Large Firms
Jul. 30, 2002
Onward, Upward
On the first Friday in June, Richard Odom boarded a plane in Los Angeles bound for San Francisco. Odom, chairman of San Francisco's Brobeck, Phleger & Harrison, had an unenviable mission: rally his 157 partners, who had been pummeled by bad press for weeks.
On the first Friday in June, Richard Odom boarded a plane in Los Angeles bound for San Francisco.
Odom, chairman of San Francisco's Brobeck, Phleger & Harrison, had an unenviable mission: rally his 157 partners, who had been pummeled by bad press for weeks.
As the weary partners arrived at the San Mateo Marriott for a hastily planned weekend retreat, the work before them was daunting.
"We all knew why we were there," says Kevin Lavin of the Reston, Va., office.
To most Brobeck Phleger partners, the reason was summed up in three words: Tower Snow Jr., the former chairman whom they had ousted from the firm three weeks earlier.
The partners expelled Snow after the media reported that he was brokering a deal to launch California offices for London's Clifford Chance Rogers & Wells with most of the securities litigation practice and $50 million in business from San Francisco-based Brobeck Phleger.
The deal, with on-again, off-again negotiations that made national headlines, closed May 30. Within a week, 16 partners tendered their resignations, and as many as 80 associates reportedly were expected to follow.
After the deal was announced, media reports circulated that more Brobeck Phleger partners would jump ship and that firm leaders were trying to identify disloyal partners and intimidate lawyers into staying.
Brobeck Phleger management quickly called a partners' meeting.
"The announcement that this group was leaving for Clifford Chance created a fair amount of anxiety," says Richard Gilden, managing partner of Brobeck Phleger's New York office.
The retreat was an attempt to "get together to stem that anxiety," Gilden says.
Snow was not a scheduled topic of discussion at the San Mateo retreat.
The partners were ready to focus on the future.
"There was certainly concern about what the firm's goals would be," Gilden says.
The direction of the firm had taken a turn in December, when Snow announced that he was stepping down as chairman after four years. Under Snow, Brobeck Phleger repositioned itself from servicing a mix of old-economy clients and technology companies to serving a much higher concentration of tech firms and startups.
To facilitate the firm's transformation into a high-tech powerhouse, Snow hired hundreds of new lawyers and raised first-year salaries to $135,000, among the highest in the country.
Snow also scheduled firm retreats in lavish locales, such as the Manele Bay resort, in Lanai, Hawaii, to which partners could bring their families.
But this June 7 partner retreat was decidedly different.
Instead of sandy beaches on a tropical island, the partners would spend the weekend at the intersection of Highways 101 and 92, not far from the firm's headquarters in San Francisco - and no families permitted.
Managing partner Richard Parker soberly says the retreat was not about entertainment.
"Partners needed to talk about their business," Parker says.
"[Under Snow], there was a feeling that more and more decisions were being determined at the top and passed down," Odom says. "Rick and I have all along said that what we want to do is get more decision making down to the partners."
The retreat, Odom says, was "an opportunity for the partners to get together and discuss their views openly."
Even so, not all partners were convinced that the weekend retreat would make a difference.
"Going into it, I was a touch skeptical whether anything meaningful would come out of it," Lavin says.
Before they arrived, each partner received a copy of Jay W. Lorsch and Thomas J. Tierney's business book, "Aligning the Stars." When they checked into the hotel, partners found waiting for them a Lucite, star-shaped paperweight with "BROBECK" etched into it, along with a schedule of the weekend's events.
Lavin kept the paperweight, but he hasn't read the book. Like most of his colleagues, he didn't have anything to wear for Friday night's Caribbean-themed surf-and-turf dinner in the hotel's Golden Gate ballroom.
"We're lawyers, right?" Lavin quips. "There were few people in Caribbean clothes."
After dinner, Odom spoke to the group. According to the partners, his presentation was indicative of Brobeck Phleger's new leadership.
Odom does not seek attention, partners say, which is in stark contrast to his predecessor, whose personal skills helped thrust Brobeck Phleger into the elite and most profitable law firms in the nation.
"Tower is a media machine," San Diego real estate partner Bill Sullivan says. "If you listened to Tower, you'd believe that everything about Brobeck he invented. The problem [for Brobeck Phleger's partners] was that Tower had grabbed the microphone and it was difficult for others to be heard."
Snow insists he never took undue credit for Brobeck Phleger's success.
No indication of Brobeck Phleger's break from the Snow era is more telling than the man chosen as his successor.
Snow joined Brobeck Phleger in 1994 from Shearman & Sterling and catapulted to the top leadership position three years later.
Except for one year at Howrey Simon Arnold & White and another year in the U.S. Army, Odom has served 34 years at Brobeck Phleger.
The difference in leadership illustrates a valuable, if costly, lesson for Brobeck Phleger, Sullivan says.
"The lesson is," he says, "you need to know people if you're going to give them your most important job."
At the dinner, Odom offered brief introductory remarks and then did something that partners say Snow would never have done: He turned the attention to other attorneys.
Odom introduced a group of Brobeck Phleger litigators responsible for winning a recent $975 million settlement. For eight years, the firm represented Western MacArthur Co. in a bad-faith suit against insurance giant St. Paul Cos.
St. Paul refused to indemnify Western MacArthur for thousands of claims arising from asbestos litigation filed against Western MacArthur entities years ago.
The terms of the settlement are confidential, and Brobeck Phleger isn't divulging how much it earned on the case, but the firm reportedly is slated to pull in up to $300 million on a partial contingency arrangement.
David Halbreich, a partner in the Los Angeles office, served as the lead trial lawyer. Odom also played a role in the case.
Halbreich and others presented video clips of depositions in the MacArthur case, demonstrating how Brobeck Phleger lawyers pressed for discovery that showed St. Paul had insured Western MacArthur.
