X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The squabbling among former Brobeck, Phleger & Harrison partners has intensified, as five from San Diego are demanding that their one-time colleagues fork over $14.5 million to cover “injury and damages” they incurred following Brobeck’s collapse. They have sent a letter to an unspecified group of ex-Brobeck partners demanding the cash. Though the entire list is as yet unclear, one of the partners singled out in the June 13 letter is Steven Zager, one-time managing partner of Brobeck’s Austin, Texas, office and head of the firm’s litigation group. Zager’s jump to Akin Gump Strauss Hauer & Feld just as Brobeck was on the brink of a potentially lifesaving merger with Morgan, Lewis & Bockius is cited by the partners as a major reason Brobeck fell apart. The five San Diego partners seeking compensation from Brobeck managers include Steven Korniczky, Jessica Wolff, Douglas Olson, W. Scott Biel and John Benassi. The lawyers are now partners at Paul, Hastings, Janofsky & Walker’s San Diego office, with the exception of Biel, who is special counsel at Sheppard, Mullin, Richter & Hampton. Zager has fired back. He filed suit in July in the district court of Harris County, Texas, against the five San Diego partners, seeking a court declaration that he has no individual liability to his former partners. Zager, who is based in Houston, is representing himself in the action. “Over the course of five years at the firm, I brought in over $30 million in fees collected and probably took home less than $2.5 million,” Zager said in an interview. “I don’t think I need to do any more for anyone. I’m tired of getting blamed for this.” In his complaint, Zager contends that he joined Brobeck in 1998 as a professional corporation rather than as an individual and that any claims should be made against his corporation. Zager first responded in a June 16 letter, saying he had no role in these alleged activities of Brobeck. He pointed out that Olson, who served on both Brobeck’s operations and policy committees, and Benassi, who was a member of the operations committee, were more involved than he was in the management of Brobeck finances and obligations. Olson declined comment on the letter he and his colleagues sent out, saying it was confidential. Zager said in the letter to his former San Diego colleagues that he, too, had not been reimbursed for business expenses. “Indeed, I was forced to resign my country club membership because the firm never paid the club for the Austin holiday party, and I refused to pay the bill myself.” The San Diego partners’ June 13 letter has come to light through former Brobeck employees who speculated on their e-mail listserv that Zager had been sued. To date, though, the San Diego group has not filed suit. The letter — which seems a likely prelude to court action — simply demands payment and alleges numerous acts of mismanagement and misrepresentation by Brobeck’s leaders. The group says Brobeck dissolved without obtaining the consent and authorization of partners and without following the requirements of the partnership agreement; improperly distributed preference payments of capital contribution to partners prior to the firm’s dissolution; failed to disclose that the departures of Tower Snow Jr., James Elacqua, Zager and others would trigger a bank default; and failed to properly apply payments to the employee benefits plans. They also claim Brobeck concealed its current and future debts, incurred overwhelming debt and lease obligations and hid its true profitability. “Cash distributions to partners was obtained by incurring debt rather than distributing profits,” the letter said. Following Brobeck’s dissolution, the group alleges partners agreed to transfer clients and assets to Morgan, Lewis “at dramatically undervalued amounts”; improperly dealt with conflicts of interest; and made a silent “side deal” with Morgan, Lewis for Brobeck’s San Francisco real estate obligations. Morgan, Lewis’ lease agreement protects Brobeck partners who joined the firm from default liability on the former Brobeck lease. Zager’s letter to the San Diego five sheds further light on the final days of Brobeck. He says he delayed his decision to leave the firm for a month to permit Brobeck to complete its restructuring. Zager said the firm had promised to make bridge loans to him and other Texas partners to enable them to pay their taxes, but reneged on the deal Dec. 31. Only then, Zager said, did he decide to leave Brobeck. “The only reason I waited until the end of January was that [Brobeck Chairman] Dick Odom asked me to do so for the benefit of the other Brobeck partners,” he said. Brobeck leaders have previously said Zager’s resignation was unexpected and that it had been a major factor in derailing Brobeck’s merger with Morgan, Lewis. Former Brobeck Chairman Richard Odom said in a June 10 declaration, submitted as part of Brobeck’s motion to dismiss an employee suit, that Zager had publicly announced his commitment to the firm. Zager amended his complaint for declaratory relief Sept. 16 to add two of Brobeck’s former landlords — South Hope Street Limited Partnership and CA-One Market Limited Partnership — as defendants. In August, the landlords filed suit against Brobeck and 166 former partners, including Zager, seeking $34 million in unpaid rent.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.