Discussion of Firms and Life in SF/SV

Does anyone know anything about this firm's south bay office? Is it busy? Anyone know if they are in the market for laterals? What is the compensation like? Any information is appreciated.

[Tyrone Slothrop]

Not Tower Snow, unless you mean that he took lots of work with him when he left. The debt came under the new regime, apparently.

Brobeckonomics

Susan Beck
The American Lawyer
04-01-2003


While Brobeck, Phleger & Harrison's tangled affairs continue to be sorted out, many have assumed that its fatal attraction to debt triggered its downfall, and have pointed the finger at former chairman Tower Snow, Jr. But some internal documents provided to The American Lawyer show that Brobeck's borrowing increased dramatically under chairman Richard Odom, not under Snow. And what appeared to have doomed Brobeck was not so much its level of debt, but its sinking revenues.

At the end of 2001, when Snow stepped down as chairman, Brobeck was not saddled with massive debt. According to a memo to partners from Odom and managing partner Richard Parker dated Jan. 11, 2002, Brobeck had $43 million in term debt at the end of 2001. It also had an additional $12.8 million in letters of credit. (Letters of credit are contingent obligations that are often required by a landlord as a form of security.)

That level of debt, on a per-partner basis, was not extraordinary, according to confidential surveys done by Citibank, N.A. According to one survey, Brobeck's debt (including letters of credit) at the end of 2001 was $277,000 per equity partner. The average for so-called peer group firms in Silicon Valley (which weren't identified) was $272,000 per equity partner. And for a collection of unidentified New York firms, the number was $409,000.

Brobeck substantially increased its borrowing after Odom and Parker took over, their memo shows. Near the start of 2002 Brobeck signed a $40 million term loan to reimburse partners for capital expenses incurred the previous year. That included $11.8 million for tenant improvements to the new building in East Palo Alto, Calif., $9.9 million for San Francisco office renovations, and $9.4 million for technology improvements.

Snow's management team had funded these 2001 costs out of revenue, not debt, according to the memo. Odom and Parker decided to give partners the cash back for those expenses by borrowing the money. (The firm had followed that practice in some prior years, too.) The new $40 million loan almost doubled the firm's term debt, kicking it up to $83 million. Odom, now a partner with Philadelphia-based Morgan, Lewis & Bockius, did not return a call.

The memo also outlines partners' personal liability obligations and provides a page for them to sign to consent to that liability. (Since Brobeck was a limited liability partnership, the bank would need consent.) Average liability could be as much as $324,000 per partner in 2002, the memo says. By the end of the year, the firm owed an additional $10 million for revolving credit, bringing total debt up to $92 million.

As 2002 progressed, Brobeck fell woefully short of its revenue and profit projections. At the start of the year, the firm budgeted for revenue of $439 million, but by year's end it brought in only $352 million. Income dropped even more sharply. It had projected income of $159 million, but at the end of 2002 Brobeck could squeeze out only $87.5 million, more than 40 percent below its original projection.

The decline was likely due in part to the exodus of Snow and the 54 lawyers who followed him to Clifford Chance. But more significantly, billable hours for the remaining lawyers had plummeted. Brobeck had budgeted for 1,844 hours for each attorney in 2002. By September, the firm had downgraded its year-end projection to 1,519 hours, according to an internal document. It's not clear where the actual year-end number landed.

Citibank knew Brobeck needed help. Near the end of last year, bank officials started renegotiating Brobeck's debt, reducing its obligation to $56 million. That was accomplished in large part by Brobeck taking $26 million of the year's undistributed income that would normally have gone to partners and giving it to the bank.

Citibank was apparently as shocked as others to learn that Brobeck planned to dissolve. According to Stephen Snyder, the former Brobeck chairman who heads the firm's liquidation committee, bank officials weren't expecting Odom's stunning January 30 announcement. "They've said they were surprised," he says. That led to a "pretty tense" relationship between the firm and its lender in the following weeks, Snyder says. The bank declined to comment.

Snyder -- who has worked at Brobeck for his entire 31-year legal career and came out of semiretirement to wind up the firm's affairs -- faces an enormously difficult and heartbreaking task. He's one of only four partners who has committed to trying to tie up the loose ends. In early March they were focusing on collecting bills, liquidating assets, and paying debt. Says Snyder: "We're trying to keep our heads above water."

[Tyrone Slothrop]

There's a chart at the bottom of the law.com article listing other firms which picked up big clients of Brobeck. They seem to be forgetting Clifford Chance. Actually, a few different things about the chart look suspicious.

