Sixteen former Dickstein Shapiro partners have sued Blank Rome claiming the 2016 merger between the two firms was inappropriately styled as a sale to avoid paying out more than $4 million in capital accounts owed to former partners.
“Blank Rome’s transactional attorneys tried to ‘play cute’ by structuring the merger of Dickstein Shapiro into its law firm by the artifice of labeling it as an ‘asset sale’ for the solitary purpose of defrauding former Dickstein Shapiro partners (who were necessarily not going to be a part of Blank Rome),” wrote the former Dickstein Shapiro’s lawyers at Kabateck Brown Kellner and The Kellner Law Group in Los Angeles in a complaint filed Wednesday in Los Angeles Superior Court.
“This lawsuit has no merit and we intend to vigorously defend it,” a Blank Rome spokeswoman said in email Thursday morning.
The lawsuit, filed on behalf of 15 partners who left Dickstein in the run-up to the Blank Rome deal and one who retired about a month prior to the February 2016 tie-up, seeks a declaratory judgement that the deal was a “de facto merger.” Such a finding, the former partners claim, would leave Blank Rome liable for Dickstein’s debts and in breach of the defunct firm’s partnership agreement with former partners, which required the firm to pay back departing partners’ capital accounts with interest. The partnership agreement, which was filed as an exhibit to Wednesday’s complaint, is available below.
Brian Kabateck, the lead lawyer on the complaint, said that some former Dickstein Shapiro partners, who knew him through his role as the president of the Los Angeles County Bar Association, reached out to him to try to cover their lost capital contributions.
“My world doesn’t usually intersect with the big firms except when I’m on the other side of a lawsuit suing their clients,” said Kabateck, noting that he wasn’t sure if other recent law firm dissolutions had been structured similarly. Kabateck said that the $4 million figure cited in the complaint is just for the 16 former partners named in the lawsuit, and that he knows of others who are owed capital. The lawsuit could be amended, he added, to include additional former partners and claims.
The suit claims that the Blank Rome deal to acquire 100-plus Dickstein Shapiro lawyers had the “hallmarks of a de facto merger.” In particular, the complaint points to the fact that Blank Rome assumed the lease on Dickstein Shapiro’s Washington, D.C. headquarters, virtually all of the dissolving firms business and clients went to Blank Rome, and various office and practice heads remained the same during the transition.
Read the complaint and Dickstein Shapiro partnership agreement:
This story was updated with comment from Blank Rome on 9/13/18 at 12:00 pm ET.