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Claiming they have been denied access to key financial information and are owed money for past services, two ex-partners of the now-defunct Philadelphia firm Mesirov Gelman Jaffe Cramer & Jamieson have sued four of their former partners. Former Mesirov managing partner Richard Jaffe, along with partners Robert Krauss, Barry Frank and Harvey Shapiro, were named as defendants in a suit filed by John Poeta and Beth Stern Fleming, who left the firm shortly before it merged into Schnader Harrison Segal & Lewis in June. Poeta and Stern Fleming are now partners in the bankruptcy group at Stevens & Lee. The suit, filed in Philadelphia Common Pleas Court on Nov. 14, charges the defendants with breach of fiduciary duty and breach of good faith and fair dealing. According to the plaintiffs’ attorney, Steven Fram of Cherry Hill’s Archer & Greiner, the four defendants were responsible for issues concerning dissolution of the Mesirov partnership after the merger was announced. Fram said his clients merely want to obtain basic information about what happened to the Mesirov partnership assets after dissolution as well as to recover money for promises made to Poeta and Stern Fleming by the defendants concerning their compensation. Poeta claims he is owed at least $65,000 for 1999 and in excess of $50,000 for 200, while Stern Fleming says she is owed a combined $200,000 in allocations for 1999 and 2000. On top of payment of monetary damages and forcing the defendants to release financial information to the plaintiffs, the suit also asks for a receiver to be appointed to wind up the affairs of the Mesirov partnership. “We’re disappointed we had to file suit,” Fram said. “John and Beth, as former partners, are entitled to basic information about the partnership, and [the defendants] failed to provide them with it, as well as telling them that they are not entitled to any additional money [on top of their respective draws].” Jaffe said he was saddened to see Poeta and Stern Fleming file the suit but declined to comment about specific allegations other than to say the suit was “without basis.” “I’m disappointed to see two partners we supported when they were with us take this kind of action,” Jaffe said. “I don’t know of any partner who left us [before the merger] who has done something like this.” Schnader Harrison litigator David Smith will represent the four defendants. The defense has been given a 30-day extension to file its response. No judge has been assigned to the case as of yet. The events surrounding the case unfurled in early 1999, when Mesirov management unveiled a new strategic plan designed to reduce or eliminate less profitable practice areas in favor of six core practice areas that targeted mid-market clients. But according to the suit, the plan also had the purpose of grooming younger partners to assume leadership positions at the firm. An associate at the firm from 1995 until leaving for Saul Ewing in 1998, Poeta says he was approached in March 1999 by then-Mesirov partner Edward DeMarco about returning to the firm. During the course of discussions with DeMarco, Jaffe and Krauss, the suit says, Poeta was told that his return would be beneficial to the firm, which was coping with the departures of high-profile partners Carl Primavera and Howard Grossman, who left shortly after the new strategic plan was announced. Poeta claims he was also told that Mesirov management had decided against merging with another firm, was looking at measures to increase firm profitability, and had begun the eventual transition of firm leadership to younger partners. To induce him to return to Mesirov as a partner, Poeta alleges, Krauss and Shapiro told him the firm was changing its past practice of automatically allocating more profits to senior partners in favor of compensating younger partners in accordance with their economic contributions to the firm. As part of Poeta’s agreement to become a Mesirov partner, the suit says, the firm agreed to secure an unsecured line of credit for him in lieu of a signing bonus. He says the firm also agreed that “sufficient amounts” would be distributed to him in January 2000 to pay the line of credit and Poeta’s federal and state income tax liability for the 1999 tax year. In other words, “Poeta’s allocation for 1999 was to be grossed-up to permit him to pay his tax liabilities such that his draws, mandatory partnership contributions and installments on the line of credit would be net to Poeta after taxes,” the suit says. As for Stern Fleming — an associate with the firm for several years before becoming a partner — the suit says she agreed to remain with Mesirov and become a partner there in 1998 after Jaffe and Krauss told her that, beginning in 1999, the firm would: � Limit compensation increases to senior partners. � Reduce the compensation of “unproductive” partners. � Materially increase the compensation of younger partners who had a solid book of business. According to the suit, Krauss told Poeta, Stern Fleming and others that allocations to senior partners would be limited to cost-of-living increases, and substantially larger allocations would be distributed to younger partners who had been identified as future firm leaders. But the suit says those promises