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BOSTON – A Massachusetts Superior Court ordered Boston-based law firm Donovan Hatem not to make 2007 profit payout to partners while a financial dispute between nine former partners and the Boston-based firm awaits arbitration. The former partners brought claims of breach of contract, breach of fiduciary duty, fraud, economic waste, mismanagement and self-dealing against the firm’s living name partner David J. Hatem and the firm. They seek $241,175 in unpaid compensation, a return of about $445,225 in capital contributions, a share of $7 million in accounts receivables and current earnings, more than $1 million in unpaid services performed during the firm’s early months and $371,947 recorded as pre-paid rent in 2006 books and withheld as income from partners. Hartzell v. Hatem, No. 07-05446 (Suffolk Co., Mass., Super. Ct.) The former partners left Donovan Hatem in July to form LeClair Ryan’s Boston office. In their Dec. 12 complaint, the plaintiffs accused Hatem of improperly reporting the finances, delaying his client collections and using advanced payment of expenses to decrease funding available for annual partner payouts. “The Law Firm was funded by and built on the unpaid sweat equity and skill of the plaintiff equity partners,” stated the complaint. “The plaintiff partners in effect worked for 11 months for nothing, some accruing negative capital from March 2001 through December 2001.” The plaintiffs also accused Hatem of staging an 11:45 a.m. walkout of a Dec. 10 all-day mediation to catch a pre-booked 1 p.m. flight. “It was later discovered that Hatem brought parties to the mediation under false pretenses and his theatrics were staged,” stated the complaint. “We attempted to resolve this with him at a mediation with a mediator that he wanted to use,” said plaintiff Neil Hartzell. “He staged a walkout of the mediation [and] at that point we had no choice but to file suit.” On Dec. 20, the court ordered the firm not make year-end payouts until at least January 31 and to produce a confidential financial statement of the firm’s income, expenses and profits as of Dec. 26 for the plaintiffs. A firm spokesman said firm distributions are normally not made until April 15. In a statement, Donovan Hatem said the former partners could not cite any violations of their partnership agreement during the court hearing. “In July 2007, when these partners chose to depart, Donovan Hatem agreed in writing to conduct its affairs in the ordinary course in all respects. The Court Order, entered by agreement of the firm, actually requires less than our prior written stipulation,” the firm said in its statement. According to the plaintiffs’ court filings, at least 29 partners and 89 associates have left the firm since its March 2001 inception. They also said Hatem was verbally abusive and his wasteful practices included excessive business travel on first-class flights and stays in expensive hotels and a $5,000 private Christmas dinner for his friends in 2005 that included a $1,000 cash tip. Hatem’s attorney Michael Mone of Esdaile Barret & Esdaile declined to comment. Court papers filed by Hatem on Dec. 18 opposing the plaintiffs’ request for an injunction said the firm has “remained a thriving multimillion dollar professional services enterprise” with 55 lawyers, including 11 contract or of-counsel lawyers and projected 2007 revenue of “nearly $19 million.” “Their attempt to disrupt a robust, thriving, professional services enterprise has no support or basis and is motivated by nothing more than greed.”

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