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Former Partners Sued for Post-Brobeck Profits
Trustee says defunct firm has claim to clients
The Recorder
April 11, 2008
The trustee in the bankruptcy case of defunct firm Brobeck, Phleger & Harrison is suing 10 former partners and the two firms they've joined for work they took with them after Brobeck dissolved.
Orrick, Herrington & Sutcliffe and four partners at the firm are the defendants in one suit. The other suit names Dorsey & Whitney and six of its partners.
The amount of profits sought is unknown to the trustee, Ronald Greenspan, according to the suits. He is asking the judge to order the firms and former Brobeck partners to render an accounting of all revenue and expenses related to unfinished business or work done as the result of opportunities that originated at Brobeck.
"[W]hen a partner disassociates from a partnership or the partnership dissolves, the net income from all partnership opportunities remains the property of the partnership," the trustee argues in the filing.
Both suits, filed March 28, hinge on a part of the state's Uniform Partnership Act and a related 1984 judicial decision in Jewel v. Boxer, 156 Cal.App.3d 171.
The claim isn't new. Morgan, Lewis & Bockius paid Brobeck's estate $10.2 million in 2004 to settle claims related to its acquisition of 58 Brobeck partners. One of the key issues in that litigation was Greenspan's Jewel claim. Morgan Lewis Chairman Francis Milone said at the time that the issues were "far from clear" but that the firm settled to avoid protracted litigation.
Clifford Chance agreed to a similar $3.75 million settlement earlier that year.
Greenspan has also collected an estimated $24 million from some 200 former Brobeck partners for various claims, though it's not clear how many -- if any -- were related to the Jewel issue.
One of the ex-partners sued March 28, Jeffery Hermann, said he already had settled previous claims with Greenspan. "This is totally different," said Hermann, an of counsel at Orrick's Los Angeles office.
The other ex-partners named in the filings are Grady Bolding and Frederick Holden Jr. of Orrick; Patrick Arrington, John Baker, Ellen Bancroft, David Hayes and Gabrielle Wirth of Dorsey; James Baker, who moved from Orrick to Jones Day in 2005; and Scott Santagata, formerly of Dorsey.
NORMAL LATERAL MOVES?
Brobeck enjoyed rapid growth in the 1990s and early 2000s thanks to the booming tech economy, but was hit hard when the economy started heading south following the burst of the dot-com bubble.
While the firm dissolved in February 2003, it wasn't until September of that year that creditors forced Brobeck into Chapter 7 bankruptcy, according to the filing. While the suits don't mention any other firms, it is conceivable that other law firms with Brobeck partners could face suits as well.
"If a firm took a Brobeck partner and a Brobeck partner took a Brobeck case ... it's the same footprint as the complaint that [the trustee is] alleging," said Michael Cooper, a bankruptcy attorney with Wendel, Rosen, Black & Dean who's not involved in the case.
"Because this matter involves ongoing litigation, we don't feel it's appropriate to provide our views at this time," a spokesman for Orrick said.
The firm is being represented by Jonathan Hughes and Pamela Phillips, partners in Howard, Rice, Nemerovski, Canady, Falk & Rabkin's San Francisco office, said Hermann. "They're the world's leading experts on Jewel v. Boxer claims," Hermann said.
Dorsey & Whitney had no comment. Other than Hermann, the attorneys named in the suits did not return messages or declined to comment.
Greenspan did not return calls on Thursday, and Bennett Murphy, a Hennigan, Bennett & Dorman partner representing Greenspan in the case, was unavailable for comment.
According to the trustee's filing, about 1,145 creditors have filed claims in the case, totaling $258 million in potential liabilities.
