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[Anne Elk]

From today's edition of The Recorder:

September 17, 2004
By Brenda Sandburg

Fish & Neave has sat on the porch and held hands with Boston-based Ropes & Gray, but it hasn’t yet decided to go to the altar.

That’s what firm Chairman Jesse Jenner told lawyers and staff at a firmwide meeting in New York Tuesday. Jenner said the meeting was called to dispel a flurry of rumors that a merger was to take place within 10 days, that a letter of intent had been signed, and that 20 lawyers were set to join 580-lawyer Ropes & Gray.

“We’ve had preliminary talks with Ropes & Gray, but there’s no deal,” Jenner said. “They are not the only firm we’ve talked to.”

Jenner said the intellectual property firm has been getting marriage proposals since 1982 and would consider tying the knot if the right partner came along. He pointed to the recent merger between Washington, D.C.’s Wilmer Cutler Pickering and Boston’s Hale & Dorr as a deal that looked good for both parties.

“If a situation like that were to arise, where we thought we would benefit and the other firm would benefit, I suppose it could happen,” Jenner said.

Two years ago the firm had some initial discussions with Wilson Sonsini Goodrich & Rosati that were ultimately dropped. The 149-attorney Fish & Neave has 18 lawyers in its Palo Alto, Calif., office, 12 in its Washington, D.C., outpost, and 119 at its headquarters in New York. Founded in 1895, the firm has boasted clients such as Thomas Edison, Alexander Graham Bell and the Wright Brothers.

The firm has held steadfast as a string of IP firms shuttered their doors or merged with general practice firms in the last three years. Limbach & Limbach, Los Angeles-based Lyon & Lyon, San Jose, Calif.’s Skjerven Morrill and, most recently, New York’s Pennie & Edmonds are among the firms that have disbanded.

In the last 18 months, however, Fish & Neave has lost at least a dozen partners. The exodus has prompted others to consider leaving, former partners say.

“Once two or three people start leaving, it creates instability for the next level,” said former partner Steven Cherny, who joined Latham & Watkins’ New York office in June. “It’s the run on the bank mentality.”

Cherny said the departure of John Nathan, a big business generator, increased the feeling of instability at the firm. Nathan joined Paul, Weiss, Rifkind, Wharton & Garrison last year. Among more recent departures, Kevin Johnson jumped to Quinn Emanuel Urquhart Oliver & Hedges’ Silicon Valley office in May, and Terry Kearney joined Wilson Sonsini Goodrich & Rosati in August. In the next couple of weeks, New York partner Gerald Flattmann Jr. will leave the firm for Kirkland & Ellis.

Jenner attributed the bulk of the departures to a restructuring of the firm’s compensation system and retirement program in May. The firm switched from an accrual-based compensation system – in which partners are not paid until income from specific work comes in the door – to a cash-based system in which partners are paid as income is generated. He did not specify how the retirement program had changed.

But former partners said this tinkering with the system was not a factor in their decisions to leave. Kearney, who left for Wilson Sonsini, contended there’s still a place for IP boutiques but said multi-practice firms can provide more comprehensive services and stability than are possible in single-practice firms.

Law firm consultants say a marriage between Fish & Neave and Ropes & Gray would broaden each firm’s practice areas. Ropes & Gray would get an instant IP litigation practice and Silicon Valley presence, while Fish & Neave would acquire a diversified platform.

“It’s a good, natural fit between the two of them,” said recruiter Gary Davis, of Patterson Davis Consulting. “Ropes wants to get into the IP space, and Fish & Neave understands the markets work against IP-only firms.”

Recruiter Avis Caravello said Ropes & Gray’s transactional capabilities in the health care area and its strong focus on the Food and Drug Administration could be attractive to Fish & Neave.

Ropes & Gray set up shop in San Francisco about 2 1/2 years ago with the goal of becoming a national firm like Latham & Watkins or O’Melveny & Myers. The firm has seven attorneys in San Francisco with the rest split between offices in New York, Washington, D.C., Providence, R.I., and London.

The firm did not return phone calls about a potential merger with Fish & Neave.

“Ropes & Gray receives inquiries from other law firms about possible combinations with some frequency,” managing partner John Montgomery said in a statement. “As a matter of policy, however, we do not comment on any such communications.”