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An Ohio-based firm and a San Antonio-based firm are doing what firms do — filing suits. But in this case, they’re suing each other. The suits are in Bexar County, where the feud began. Arter & Hadden v. Loeffler, Jonas & Tuggey, filed in November 2001, was transferred to San Antonio’s 45th District Court from the 95th District Court in Dallas on May 2, according to records of the Bexar County District Clerk’s Office. The second suit, Loeffler, Jonas & Tuggey v. Arter & Hadden, was filed on Feb. 5 in San Antonio’s 37th District Court. In its suit, Arter & Hadden alleges that its former partners who left the firm with Tom Loeffler on May 1, 2001, to form a new firm breached their fiduciary duties to Arter and breached the partnership agreement. “I think it’s baseless,” Houston attorney Joe Jamail says of Arter & Hadden’s suit. Jamail, a partner in Jamail & Kolius, says he agreed to represent Loeffler Jonas if the case goes to trial. “Loeffler’s a good friend,” he says, but declines further comment. “We attempted to resolve this dispute before any lawsuit was filed, but unfortunately that didn’t work out,” Michael P. Lynn, lead counsel for Arter & Hadden, says in a written statement. Lynn, a partner in Dallas’ Lynn Tillotson & Pinker, declines further comment. “We are confident in our position, and our pleadings will represent our public comments on this case until we go before a judge or jury,” he says. Arter & Hadden alleges in its suit that the partners who formed Loeffler Jonas conspired against their former firm. The former partners didn’t fully or fairly disclose their intentions prior to leaving Arter & Hadden, the suit alleges. About 20 lawyers from Arter & Hadden’s San Antonio office, a partner in its Austin office and two government affairs specialists in its Washington, D.C., office made the move with Loeffler, a former Republican congressman. The move effectively shut down Arter & Hadden’s offices in San Antonio and Austin. “What happened here is a number of outstanding professionals in that firm [Arter] made decisions individually that their future was not best served by the firm,” says Julian Read, an Austin public relations consultant hired by Loeffler Jonas. Read says the lawyers that formed Loeffler Jonas weren’t the only Arter & Hadden lawyers jumping ship. Between 100 and 150 people left the firm in the past year, he alleges. In The National Law Journal‘s November 2001 survey of the 250 largest firms, Arter & Hadden showed the greatest decline in the number of lawyers, having decreased about 31 percent in a year’s time. The firm’s rank dropped from 64 to 123, NLJ reported on Dec. 17, 2001. (NLJ is an affiliate of Texas Lawyer.) Bruce Vincent of Androvett Legal Media, who is Arter & Hadden’s spokesman, says the firm has 282 lawyers in its offices nationwide, including 42 in the Dallas office. Dallas is the only Texas city where the firm has an office, he says. CLIENT RELATIONS Arter & Hadden alleges in its suit that the entire San Antonio office submitted notices of resignation on April 11, 2001, just hours after receiving the first and largest installment from a fund the firm established to reward partners deemed worthy of special financial recognition. Arter & Hadden alleges that the bonuses to the San Antonio partners were increased based on arguments that the higher rewards were important to the success of that office. David Coale, a Dallas attorney representing Loeffler Jonas, says the bonuses were for the partners’ work in 2000. By leaving, they forfeited a portion of their bonuses, says Coale, a partner in Carrington Coleman Sloman & Blumenthal. Arter & Hadden alleges in the suit that the mass notices submitted by the San Antonio lawyers failed to meet the requirement in the firm’s partnership agreement that a partner give written notice 30 days in advance of leaving. Coale says Arter & Hadden had agreed to accept less than 30 days’ notice. According to Arter & Hadden’s suit, Loeffler joined the firm in 1993 as part of the acquisition of his then-existing small lobbying firm. Loeffler and his group became Arter & Hadden’s San Antonio office, the suit says. J.D. Pauerstein, a partner in Loeffler Jonas, says he joined Arter & Hadden in 1997 because he previously had practiced with Loeffler and James Jonas, who was on Arter & Hadden’s executive committee. The decision to start a new firm in 2001 seemed natural, he says. “We’re all basically a team,” Pauerstein says. “It’s quite natural we would keep our team together, in my mind.” Pauerstein says Loeffler Jonas has 31 lawyers in its San Antonio, Austin and Washington offices, with 29 of them working in San Antonio. Loeffler, the only attorney in the Washington office, also works in San Antonio, he says. Arter & Hadden alleges in its suit that the firm invested millions of dollars in building its San Antonio office and carried the cost of a “lavish” renovation in 1999. The firm is seeking compensatory and exemplary damages. Loeffler Jonas alleges in its suit that the former Arter & Hadden partners built the San Antonio and Austin offices “from the ground up.” The San Antonio office was heralded as Arter & Hadden’s most successful at the end of 2000, Loeffler Jonas says in its suit. Arter & Hadden also alleges in its suit that its former partners left the firm with more than $150,000 in unbilled expenses to clients. The Loeffler Jonas suit alleges that Arter & Hadden historically accrued expenses and fees in excess of a client’s monthly retainer. It never was intended that the sums shown on Arter’s books would be billed to clients, according to the suit. Arter & Hadden attempted to disrupt relationships between Loeffler Jonas and clients by telling them in letters that they owed unidentified sums of money for which they had not yet been billed, the new firm alleges. Loeffler Jonas has won the first two rounds in the legal fight. Judge Frank Montalvo, of San Antonio’s 288th District Court, issued a temporary restraining order on Feb. 5 to bar Arter & Hadden from taking any action to collect money from Loeffler Jonas clients. Pauerstein says the two firms have reached an agreement that Arter & Hadden will stop communication with Loeffler Jonas clients. Information provided to Arter & Hadden shows the clients don’t owe the firm any money, he says. Loeffler Jonas also was successful in having the case moved to San Antonio. Acting on a change of venue motion filed by Loeffler Jonas, 95th District Judge Karen Johnson of Dallas signed an order authorizing the transfer of the case on April 15, but the case didn’t arrive in San Antonio until May 2.

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