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Brobeck, Phleger & Harrison negotiated a deal that would have had Morgan, Lewis & Bockius assume $53 million of its debt if the two firms had merged, a recent court filing reveals. And Brobeck partners would have had to pay a pretty penny if they decided to exit the combined firm. If they left Morgan Brobeck — as the firm was to be called — they could have been on the hook for as much as $650,000. The details of the merger agreement are part of a filing by the now-defunct Brobeck in response to an employee lawsuit seeking 60 days severance pay. In asking U.S. District Court Judge Claudia Wilken to dismiss the suit, Brobeck argues that since it was trying to stay in business prior to the employees’ termination it did not have to give them prior notice. As evidence, the firm includes its last draft agreement with Philadelphia-based Morgan, Lewis completed Jan. 28 — two days before Brobeck announced it would be dissolving. In return for Morgan, Lewis picking up Brobeck’s debt and its letters of credit, Brobeck partners were to contribute as capital their interest in the Brobeck partnership and pay the merged firm $4.3 million per year from their income. A clause also specified that Brobeck partners were to pay the merged firm if they left within the first two years of the marriage. The departure fee ranged from $25,000 to $650,000 based on the partner’s status at the firm. Employees filed suit against Brobeck and Morgan, Lewis in March claiming both firms violated the California State Workers Adjustment and Retraining Notification [WARN] Act and California Labor Code by failing to provide employees 60 days notice — or 60 days severance pay in lieu of notice — that the firm was to close or a mass layoff was to occur. Brobeck contends the laws do not apply to its dissolution. “Both state and federal law do not require an employer to give notice if, as of the time the notice would have been required, the employer was actively seeking capital or business, which, if obtained would have allowed the employer to avoid or postpone the relocation or termination,” Brobeck states in a June 11 filing. To further support its argument that the firm was striving to continue operations, Brobeck includes a document on its anticipated cash flow for 2003. The firm had planned to lay off 56 staff and 22 associates in the first two months of the year. Also attached to the filing is a Dec. 5 e-mail from Steven Zager, the head of Brobeck’s litigation department and a top rainmaker at the firm, to his partners in which he describes a meeting with Morgan, Lewis lawyers. In the message he said he was “very excited” about the creation of the new firm and referred to an upcoming hunting trip with Morgan, Lewis partners. Zager departed Brobeck on Jan. 29 — and his exit was a factor in the merger’s collapse, attorneys from both firms have said. In its filing with the U.S. District Court for the Northern District of California, Brobeck requests that as an alternative to dismissing the suit, the court grant summary judgment on the claims of five of the 42 plaintiffs. The firm argues that the staffers do not meet the requirements of the WARN Act since, among other things, they worked at the firm’s Colorado, Dallas and Washington, D.C., offices, which had fewer than 50 employees. Morgan, Lewis also filed a request to dismiss the suit, objecting to employees’ claims that it is an alter ego of or successor to Brobeck. Morgan, Lewis hired approximately 100 Brobeck attorneys and 150 staff following Brobeck’s dissolution. The Philadelphia firm said it never controlled Brobeck’s employment activities, had no role in the decision to terminate employees, and bought only a small fraction of the firm’s assets. In a declaration in support of the firm’s motion, Morgan, Lewis Executive Director Francis Fee says that on Feb. 14 his firm entered into a purchase and transition agreement with Brobeck and Citibank under which it bought certain Brobeck furniture and other assets in San Francisco and Irvine for $2.1 million. He said that as of Dec. 31, Brobeck’s cash accounts receivable and unbilled time “reportedly exceeded $100 million” and its total balance sheet assets were reportedly substantially greater. A hearing on McCaffery a/k/a Broke Beck v. Brobeck, 03-418426 is scheduled for Aug. 1 before Judge Wilken.

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