The Score

February 2, 2010 6:00 AM

The 2010 Lateral Report: Economy Model

Posted by Ed Shanahan

By Claire Zillman from the February 2010 Issue of The American Lawyer

Daralyn_Durie Daralyn Durie, Mark Lemley, Michael Page, and Ragesh Tangri started kicking the idea around almost 20 years ago, when all four were students at UC Berkeley School of Law. They’d start their own law firm together, someday.

After graduation, the four went their separate ways--clerkships, big-firm jobs--before reuniting at San Francisco's Keker & Van Nest. Durie, Tangri, and Page became partners there; Lemley, an intellectual property professor at Stanford Law School, was of counsel; and all of them helped build one of the country's most potent IP litigation groups, with clients like Genentech, Inc., Google Inc., and Comcast Corporation. But the idea of starting their own firm never faded.

Then came the recession of 2008. "We decided that if we were gonna do it, we were gonna do it now," says Durie, 42. "We were at a point in our careers where we had the confidence to do it and were young enough to have the energy to pull it off. We became beneficiaries of the downturn." On February 1, 2009, the four Berkeley classmates, joined by two other former Keker partners, swung open the doors of their own IP boutique, Durie Tangri.

The Durie Tangri partners aren't the only lawyers with an entrepreneurial itch these days. From October 2008 through September 2009, according to The American Lawyer 's Lateral Report, 114 partners left The Am Law 200 to start or join small practices, up from 70 in the previous 12-month period. Some notable new start-ups include MoloLamken, whose name partners came from Shearman & Sterling and Baker Botts; Kendall Brill & Klieger, an Irell & Manella litigation spin-off; Chaffetz Lindsey, started by five former Clifford Chance litigation partners; Harrington Dragich, a bankruptcy boutique whose founders were Foley & Lardner lawyers; BuckleySandler, formed from the merger of Buckley Kolar and a group from Skadden, Arps, Slate, Meagher & Flom; Bryant Burgher Jaffe & Roberts, whose partners left DLA Piper, McKee Nelson, and Alston & Bird; and Van Etten Suzumoto & Sipprelle, founded by three partners from McGuireWoods.

Durie says she left 70-lawyer Keker because she wanted to work at a "true small firm." Steven Molo jumped ship from Shearman because he wanted to avoid the unwieldy infrastructure of a large firm. B. Seth Bryant exited DLA Piper and cofounded Bryant Burgher, a minority-owned firm, in part because his efforts to provide interdisciplinary legal teams for companies investing in urban markets had not meshed well with the ambitions of his former firm's corporate practice.

Some might think it's insane to leave a large firm to hang up a shingle in the midst of an economic downturn. But those who have gone out on their own think it's crazy to stay put. If the lawyers who started their own firms had different personal reasons for leaving their old firms, their business rationales are nearly identical: It's all about value. The recession has increased clients' price sensitivity, creating an opening for smaller firms with lower, more flexible costs. Boutiques cater to cost-conscious clients by lowering overhead expenses, slashing rates, and offering alternative fee arrangements, while providing the same legal services that their founders offered at their old firms. "This is an advantageous time to start a firm," says consultant Joel Henning of Joel Henning & Associates. "These lawyers are skimming some of the cream off the top of their former firms and catering to clients' cost needs."

Click here to read "Economy Model" in full.

To access the complete 2010 Lateral Report, including charts tracking the firms with the most lateral partner hires, those with the biggest losses, and moves by practice area, click here.

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