were broken. As the firm’s practice-trimming strategy was failing, the suit says, in January 2000, Mesirov management gave senior partners “substantially larger allocations” that were not justified by increased client development, higher billings or hours or any other basic criteria. In addition, the suit says that the four defendants refused to decrease the allocations of non-productive partners, and the allocations given to younger partners like Poeta and Stern Fleming do not jibe with the promises previously made to them. For example, Poeta claims that allocations made to him for 1999 did not pay for his federal and state tax liabilities as Mesirov management had promised — costing him about $65,000. During the early months of 2000, the suit states, several younger partners threatened to leave if their compensation was not adjusted. DeMarco — described in the suit as one of the partners being groomed for firm leadership — left to become a partner at Ballard Spahr Andrews & Ingersoll. The suit alleges that in the wake of his and other departures, and out of fear of losing more younger partners, the four defendants made “nominal additional allocations” to Stern Fleming and two other partners but that her compensation still did not meet the number promised to her when she became a partner. Poeta also protested his compensation, but the suit alleges that those complaints were disregarded because management felt that the threat of his leaving only nine months after joining the firm was negligible. According to the suit, Jaffe soon announced that the firm was engaging in merger talks with other firms with an eye on dissolution on June 1. The suit says Mesirov management spoke to almost every major Center City law firm before narrowing its choices down to Wolf Block Schorr & Solis-Cohen, Pepper Hamilton and Blank Rome Comisky & McCauley and eventually focusing on Blank Rome. A merger with Blank Rome was problematic for Poeta, Stern Fleming and other bankruptcy lawyers at Mesirov because that firm has a strong bankruptcy practice that did not need additional attorneys. As discussions continued with the three firms, the suit alleges, Jaffe told partners that while he hoped the firm’s lawyers would stay together, he understood that certain attorneys or practice groups might not see particular firms as a good fit for them. The suit adds that Jaffe said if any partner decided to leave beforehand that the departure would not be taken into consideration with respect to 2000 allocations. Poeta, Stern Fleming, partner Ron Glick and two associates from the bankruptcy group began to explore other options in light of the Blank Rome talks. On April 25, the group advised Jaffe that they had decided to leave for Stevens & Lee. During that meeting, Stern Fleming asked Jaffe if her departure before any merger would affect her 2000 allocation. The response, according to the suit, was that since the firm was planning on folding soon and taking with it all the partners, allocations would not be impacted by early departures. During that same meeting, the suit says, Jaffe asked the group to postpone announcing its departure for a week or two and remain with Mesirov until the end of May to avoid hurting the firm’s standing in merger negotiations. The group agreed with the request. On May 2, The Legal Intelligencer published an article that divulged the bankruptcy group’s departure without any comment from the lateralling lawyers. But at a meeting that day, Jaffe asked Poeta to leave the firm as soon as possible, the suit alleges. A merger agreement was eventually reached between Mesirov and Schnader Harrison on May 25, which was scheduled to take effect at the end of that month, when the two plaintiffs were scheduled to leave for Stevens & Lee. The four defendants, according to the suit, became responsible for all of Mesirov’s assets, which included $800,000 in accounts receivable and work in progress by Poeta and Stern Fleming for 2000. The Mesirov assets, according to the suit, were transferred to Schnader Harrison, which returned the favor by crediting its new partners for capital contributions and guaranteeing them 2000 allocations. The Mesirov-turned-Schnader Harrison partners used “the assets of the Mesirov to fund their capital contributions to and compensation from the Schnader firm to the detriment of the Mesirov partners who did not elect to accept positions with the Schnader firm,” the suit states. The four defendants have refused or failed to provide information to the plaintiffs concerning Mesirov assets and liabilities, the winding up of Mesirov affairs, and the transfer of assets from Mesirov to Schnader, according to the suit. Although the suit says the Mesirov partnership agreement does not address the dissolution of the firm, it does provide that even partners who leave the firm should be entitled to “final allocation” and that it “shall not penalize the partner solely because of the withdrawal but may take into account the effect of the withdrawal on the partnership.” In addition to seeking the appointment of a receiver to wind up Mesirov affairs, the suit asks for an accounting of Mesirov assets and liabilities, compensatory and punitive damages, and interest and costs of suit.

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