- The Washington Times - Monday, March 6, 2000

Washington-area law firms are starting to make an important decision: raise sa-laries and offer more benefits, or lose their lawyers to the region's growing high-technolgy industry.

"In '99 we saw a greater number of attorneys leaving our firm to go in-house with our clients than we ever had before," said James Burns, managing partner at Brobeck, Phleger & Harrison, a California law firm with offices in the District and another opening soon in Northern Virginia.

Lawyers at the firm received a 55 percent pay increase this year, raising starting salaries from $100,000 to $155,000. The firm also buys and offers its associates stock in client companies to counter stock options many technology companies use to attract employees.

"We want to make it as attractive as possible for our attorneys to stay and make their careers at Brobeck," Mr. Burns said.

The high-tech lure has prompted many lawyers to trade their high salaries for the Internet companies' stock options, which could be worth millions of dollars in the next few years.

"It's a trend," said K. Jill Barr, director of career services at American University. "You hear about it all the time. But it's hard to know in terms of data."

Law firms in California were the first in the nation to raise their salaries and add benefits to compete with Silicon Valley's tech companies. Boston and New York, both areas with major high-tech presences, are following the lead. Washington with strong law and high-tech sectors is facing the same issue. So where a law firm is based affects its compensation package.

National firms with local offices already have started giving their associates raises. Skadden, Arps, Slate, Meagher & Flom, the nation's largest law firm, raised salaries by 40 percent last month. And Newis Polk and Wardwell raised salaries by 25 percent. Both firms are based in New York.

Many firms are hoping their lawyers will stay instead of jumping ship to hot Internet companies.

But search firms specializing in the legal field hear about lawyers moving to the Net all of the time.

"I hear constantly of lawyers leaving firms it's very hard to compete with the stock options [Internet] companies offer," said Jackie Finn, partner at Finn and Schneider Associates, a Washington executive search firm that specializes in finding lawyers.

"This phenomenon is just hitting Washington," Miss Finn said. "It's new here, so at this point firms are trying to decide whether or not they want to increase their compensation."

The highest profile example of a lawyer who left a law firm to join an Internet company is Paul Cappuccio. Now general counsel for America Online, the world's largest Internet provider in Sterling, Va., he used to work for Kirkland & Ellis in the District.

Clint Smith is another example. A former associate at downtown's Steptoe & Johnson, he is now deputy legal counsel for UUNet Technologies, the Internet service provider arm of MCI WorldCom.

"It was a chance of a lifetime," Mr. Smith said. "And with stock options you have a stake in the outcome of your work that's not available at a law firm."

Mr. Smith said he took a "considerable" salary cut when he joined the Ashburn, Va. company. But the long-term returns from stock options which he is already enjoying were worth it.

"I have no regrets. At Steptoe I worked with brilliant people who made me into a better lawyer, but at UUNet all my energy is focused on one client, and making that client succeed," he said. "And that to me is more rewarding than working for multiple clients at a large law firm."

Other attorneys have left law firms and started their own Internet companies.

Sheila Walsh, her husband Michael, and three other attorneys left their jobs at local law firms to team up and start infirmation.com, an on-line career center for lawyers.

Ms. Walsh, a former tax attorney at Chadbourne & Parke, said she does not miss her old job.

"What I found working at a law firm was that I was only using a subset of all my skills," Ms. Walsh said. "I was thinking and researching but wasn't able to use a wide range of creative and managerial skills, which I do in running my own business. And there is something very satisfying about building something."

Ms. Walsh, author of a book about finding jobs in the law field, said many lawyers are interested in working for Internet companies and corporations.

As someone who has been on both sides of the fence, and as owner of a career center for attorneys, she is sensitive to news in the field. She also wants attorneys to know the news, and that's where infirmation.com comes in.

Aside from job postings and a forum to discuss the work place, the Web site lists all local law firms and their salaries. In the next few weeks there will also be a section about what law firms are doing to keep their associates, other than raising salaries.

"Some firms are touting they have less billable-hour requirements than other firms," Ms. Walsh said. "It's a range of things from saying 'We have Starbucks coffee in the office' to having a massage person who comes in and gives everyone a massage once a week … or an office valet who takes care of your dry cleaning and so forth."

Indeed, anecdotes of law firms that provide day care and dry cleaning services are causing the National Association of Law Placement to start a survey to pinpoint these stories.

"On the West Coast there is even talk of equity sharing, with firms involving clients," said Paula Patton, executive director of the D.C.-based nonprofit organization. "That mimics what's going on with stock options at dot-coms."

The Washington area has 12,183 high-tech companies, more than Silicon Valley's 11,930.

But it also boasts plenty of lawyers. The District alone has 32,500 lawyers at law firms.

The number of lawyers in the area is much higher, though it is hard to pinpoint because many work for the government, high-tech companies or teach law, said Stephen Fuller, a regional economist with George Mason University.

To illustrate the problem facing the legal community, Paul Dinte, president of Dinte Resources, a McLean search company that finds chief executive officers, vice presidents and operating officers, recalled a recent conversation with an applicant.

"He doesn't want to work the kind of hours attorneys work. His view of work is to find a dot-com company where he can become general counsel," Mr. Dinte said. "There is a push, clearly, and people in professional services are very interested at looking at Internet-based companies."

Piper, Marbury, Rudnick & Wolfe, with about 800 associates and main offices in Washington, Baltimore and Chicago, is another firm that raised salaries. The firm opened an office in Reston in May to focus on its high-tech practice.

"We made some salary raises with respect to our technology lawyers in recognition of market forces," said Jeffrey Liss, chief operating officer of the law firm, who would not specify the amount of the raise.

President Clinton, in his budget proposal last month, asked Congress for $15 million for the Securities and Exchange Commission to pay its lawyers and other professionals above government rates. The agency lost 25 percent of its lawyers, accountants and examiners in the past two years to lucrative private-sector jobs, mainly in the high-tech field.

"Associates are in great demand," Miss Finn said. "But even if firms pay them well and treat them well, they are still not necessarily staying."

At Holland & Knight, a Miami-based firm with 20 offices nationwide including the District, 950 lawyers get a raise each year in response to market demands. This year's potential raises are under review.

"If a high-tech company offers somebody a position and the company is close to going public and willing to include pre-IPO options, then, economically, we really can't match that kind of offer," said Bill Mutryn, head of Holland & Knight's technology and emerging-companies division.

The tug-of-war over lawyers comes as the nation's unemployment rate is at a 30-year-low of 4 percent. And technology was the field that created the most jobs in the Washington area.

"There are all these tech companies that are getting started, and there are many anecdotal stories about people hitting it real big when their companies go public, and it's not unusual for lawyers to be involved in these transactions," said Michael Missal, partner at Kirkpatrick & Lockhart, a law firm that employs 560 lawyers across the country.

"So they see what's going on, and it's like playing 'Who Wants to be a Millionaire' the stock goes public, and you hit it big. Everyone has lost people to some extent to these companies because of the opportunity to earn a lot of money in a very short time."

That's the hope of associates at Gordon, O'Brien & Hickey, a Bethesda firm that has been representing Alabanza, a Baltimore Internet services company, since last year.

"We have grown with the company, and more and more of our time is spent there," said Patrick O'Brien, one of the partners. "Depending on how things go, one of us could end up as their legal counsel."

Mr. O'Brien and Ken Hickey, another partner, already sit on Alabanza's board of directors and have stock options.



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