A New York trial judge has ruled that Nixon Peabody did not violate any laws or contracts when it hired a dozen Taylor Wessing partners this summer -- less than a year after agreeing to a two-year moratorium on recruiting from Taylor in the wake of failed merger talks.
The ruling by Judge Kenneth Fisher calls into question the kind of noncompete agreements that make merger talks between firms possible, says Dreier name partner Marc Dreier, who represented Taylor Wessing in litigation stemming from those failed talks.
Nixon management praised the ruling.
"From the start, we were convinced these claims should never have been filed," Richard F. Langan Jr., the firm's managing partner, said in a statement. "Nixon Peabody looks forward to welcoming a team of dynamic partners from Taylor Wessing France to join our firm."
As The Am Law Daily has reported, the two firms struck an initial agreement in July 2007 over merger discussions. Talks, though, collapsed in November, when Taylor equity partners concluded they were dissatisfied with Nixon's financial offer and Taylor nonequity partners rebelled at the thought of working under the American billable hours system.
That's when the intrigue started. Arnaud de Senilhes, managing partner of Taylor's Paris office, continued talks with Nixon and eventually convinced a dozen nonequity partners to come with him -- billable hours be damned. A fellow equity partner learned of de Senilhes' talks when he found pages from a PowerPoint presentation intended for Nixon management left sitting on a Taylor printer. Whoops.
Taylor sued in an upstate New York court, claiming Nixon breached the noncompete agreement. The European firm sought $5 million and an injunction blocking the hirings. Nixon countersued, claiming Taylor was unfairly restricting the freedom of its partners to change jobs.
Judge Fisher ruled for Nixon on September 11, saying, in essence, the noncompete agreement was unenforceable under New York law. Fisher compared the agreements to other banned "restrictive covenants," including contract clauses, long since deemed illegal, that prevented partners from taking associates with them when they left one firm for another.
The decision surprised Ward Bower of the consulting firm Altman Weil. He says such noncompete agreements are common between firms in merger talks -- and that both sides usually honor them.
Fisher mostly limited his analysis to New York law, so the impact of the ruling remains unclear. According to Dreier, "no firm will feel comfortable" entering into merger talks without a noncompete agreement.
A team from the Wolford Law Firm and Patterson Belknap Webb & Tyler represented Nixon Peabody.