[c2ed]

Originally posted by Tyrone_Slothrop
There's a chart at the bottom of the law.com article listing other firms which picked up big clients of Brobeck. They seem to be forgetting Clifford Chance. Actually, a few different things about the chart look suspicious.

It looks like American Lawyer just chose a few clients to put on this list, and for whatever reason didn't list those that went with Tower Snow's group to Clifford Chance for the work that Tower did for them.

The chart is misleading because it implies that (for instance), one firm does all the work for B of A, when B of A keeps a few firms on its rost. It makes it seem like, for another instance, they did all the work for Verizon Communications, which then went to Akin Gump, when the more likely scenario is that the Austin group did a lot of litigation (particularly IP litigation) for Verizon, and Zager took that book of business with him to Akin Gump when he finally left. Same with Dewey Ballantine, which acquired a bunch o' scriveners from Brobeck before the "dissolution" (and thus, likely the discrete chunk of work they had done for Intel and Broadcom while at Brobeck). In fact, from what I know of these clients and the firms listed, the only new land grab was Fenwick's of some of the Cisco work (and I think even then they just grabbed another piece - wasn't Fenwick already doing some of their stuff?).

C(what a mighty web they've weaved)deuced

[Sidd Finch]

Fascinating article. Those debt levels are stunning.

I wonder if borrowing money to repay partners for capital expenses was in part a desperation move, intended to keep even more partners from leaving the firm.

I found this paragraph scary:

Originally posted by Tyrone_Slothrop
Brobeck had budgeted for 1,844 hours for each attorney in 2002. By September, the firm had downgraded its year-end projection to 1,519 hours, according to an internal document. It's not clear where the actual year-end number landed.

Consider this: not only did projected hours/attorney drop, but the number of attorneys dropped -- by a few hundred, if I'm not mistaken.

Sidd(my, how our world here has changed)Finch

[Flinty_McFlint]

Sidd:

Nice to see you back. You must have either (i) gotten underwater on some cases; (ii) fell off the truck after the last move; or (iii) finally gotten tired of your JustForFun sock and put your "real" sock back on. Either way, I'm glad to read your posts.

I think we're all fascinated about what transpired at Brobeck. What I find most interesting about all of it are the reports that the decision to dissolve was an ultra vires (am I using that right?) act on the part of the Management Committee, which is somewhat confirmed by the article. I think the committee just decided to throw in the towel (to exploit the opportunity to get other jobs), and press released it before putting it to a vote of the partners. I'm not privy to the partnership agreement or whatever controlling internal document it is, but I would be surprised if it allowed dissolution without some majority vote of the partners. Do you think that the management committee could be exposed to additional lawsuits from creditors and partners for tanking the firm without proper authority--perhaps causing additional damage that it wouldn't have normally taken, such as the impairment of collecting on outstanding receivables, loss of additional revenue, that sort of crap? I'd be interested in hearing a litigator's thoughts.

Anyway, nice to see you.

Flinty (Brobeck....Approval? We don't need no stinking approval.) McFlint

Originally posted by Sidd Finch
Fascinating article. Those debt levels are stunning.

I wonder if borrowing money to repay partners for capital expenses was in part a desperation move, intended to keep even more partners from leaving the firm.

I found this paragraph scary:





Consider this: not only did projected hours/attorney drop, but the number of attorneys dropped -- by a few hundred, if I'm not mistaken.

Sidd(my, how our world here has changed)Finch

[Tyrone Slothrop]

Originally posted by charmed
Does anyone know anything about this firm's south bay office? Is it busy? Anyone know if they are in the market for laterals? What is the compensation like? Any information is appreciated.

I merged the Manatt thread into this one because it wasn't getting any responses. If you know anything about Manatt or their South Bay office, please post it here. Or you can send me a PM (Private Message, using the button at the bottom of this post), or you can e-mail me (at doctorhilarious@yahoo.com, or by using the button at the bottom of this post).

Just interviewed someone from Fenwick's litigation group. Em implied that the firm was no longer "stable" - not sure what em meant. Any truth there? Major defections lately? No work? Firm having trouble paying for that fancy new building?

[Greedy,Greedy,Greedy]

Originally posted by Alice
Just interviewed someone from Fenwick's litigation group. Em implied that the firm was no longer "stable" - not sure what em meant. Any truth there? Major defections lately? No work? Firm having trouble paying for that fancy new building?

