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December 20, 2010 1:54 PM

S.F. v. S.V.: Firms Bypassing San Francisco for Silicon Valley?

Posted by Ross Todd

When Skadden, Arps, Slate, Meagher & Flom announced earlier this month that it will close its San Francisco office at the end of June 2011 and relocate its lawyers in the office to Palo Alto, it became the third New York-based firm to make a similar move south since 2006. White & Case consolidated its Northern California offices in Silicon Valley in 2006, and Dewey & LeBoeuf did the same last year.

Add to that the fact that Kaye Scholer chose to open its first Bay Area office in Palo Alto in March, and it's becoming clear that, for non-California-based firms at least, Silicon Valley is the center of gravity in Northern California. All told, the Recorder's Petra Pasternak reports, 19 Am Law 100 firms have opted for Silicon Valley over San Francisco. Here's her take on the trend of firms setting up shop further south in the Bay Area. (A quick check of the traditional California firms in The Am Law 100, though, shows that firms native to the Golden State have so far opted to maintain offices in both business centers.)

"The San Francisco market just isn't a relevant data point anymore," Bijal Vakil, head of White & Case's Silicon Valley office, told the Recorder. "It really is the Valley--at least for the type of work our office focuses on."

Others agreed. "If you look at where there's more growth, where there are more companies and more capital formation, it isn't San Francisco," Skadden's Kenton King told The Recorder earlier this month. The firm asked its 17 associates, three counsel, and four partners in San Francisco to move to its Palo Alto office.

Major, Lindsey & Africa's Northern California recruiter Natasha Innocenti told the Recorder that corporate work has steadily been moving to Silicon Valley for the past seven to ten years. Innocenti said the recession didn't produce the expected increase in countercyclical litigation in San Francisco offices, and that's forcing the hands of some firms.

The slowdown in litigation "just threw into relief the fact that most San Francisco offices aren't as countercyclically balanced as they used to be," Innocenti told the Recorder. "Pushing corporate to Silicon Valley is smart; it just makes good business sense."

But not all major firms are ready to write off San Francisco. Morgan, Lewis & Bockius's San Francisco managing partner, Franklin Brockway "Brock" Gowdy told the Recorder he doesn't think Skadden's move will spawn a larger exodus. Skadden never built a major presence in that city; Morgan Lewis, by contrast, has 136 lawyers in San Francisco and fewer than 50 in Palo Alto.

Gowdy told the Recorder that about 70 percent of the work done in the Bay Area is for Northern California clients, many of them large tech companies such as Google Inc., Hewlett-Packard Co., and Cisco Systems Inc. and financial institutions such as Wells Fargo and Charles Schwab. With the exception of firms like Skadden, which focus on the highest-end of the market, Gowdy says, "I think it's plainly preferable to be in both places."

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