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A recession may not seem like the perfect environment for starting a new law business, but with clients under pressure to manage costs and large firms favoring institutional clients in potential conflicts, dozens of boutiques have popped up offering sophisticated legal expertise at reasonable costs to clients large and small.

A recession may not seem like the perfect environment for starting a new law business, but with clients under pressure to manage costs and large firms favoring institutional clients in potential conflicts, dozens of boutiques have popped up offering sophisticated legal expertise at reasonable costs to clients large and small.

Chaffetz Lindsey was just one of many boutiques opened nationally in the last year by former big firm partners. While it is too soon to measure its success, the five partners who departed Clifford Chance say their gamble is working out better than expected.

Chaffetz Lindsey partners launched their firm in May and ever since have been pitching it as a cost-effective alternative to large law firms with a focus in international arbitration, reinsurance and commercial litigation.

“It’s so far positive, more positive than I would have thought at first,” said name partner David Lindsey.

Peter Chaffetz, 57, the other name partner and the former head of Clifford Chance’s firm-wide litigation practice, said the new firm has “really been going full-bore since Labor Day.”

Chaffetz Lindsey spun out of troubles that plagued Clifford Chance’s litigation department last year, after the international firm’s expected boom in litigation never materialized. As was common at many large firms last year, conflicts also increased inside Clifford Chance after Lehman Brothers Holdings Inc. collapsed and businesses began suing financial institutions for losses, Chaffetz said.

Clifford Chance in October 2008 laid off 20 litigation associates, saying at the time that “sluggishness in litigation matters continues despite market volatility that historically has produced countercyclical balance.”

The firm took further hits last December, when a three-partner white-collar litigation team left to join Skadden, Arps, Slate, Meagher & Flom, including John Carroll, a former managing partner for Clifford Chance in the Americas. With their defection, other partners also began to jump ship, Lindsey said.

“It was clear the department was in trouble and any partner who stayed had to think whether to stay,” he said.

Lindsey, 47, said he was swayed to start a small firm when Chaffetz and another Clifford Chance partner, Charles Scibetta, presented him with projections and spreadsheets outlining a plan to take a different route and start a new firm from scratch.

Scibetta, 41, said they had researched and estimated start-up costs and ongoing operational costs and put them in a spreadsheet listing expenses by category. They also thoroughly analyzed their potential revenue streams, he said.

“We considered how our practices had run over the years and how they were likely to be bolstered by the ability to take on matters that we previously couldn’t handle due to conflicts or the large-firm cost structure,” Scibetta said. “We also considered the potential for referrals from other large-firm lawyers who were facing the same cost and conflict issues we were facing at Clifford Chance.”

The lawyers’ pre-launch cost analysis has held up “very well,” Scibetta said.

The attorneys took advantage of what they correctly assumed would be cheaper rents due to falling real estate prices. Asking rents for office space in Manhattan were down 22 percent in the third quarter, according to a report by Cushman & Wakefield.

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