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Details of Sonnenschein Nath & Rosenthal’s compensation policies continued to come to light in the ongoing D.C. Superior Court trial arising out of the lawsuit brought by former antitrust partner Douglas Rosenthal against the firm. Rosenthal (who is not related to the Rosenthal in his former firm’s name) filed his $8.5 million suit against the firm in 2005. Now a partner at Constantine Cannon, he says Sonnenschein did not fairly compensate him for his representation of the families of those killed in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland. That work brought the firm about $17 million in fees. He also claimed Sonnenschein owed him for the 600 hours he says he spent on the case before joining the firm. But Judge Melvin Wright dealt a blow to the plaintiff’s case when he struck that claim last Wednesday. Rosenthal says he is owed origination credit for the firm’s work on Sun Microsystem’s antitrust case against Microsoft. That case settled in 2004 and paid out $20 million to Sonnenschein. The trial, which began March 11, continued into its second week with Sonnenschein’s former chairman, Duane Quaini, as its central witness. Quaini — still an equity partner at the firm — took the stand Wednesday morning. Compared to the impression given by Rosenthal during his three-and-a-half days of testimony, Quaini offered the jury and Judge Wright a much different depiction of Sonnenschein’s compensation structure. During his testimony, Rosenthal described Sonnenschein’s policy of compensating equity partners as formulaic, based primarily on billable hours, realization of fees, and origination credit. In contrast, during questioning by Sonnenschein’s attorney, James Hamilton of Bingham McCutchen, Quaini told the jury last Wednesday that there are 17 “core factors” considered by the firm’s management committee to determine how to set compensation for equity partners. (Akin Gump Strauss Hauer & Feld partner Michele Roberts is also representing the firm.) Quaini depicted the system as individualized, telling the jury that “there are lots of situations with partnerships that just can’t be expressed formulaically.” The process, Quaini testified, is a lengthy one. It includes self-evaluations, one-on-one interviews between partners and management, and several meetings of the management committee. Internal Sonnenschein documents produced during last Thursday’s cross-examination of Quaini by Gary Malone — a partner in Constantine Cannon’s New York office — also shed light on the firm’s inner workings. (Robert Begleiter, also from Constantine’s New York office, is also representing Rosenthal.) Rosenthal testified during the first week of the trial that he was short-changed when the firm’s management committee set his compensation at $800,000 for 2005 and 2006. Because his Pan Am work had raked in millions of dollars for the firm at that point, Rosenthal felt his compensation for those years should have been set at about $2 million per year. For those two years, Quaini testified that his own base compensation was set at $1.4 million. The highest-paid partner for 2005 and 2006 received base compensation of $2.3 million. During the cross-examination, Malone produced a 2004 e-mail from Sonnenschein’s chief operating officer, David Schadler. In it, Schadler acknowledged that Rosenthal’s collections for 2003 and 2004 could potentially amount to $19 million (Rosenthal actually ended up with $18 million in collections) and that another partner whose collections were $18 million for 2003 and 2004 was getting a compensation of $1 million for 2005 and 2006. Despite that apparent disparity between the compensation of Rosenthal and a seemingly comparable partner, Quaini’s testimony from the day before was that other Sonnenschein partners were unimpressed with Rosenthal’s ability as a litigator. For example, Quaini said when he offered $800,000 for Rosenthal’s compensation, colleagues told him he was “crazy.” Quaini described how, in the spring of 2002, he began to distrust Rosenthal’s aptitude on the Pan Am case. It was then, he said during Hamilton’s questioning, that the firm took a closer look at the case and thought it appeared to be mishandled. The case was eventually turned over to a “big case litigator,” then-D.C. managing partner Caryl Potter III. (Potter is slated to take the stand Monday.) It was after the change that the case began gaining traction, Quaini testified. Closing arguments in the trial are expected to begin early this week.
Marisa McQuilken can be contacted at [email protected]. W.J. Hennigan can be contacted at [email protected].

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