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When lawyers part ways, the splits can be as messy as any divorce. And the disputes aren’t just limited to who gets clients or who owes what. Sometimes, former colleagues can’t even agree on who made partner. “These disputes do arise,” says Robert Waxman, a partner at Beverly Hills’ Ervin, Cohen & Jessup who has been retained as an expert witness in partnership disputes. “And they do arise more frequently today than they used to because this concept of equity versus non-equity partners is something that’s really come into vogue in the last five to seven years.” Take San Francisco’s now-defunct Wuerfel, Pardini & Hooven. Since Nan Hooven and Julian Pardini left the firm more than three years ago, they’ve been fighting with Mark Wuerfel over whether they were employees or “partners” � and, therefore, whether they’re owed back wages or have to help Wuerfel pay off the debts of the firm, which closed its doors about six months after they departed. The Montgomery Street civil practice had had about 15 other attorneys when Pardini and Hooven left, according to Wuerfel’s court papers. Though all three agreed to binding arbitration more than a year ago, they’re still squabbling. Pardini and Hooven, who claim Wuerfel was the firm’s sole owner and shareholder and that they were non-equity members and basically employees, went to the state labor commissioner in 2002 seeking unpaid wages. Pardini and Hooven were awarded more than $242,000 in back wages, interest, and penalties. Wuerfel, who claimed the two lawyers had been his law partners since early 2000, appealed the labor commissioner’s decision in San Francisco Superior Court. And he sued Pardini and Hooven for breach of fiduciary duty and other claims in 2002, to try to force them to help pay off the firm’s debts. (Pardini and Hooven came back with a countersuit the following year, for breach of contract and other claims.) Wuerfel declined to comment beyond the court documents, as did Pardini, speaking on behalf of himself and Hooven. QUESTIONABLE INTENT The disagreement over Pardini and Hooven’s roles traces back to early 2000, when partner Kevin Cholakian left the firm, then known as Wuerfel & Cholakian. Pardini and Hooven, both hired in 1992, said in court papers that after Cholakian left, they and Wuerfel “all voiced an intent” to enter into an equity partnership agreement “at some time in the future.” But they claim that Wuerfel, blaming delays on outside attorneys and accountants, didn’t provide them with a drafted agreement until the summer of 2001, weeks before they left the firm, and they never signed it. Both Pardini and Hooven wrote that more administrative and personnel matters fell to them as a result of repeated office management turnover. But, both wrote, “I was never presented with or asked to execute any document indicating that I was responsible for any of the debts or financial obligations of [the firm].” At the heart of all the litigation is a “non-equity member employment agreement” that Pardini and Hooven each signed in 1998, and unsigned “firm guiding principles” dated August 2000. In court papers, Wuerfel noted that the 1998 agreements called for Hooven and Pardini to pay at least $50,000 if they left. And even if those agreements were null, he argued, Pardini and Hooven should be responsible for a share of liabilities because “the law firm nonetheless functioned as a partnership.” The firm guiding principles governed the relationship among the three lawyers during 2000 and 2001, setting out compensation and responsibilities for them and no other lawyers at the firm, Wuerfel wrote in his declaration. “When cash flow was low, the principals did not receive their regular ‘draws’ and had to wait until sufficient cash flow was available to pay their compensation,” Wuerfel added. Pardini and Hooven acknowledge they sometimes went two or three months without pay, but say they did so during the “interim period” after Cholakian’s departure because they expected to become equity partners. They describe the guiding principles as a document meant to reflect “how members of the anticipated new firm would work together in a calm, positive and businesslike manner,” but point out the latest version was marked as an eighth draft and never signed. Many of its provisions were never implemented, they claim. One thing the three lawyers do agree on: They never signed the shareholder agreement that had supposedly been in the works since Cholakian’s departure. “For more than a year, Ms. Hooven, Mr. Pardini and I attempted to negotiate new agreements among us to establish the terms of our relationship in written form,” Wuerfel wrote in court papers. “However, because of various differences, we did not succeed in entering into any written agreement.” For firms, in general, growth can lead to murkiness, particularly if it’s dealt with informally, says retired San Francisco Superior Court Judge Alfred Chiantelli, a neutral with ADR Services who has mediated other law firm disputes. “As the firm progresses with more businesses, more clients and more work, you have to make changes midstream,” splitting up clients and divvying up responsibilities, Chiantelli says. “As careful as attorneys are in advising their clients how to get into contractual relationships, they should be just as careful when they’re dealing with themselves.” Pam Smith is a reporter for The Recorder , the ALM newspaper published in San Francisco, where this article first appeared. Her e-mail address is [email protected].

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