"You really saw how the case got built," Lavin says. "Our lawyers went to extraordinary lengths to both find the evidence that our client was insured and to get that evidence introduced into trial."
Lavin says the presentation concluded with an audio clip of Jay Fishman, St. Paul's chairman and chief executive officer, "explaining to financial analysts why [St. Paul] settled, and for all practical purposes, acknowledging that they got beat in the courtroom."
For Brobeck Phleger in recent weeks, the presentation was a rare high point. What started out as a sober, soul-searching evening concluded in celebration. Some partners, tired from travel, went to bed; others drank late into the night, Gilden says.
While the late-night partners sipped cocktails, discussions turned to Snow.
The partners are of two minds about Snow and the Clifford Chance deal, Gilden says.
"They're angry about a chairman who led the firm for a period of time and built an organization, and when it started to falter, not only left but encouraged others to leave," Gilden says.
Partners are also empathetic toward colleagues who felt compelled to follow Snow even if they didn't want to leave Brobeck Phleger.
"If your practice is leaving and you don't have clients of your own, what choice do you have?" Gilden says.
Lavin is confused by those who feel sorry for the departing partners.
"[Snow] has disappeared," he says. "So why would you not stay [at Brobeck Phleger] to fill the void rather than feel like you can only succeed only under the shadow of Tower?"
"These folks are afraid to be competing against him, and I think that's unfortunate," Lavin adds.
When the attorneys awoke Saturday morning, it was a warm clear day. Except for a few partners who slept in because they drank too much the night before, Gilden says, lawyers were up and ready for an 8 a.m. "status of the firm" speech by Odom and an update from Brobeck Phleger's policy committee.
Conspicuously absent from the meeting, of course, were the partners who had submitted their resignations. Those partners were not invited but continued working at Brobeck Phleger under a 30-day notice period provided for in the partnership agreement.
John Larson, a 40-year Brobeck Phleger veteran who served as the firm's chairman from 1988 to 1996, says the continued presence at the firm of the departing partners was strange.
"It's awkward because they're going to leave and they want to compete with us," Larson says.
While some Brobeck Phleger lawyers were concerned with how much business the departing partners would take with them to Clifford Chance, Larson wasn't worried.
"Departing partners will be surprised by what they expect to get and what they do get," he says.
As Saturday got under way in San Mateo, Steve Finn, a partner in San Francisco and architect of the retreat, says 40 of Brobeck Phleger's "best and brightest - long-term partners who have their gut in it - were selected to lead discussion groups. Topics included vision strategy, client service, and compensation and firm governance.
The discussions also centered on whether Brobeck Phleger will continue to focus almost exclusively on technology and how much control the firm's California headquarters will exert on outside offices and individual practices, according to partners.
Parker says partners came to the retreat "chaffing" at a uniform set of rules adopted during Snow's tenure governing just about everything, from billing rates to the types of clients the firm would accept.
"There was a widespread sense that there had been a one-size-fits-all approach," he says.
Gilden agrees.
"We're in a lot of different markets, and there was a common recognition that what works in Palo Alto may not work in New York," he says. "If we're going to succeed, we ought to tailor each office to its market."
Both partners say a consensus emerged that Brobeck Phleger must remain committed to startup companies backed by venture capital, but not exclusively computer or Internet companies, and that each office must have the autonomy to pursue those clients on its own.
"A media company that's venture-backed is of just as much interest as a chip company that is venture-backed," Gilden says.
Lavin says there also was consensus that Brobeck Phleger will no longer ignore its Fortune 100 clients that "may or may not be" technology firms, such as Exxon Mobil Corp., Baxter International Inc. and McKesson Corp.
"Tower was actively hostile to our continuing representation of nontech clients," Lavin says.
In turn, those clients were offended by Snow's claims that Brobeck Phleger was exclusively a high-tech firm.
At the retreat, the partnership also committed to devote more attention to litigation, tax, labor and transactional practices - an emphasis which Snow describes as the "old Brobeck."
"Brobeck's old model of trying to be all things to all people may have worked fine in the 1950s," Snow says. "But it was not going to lead the firm to success. ... To those who say, 'We want to go back the way it was,' I say, 'One can never go back to the way it was.'"
Still, if you ask Larson, 66, Brobeck Phleger is headed along the same path.
According to Larson, Brobeck Phleger took on its first technology client, Signetics, a semiconductor company, in 1962 and has been a major player in the high-tech industry since 1980.
Snow was able to lay claim to Brobeck Phleger as a high-tech law firm because venture capital financing of technology companies grew eightfold during his tenure as chairman, Larson says.
"It wasn't that [Snow] got us in the [technology] business; it was that the business that we were in took off like gangbusters," he says.
Back in San Mateo, Odom gave a low-key wrap-up speech Saturday evening, followed by drinks and dinner. The partners departed early Sunday morning.
While a handful of partners and key staff left for Clifford Chance in the weeks following the retreat, Odom and Parker insist Brobeck Phleger will forge ahead - more like the firm it was before Snow.
Since the meeting, Brobeck Phleger has won another favorable ruling - this time against insurance carrier Argonaut Group Inc. of San Antonio, a co-defendant in the $975 million Western MacArthur case. The ruling finds that a 1999 insurance policy issued by Argonaut covers Western MacArthur, significantly increasing Argonaut's liability.
"The good news in that regard just keeps rolling in," Odom says.
Brobeck Phleger's business and technology practice continues to add clients, he adds, and the effects of the San Mateo retreat are taking hold.
"We're getting an increasing amount of input from individual partners and from our group and office leaders. Our meetings are simply becoming much more open," Odom said. "Partners are beginning to understand that they are encouraged to express their opinions on all sorts of views."
Joel Rosenblatt
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