ranking in the Chambers guide, represents Blockbuster Entertainment in litigation with Netflix. He also
represents Grupo Televisa in litigation against Univision, and is the current chairman of the Commission on Judicial Performance.

A partner knowledgeable about the firm's finances said revenue grew from about $20 million-$25 million in 1999 to $60 million in 2006, with about half that distributed to partners. A recruiter familiar with the firm's finances put revenue at $62 million, and profits per partner in the $700,000 range.

Stein, who is 62, spent the early part of the year resisting Grossman's push toward a merger. When Grossman started talking seriously with Cooley Godward in May, Stein got more serious about Marc Dreier. 'Cooley was not interested in dealing with the internal issues we had to deal with,' Grossman said. That's when, he said, he resigned himself to dealing with them on his own. 'That provided the impetus for the change you have now seen take place,' he said.

Stein's talks with Dreier progressed on one floor while Grossman's talks with Cooley proceeded on another. But the firm was leaking lawyers. In July, four partners left the firm to open a Century City office for Washington, DC-based Steptoe & Johnson. Another partner followed soon thereafter. Recruiters tried to lure associates away from a firm in turmoil.

In September, Cooley called a halt to the merger talks, announcing it would instead combine with New York's Kronish Lieb Weiner & Hellman. 'Cooley asked us if we'd be willing to sit tight until end-of-year then see what things looked like Jan. 1, and we demurred,' Grossman explained. 'It's sort of, 'How do you go back to an old lover after you've broken off?”

Over the course of months, Stein, Grossman and Kahan would meet in the firm's conference rooms to devise a separation agreement, ironing out details such as a sub-lease for one of the floors. Eventually, they brought in a mediator to finalize the split. The firm's lawyers would be allowed to choose which partner to follow, they said, though other insiders say tensions arose when it came to courting new associates and staff members.

Over New Year's, a crew swept into The Water Garden and moved Dreier, Stein & Kahan into two floors below Alschuler Grossman.

Kellie Schmitt is a reporter for The Recorder, the San Francisco-based daily legal newspaper and an ALM affiliate of this newsletter.