One big question for tech lawyers in the wake of Brobeck, Phleger & Harrison's demise appears to have been answered: The firm's biggest client, Cisco Systems Inc., is taking its corporate work to Fenwick & West.
Wooing the largest maker of computer network equipment is a major score when it comes to bragging rights for Fenwick lawyers. And, of course, any corporate work is cause for celebration given the dearth of new Silicon Valley clients. But how big a contribution the Internet bellwether will make to Fenwick's bottom line remains to be seen.
Gordon Davidson, Fenwick's chairman, said he is "optimistic" about Cisco's ability to weather the downturn and regain its prominence as a dealmaker.
"They have a history of doing many mergers and acquisitions deals, and if the market returns, maybe that pattern will continue," Davidson said.
Davidson wouldn't estimate how much revenue Cisco could represent for his firm, saying only that the volume of work "was significant to Brobeck, and we have every reason to believe" it will be the same for Fenwick.
Cisco had a seemingly inexhaustible appetite for buying companies during the technology boom. From 1998 to 2000, it bought 50 companies, according to its Web site. Brobeck managers have said that during the boom, the firm had 50 lawyers or more working on Cisco matters at any given time.
But Cisco isn't buying companies the way it was when its stock was flying high. The stock peaked at $80 per share but now trades in the mid-teens. Since the beginning of 2001, Cisco has bought eight companies.
Davidson said he's been trying to get Cisco's business for the past eight years, making formal pitches annually to company lawyers. And the firm has picked up a few projects for the company in the past. But Cisco's longtime attachment to Brobeck appeared to be unshakable.
Now that Cisco has made the switch, Fenwick will represent the company for M&A deals and other transactions along with everyday corporate work, tax issues, some licensing and intellectual property counseling.
"In this rapidly changing environment, we will look to [Fenwick] to partner with us as we continue to drive best practices across a broad spectrum of corporate activities," said Mark Chandler, Cisco's general counsel, apparently alluding to recent changes in corporate governance laws.
Cisco is still spreading its work around the Valley, however. The company farms out some of its licensing work to Cooley Godward. Former Brobeck lawyers who moved to Clifford Chance last year—chiefly Brobeck's ex-chairman, Tower Snow Jr.—continue to represent Cisco in securities-related litigation.
For IP litigation, Cisco has traditionally turned to Weil, Gotshal & Manges for big-ticket patent battles. But the company also has pending matters with Orrick, Herrington & Sutcliffe, and Morgan, Lewis & Bockius through that firm's recent hire of a team of former Brobeck partners.
As its former client found a new home, Brobeck on Tuesday continued the process of shutting down operations.
Stephen Snyder, head of Brobeck's liquidation committee, sent an e-mail to former partners last week asking them to contribute money to help cover the committee's costs. A former partner said the requested contribution ranged from about $8,000 to $70,000 based on the partner's compensation level. Brobeck had 11 compensation levels.
It's unclear how many former partners got the call for help. Some partners who recently left the firm said they had not received Snyder's memo, including Steven Zager and Paul Bessette, who are now partners at Dallas-based Akin Gump Strauss Hauer & Feld. Zager chaired the firm's litigation team.
Among other things, Franklin Brockway Gowdy, a partner who jumped to Morgan, Lewis, said the liquidation committee would be collecting bills, paying vendors and making sure files are transferred to lawyers at their new firms.
Brobeck also may have resolved potential litigation hanging over its head. On Friday, the firm issued final paychecks to employees, including a separate check for unused vacation time. A staff member had threatened to sue the firm if it did not pay employees for this time.
Peter Gilhuly, a partner at Latham & Watkins who is representing Brobeck in its liquidation, said the bank had released more than $5 million to cover the paid time off. As for whether Brobeck will file for bankruptcy, Gilhuly said the firm "is reviewing all its options and hasn't made any decisions." Three possible options, he said, are avoiding insolvency, filing for bankruptcy or making an assignment for the benefit of creditors.
While some former Brobeck partners have said they believe the firm has sufficient assets to cover its debts, Gilhuly said that depends on the rate at which the firm can collect receivables. "Very few firms in dissolution earn more than 75 cents on the dollar, and many collect 20 cents," he said. "And are contingencies in there? We really don't know the answer."
Another complication for Brobeck may have disappeared. Morgan, Lewis negotiated an agreement with Brobeck's landlord, Equity Office Properties-One Market, to take over most of Brobeck's space in the building. EOP filed an unlawful detainer claim against Brobeck last week to regain the premises and receive back rent.
And on Tuesday, firms issued a flurry of releases announcing they had hired Brobeck partners.
Nigel Howard, a member of Brobeck's policy committee and head of the firm's information technology practice, joined Mayer, Brown, Rowe & Maw's New York office, along with partner David Hudanish, counsel Doreen Sullivan and three associates.
Orrick, Herrington & Sutcliffe hired its fourth Brobeck partner, employment lawyer Gregory Lemmer. Orrick said it also expects to hire several Brobeck associates and staff. And Bingham McCutchen hired commerce and finance partner George Hisert, who spent 22 years with McCutchen, Doyle, Brown & Enersen before joining Brobeck in 1993.