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In a decision with broad implications for partner mobility, a New York state appeals court unanimously found that two law firm partners did not breach their fiduciary duty by leaving one firm for another and taking with them copies of their correspondence. However, the Appellate Division, First Department, ruled 3-2 that the partners were liable for distributing information about the salaries of associates and support staff while still members of the partnership. The ruling in Gibbs v. Breed Abbott & Morgan, 3040-3041, reversed the bulk of a controversial 1998 decision by Supreme Court Justice Herman Cahn, which held that former firm Breed Abbott & Morgan trusts and estates partners Charles Gibbs and Robert Sheehan were disloyal to their former partners when they left the now-defunct firm in 1991 to join Chadbourne & Parke. The partners took with them two associates, support staff and approximately half of the firm’s trusts and estates clients. At trial, Breed Abbott argued that the partners left in a manner that gutted the firm’s trusts and estates department, and Cahn agreed. He held Gibbs liable based on three factors: that Gibbs initially solicited Sheehan to accompany him, that both men took with them copies of their files, and that they solicited other Breed Abbott employees before telling the partnership of their intent to leave. Cahn awarded $1.8 million in damages, which he found represented profits lost by the department from the time the partners left until Breed Abbott dissolved in 1993. In reversing Cahn, the First Department, in a decision written by Justice Angela Mazzarelli, held that Gibbs did nothing actionable in recruiting Sheehan, and that neither lawyer breached his duties to the firm by copying correspondence files. However, the majority also ruled that Gibbs and Sheehan should not have sent Chadbourne a memo in April 1991, before they left Breed Abbott, that included information such as associate salaries and billing rates. The majority reasoned that the information was confidential and that distributing it hurt Breed Abbott because it placed the firm “in the position of not knowing which of their employees were targets and what steps would be appropriate for them to take in order to retain these critical employees.” The dissent disagreed that anything contained in the April 1991 memo was confidential, observing that salaries and bonuses are “often the greatest unkept secret in the profession.” The dissent, written by Justice David Saxe, also noted that recruiters commonly know employees’ billing rates, and that directories such as Martindale-Hubbell provide resume information. In a broader statement, the dissent said that clients are entitled to the lawyers of their choice, and that restricting partners from soliciting associates ultimately impedes the clients’ rights select attorneys. “[T]he paramount concern of ensuring that clients are completely free to choose which firm will best serve them … can only be protected if lawyers are able to take with them those willing members of their legal team who played an active and important role in the clients’ work,” the dissent wrote. DAMAGES VACATED As part of its ruling, the appeals court vacated the $1.8 million damage award and remanded the matter for a new damage calculation. The court ordered that any award be limited to whatever harm was caused by distributing the employee information, specifically noting that the firm had not established how “supplying employee information to Chadbourne, in and of itself, was a substantial cause of [Breed Abbott's] lost profits.” The majority opinion was joined by Justices Ernst Rosenberger and Alfred Lerner. The dissent was joined by Justice Richard Wallach. Gibbs and Sheehan were represented by Greenberg Traurig partner Leslie Corwin and associate Simon Miller. Breed Abbott was represented by Morvillo, Abramowitz, Grand, Iason & Silberberg partner Paul Grand, counsel Diana Parker and associate Tracy Lehman.

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