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A respected employment attorney who until this summer worked in the recently shuttered New York office of Philadelphia-based Harvey Pennington has sued the firm in federal court in New York’s Southern District, seeking nearly four years of backpay. The case represents an employment dispute between parties who themselves are sophisticated experts in the field of employment law. The Philadelphia-based firm has a strong reputation in the labor and employment law fields, name partner Stephen Cabot has been described by his peers as one of the nation’s premier labor attorneys, and plaintiff Michel Lee is an employment attorney whose work is highly regarded by her peers and colleagues. Moreover, the situation was exacerbated by the manner of the closing of the New York office on May 31. Many Harvey Pennington lawyers, including the former managing partner of the New York office, Carolyn B. Stevens, felt the Philadelphia leadership handled that task abruptly, without enough tact and attention to detail. None of the handful of attorneys who worked full time in the New York office is still with the firm. Harvey Pennington’s New York office opened in 1996. From the start, sources said, the office was to some extent regarded within the firm as a “foundling” or “orphaned” operation. There was a split among the partners’ ranks as to whether the firm should allocate its resources to New York or instead invest in the Philadelphia region. There was enough support for New York to move forward, but not enough support to fully fund the operation from the start. This funding problem wasn’t helped by some persistent difficulties in collecting receivables. The alleged lack of uniform resolve among the partners also may have expressed itself in a certain distancing of most partners from an interest in the New York business. Apart from a few partners who held certification in both Pennsylvania and New York, most paid little attention to the functioning of the New York office, according to firm sources who asked not to be named. Co-managing partner David L. Pennington said the primary reason for closing the office was a change in New York law several years ago. “A great deal of our New York practice was defense of companies in workers’ compensation cases. When the new law passed, a substantial portion of this business dried up,” he said. “The change came several years ago; it just took awhile for the change to get through the pipe. The New York office, as structured, was not something we wanted to support.” Technically the office still exists, Pennington said, although no one works out of it. The firm keeps “New York office” on its letterhead, and the phone number, now automatically forwarded to Philadelphia, is still active. LEE’S CLAIMS The complaint says that Lee has not been paid for her part-time work performed since September 1997, a total of 3,805 hours of legal work for which she seeks about $380,000, and an additional $72,000 in liquidated damages and attorney’s fees under provisions of New York’s labor law. Larchmont, N.Y., solo practitioner Joseph Lanni, Lee’s attorney, said Lee didn’t seek reimbursement earlier because she knew the New York office was initially undercapitalized and she wanted to give the “fledgling” office a chance to gain firmer footing before she demanded her paycheck. Lee saw her job as a chance to get in on the ground floor of a growing office and to build her own practice. In a phone conversation, Lee said she had always felt the firm was a class operation, with excellent clients, and, in fact, she had even recommended a couple of potential clients to the firm since she left. The complaint cites a written agreement between Lee and the firm that provides for payment of $60 per hour of billable client work. According to the complaint, filed Oct. 10, Lee began work at the New York office in September 1997. The complaint says that in April 1998, the parties signed an employment contract to pay her “$60 per hour for hourly billable work,” with a “negotiated amount for work done on different fee arrangements.” An of-counsel lawyer to the firm, Lee was an independent contractor and not an employee, Pennington said. Pennington emphasized that the agreement with Lee stipulated that she be paid once the firm received payment for her work. He said that although the firm has an obligation to compensate her for billable work, she failed to identify billings tied specifically to her work. The other co-managing partner, Ernest J. Bernabei III, said that Lee arrived at the firm, seeking a place to hang her hat in an of-counsel relationship. He said her contingency work didn’t really develop into the type of billings that were originally expected, and he speculated that she might have taken several contingency clients with her when the office closed. In addition, he said, her nominal billings were far exceeded by her expenses, such as office space and Westlaw usage. Pennington and Bernabei said Lee was given all the resources she asked for, including office space, computer online research access and support staff, as well as an opportunity to build a practice for herself. From the start, Lee was working 15 hours to 20 hours each week on a part-time “mommy track” (she had just had the second of her two children). Lee, 43, now claims that she has never been paid for the work she did. Pennington said the firm had made