Alice,

It is wonderful seeing you here, that is, except for the fact that I cannot see you. But let me clue you in on something: they are nothing but a deck of cards! Though I still would not believe a word of the evidence given by that Knave of Hearts...

G3

[Sidd Finch]

Originally posted by Flinty_McFlint
Do you think that the management committee could be exposed to additional lawsuits from creditors and partners for tanking the firm without proper authority--perhaps causing additional damage that it wouldn't have normally taken, such as the impairment of collecting on outstanding receivables, loss of additional revenue, that sort of crap? I'd be interested in hearing a litigator's thoughts.

Thanks for all the warm fuzzies. It's nice to see everyone again, now that I'm finished with my extended snipe hunt.

Without thinking this through much, or giving it much analysis, or allowing anyone to rely on this as advice.... (after all, if I wanted to do research or serious reflection before mouthing off, I would just work instead of coming to the boards), I would say this:

I'd be surprised if the Brobeck p-ship agreement allowed dissolution without a partner vote. OTOH, I'm surprised anyone would carry that much debt, so what do I know? Maybe the agreement allowed dissolution by the committee under extraordinary circumstances, i.e. being near-busted.

Assuming the committee exceeded its authority, they could be on the hook (maybe with insurance, maybe without). Probably not to creditors -- unlikely they have a duty to creditors, and the big creditors (Citibank, landlord) have personal guarantees anyway. But maybe to other partners. A tough and expensive claim to take all the way, I would guess (for a host of reasons I won't go into here), but one that might have some staying power (i.e., enough to get past summary judgment in SF Superior.

Overall, among the most interesting things to me is the number of lawsuits, workouts, etc. etc. etc. that are stemming from the Brobeck collapse, starting from the suits by and against Tower Snow. Lawyers throughout the Bay Area will be feeding off this carcass for some time to come.

In other words, Brobeck died so that others could live.

[Seven of Nine]

So, the site is quite complex. It allows me to do things I never really thought I would want to do. And, I've wasted three billable hours today exploring all of the new and enhanced functionality. Which brings me to my question. Why are avatars limited so extremely in both file and pixel size? Can we increase this, just a bit? 15k and 100 pixels is a bit rediculous for the 21st century. And think how cool our avatars could be. I know I had to rule out at least three hundred million avatars because of the dreaded file constraints. So, open message to those with the power:


PLEASE MAKE THE AVATAR SIZE BIGGER!

Your humble drone.

Seven.

[leagleaze]

Avatars are the size they are because of bandwidth issues.

They are hosted on the site and therefore if we allow them to be bigger then they are, they eat up too much bandwidth. Perhaps, some day, if we become sponsored, we could have bigger ones, but for now, it isn't possible simply for financial reasons.

I think if you will look around on most boards, you will find similar sizes, if not smaller.

[SlaveNoMore]

Originally posted by Seven of Nine
PLEASE MAKE THE AVATAR SIZE BIGGER!

I know Leagl answered this but I'd like to add my two cents.

We were fortunate to be able to get this new spiffy Lawtalkers (version 3) site up and running and stable through the hard work of Leagl, MR and a few others and, more importantly, the charitable donations of many of our regulars.

The only way we could assure stability was to pay for dedicated server space. So we did.

But the more bandwith we use - the more money it costs. And since we aren't a pay site, until we are able to draw some revenue, we are limited to those resources so generously provided to us. Avatars eat up a tremendous amount of bandwith.

If you follow the links in the help section, you will find links that will enable you to "resize" a particular photo to the proper size. My avatar was initially 300 x 300, BTW.

not7y(I'm expecting a good Jeri Ryan pic)S

[Tyrone Slothrop]

Originally posted by Sidd Finch
Lawyers throughout the Bay Area will be feeding off this carcass for some time to come.

Yesterday's Daily Journal reported that Brobeck has sued two insurance carriers to cover the cost of defending the suit brought by a Santa Monica firm, Dickson Carlson & Campillo. That firm claims that two partners who left them for Brobeck breached various duties, and that Brobeck interfered with contractual relations.

[Sidd Finch]

Originally posted by Tyrone_Slothrop
Yesterday's Daily Journal reported that Brobeck has sued two insurance carriers to cover the cost of defending the suit brought by a Santa Monica firm, Dickson Carlson & Campillo. That firm claims that two partners who left them for Brobeck breached various duties, and that Brobeck interfered with contractual relations.

That's all well and good, but how does everyone like my new avatar?