Lee an offer to settle the matter but that it hadn’t heard back from her attorney. FRUSTRATED PARTNER One individual that Lee did not name in the suit was Stevens, managing partner of the New York office through most of its existence. Despite her position in New York, Stevens never served on the firm’s executive committee, although she participated in several other committees. According to the complaint, from late last year to the spring of this year, Stevens tried to bring Lee’s concerns regarding payment to the attention of the Philadelphia partners while assuring Lee that her pay situation would be rectified. But it never was. Through this period, according to Lanni, at least one other New York attorney — and maybe two other attorneys — experienced significant delays in credited compensation, but others indicate that the firm in time brought those accounts up to date. It isn’t clear whether this was simply due to delays in collecting client receivables or in processing by the firm’s accounting department, which some at the firm considered notoriously slow. Although Stevens and her work were well-regarded both inside and outside the firm, she depended on contacts with some senior businessmen for business referrals that, over time, dried up. Eventually her caseload and her revenues declined, reducing her influence within the firm. While the Philadelphia partners wanted to help out by directing work to New York, where they were confident it would receive the proper attention, such referrals were limited by the Philadelphia attorneys’ need to tend to their own legal practice. PHILLY DIDN’T ANSWER Sources said Stevens grew irritated by the lack of attention that the firm’s managing committee is said to have paid to her administrative concerns, especially when it came to how the New York office was being closed. According to an e-mail she sent on the eve of the office closing, the Philadelphia partners didn’t reply to her repeated calls and e-mails. In that e-mail, Stevens writes that she has not heard about her severance package, that she is “dismayed that it has dragged on this long — to my last day, without the courtesy of having the issue addressed.” Stevens said in the e-mail that she had been “consistently ignored or not told of changes,” such as what day the office would be closed. She wrote that she was instructed to try to sell the office furniture and did so only to find out that the furniture was to be bartered to get the computers shipped to Philadelphia. She said she did not receive expected paperwork, doesn’t have a computer, and had not been given forwarding contacts for the office telephone and mail. ‘DEMOCRACY GONE AWRY’ The 27-year-old Harvey Pennington firm focused for many years on insurance defense but now has a large portion of its practice in the areas of employment, ERISA, labor and workers’ compensation. Some observers speculate that this lawsuit might have been the result of tension between the defense lawyer’s hourly clock and the plaintiffs’ lawyer’s contingency check. As Lee herself has acknowledged to colleagues, the compensation letter she wrote was poorly drafted. Her business goal, her lawyer said, was growing her practice. This practice, according to the firm’s marketing brochure, included both plaintiff and defense work, a situation treated ambiguously by the agreement. There are also sizable delays in payment within a contingency-based practice because trials, settlements, appeals and judgments often take a long time. Others say the structure of the firm didn’t help. According to several observers, the bylaws at Harvey Pennington required a large quorum of its executive committee to vote on firm business, but some say that getting partners together was frequently difficult. In some cases, it was because some partners just didn’t get along personally. In other cases it was due to simple logistics. While the executive committee at some firms might set up a meeting by teleconferencing to handle matters as they arose, Harvey Pennington typically waited until they could all meet in person. That sometimes took awhile, and in the meantime, events sometimes superseded the need for a decision. In a couple of instances, the firm missed out on unique opportunities to offer positions to a highly qualified individual because of the need to coordinate the decision-making body. One observer said the decentralized management style, and the consequent inability of the firm to respond quickly, could best been dubbed “democracy gone awry.” One example of the firm’s purported inability to act may have indirectly led to the closing of the New York office. During 1997 and 1998, Harvey Pennington was looking at acquiring an ongoing firm’s practice and folding it into the New York office. This would have added a dozen or more attorneys — presumably capturing some clients and some existing steady work — in the area of personal injury and medical malpractice. The partners held at least three or four major discussions about expansion, even conducting discussions about taking on a major rainmaker, which came to a committee vote. But the deal fell through because during the delay, the attorney at the target firm had already decided to go elsewhere. The co-managing partners said the seven-member executive committee now meets at least once a week and receives regular reports from the firm’s other offices.

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