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Brobeck, Phleger & Harrison partners are facing a few new financial dilemmas. The firm’s bank refused to cough up cash to prepare partner earnings statements for tax purposes, and questions are mounting about whether the firm owes some of its former lawyers and staff for deferring portions of their salary and not paying it back when the firm closed its doors. And while Brobeck faces complaints from creditors, employees and clients, the firm’s liquidation committee may be trying to put the firm’s one-time leaders on the hook for some of the problems. Several sources have confirmed that staff who joined Morgan, Lewis & Bockius after Brobeck’s collapse were recently asked by the head of Brobeck’s liquidation committee to sue former Brobeck Chairman Tower Snow Jr. and former firmwide managing partner James Burns Jr., alleging the pair were partially responsible for the firm’s demise. Snow and Burns jumped to Clifford Chance eight months before Brobeck’s January announcement that it would shutter. All of the uncertainty around the firm’s finances means a hit to partners’ personal pocketbooks. In a May 21 memo to former Brobeck partners, the liquidation committee asked partners to chip in money to cover the costs of preparing K-1s for firm partners — the equivalent of a W-2 form that indicates partners’ income, losses and expenses. The committee said it has paid PricewaterhouseCoopers $109,000 to handle the tax forms, but that Citibank would not release funds to cover the payment. “As a result, a group of partners advanced the $109,000 out of their own funds contributed to a trust,” the memo says. “There will undoubtedly be other costs associated with the preparation of these K-1s as well. � Consequently, we are asking you and the other partners who have not already contributed and who wish to receive K-1s for the firm for 2002 and 2003 to pay $1,500 each.” “I think they are trying to ratchet down the expenses as much as possible and preserve collections for the banks,” said one former partner who contributed to the initial fund. At the same time, Brobeck may be facing further claims from former employees. Former senior counsel Jayne Loughry filed what appears to be the first claim against Brobeck over deferred wages. In a complaint filed with the California Division of Labor Standards Enforcement, she is seeking $80,000 for one year of deferred compensation plus waiting time penalties. Loughry said that around 1999 Brobeck implemented deferred salary compensation to address the problem of salary compression — in which senior associate salaries were increasing at such a rate as to pass those of senior counsel. Senior counsel at level 1 received an additional 5.5 percent of their base salary, and those at level 2 were to receive 9.5 percent of their base salary distributed to their 401(k) accounts. The firm had about a dozen senior counsel at the time it disbanded in February. Staff had been receiving a similar so-called “profit-sharing” contribution to their 401(k) accounts, which consisted of 5.5 percent of their base salaries. Loughry had a conference before the California Labor Commission on June 2. Brobeck representatives did not show up at the hearing, Loughry said. “Brobeck’s position is that this is an ERISA claim,” Loughry said, “but it is a wage claim and was due at the time of our termination � Just as it would have been wrong for Brobeck to withhold PTO [paid time off] from the staff, I believe it would be wrong to withhold this money from them.” Former partner Stephen Snyder, who heads the liquidation committee, didn’t respond to a phone call seeking comment on the staff issues or on the proposal to sue Snow and Burns. On or about May 20, Snyder reportedly held a meeting of retired Brobeck partners and about 20 former staff now at Morgan Lewis who had worked at Brobeck for at least 20 years to encourage them to sue Snow and Burns, according to several former Brobeck employees. It’s unclear what grounds the group would have for litigation. Former partner Gary Fergus, who was present as an adviser at the meeting, would not comment on what was discussed. “I’m really not at liberty to discuss it,” he said. In response to questions about the meeting, Robert Long, a partner at Latham & Watkins who has been representing Brobeck in its claims against Snow and other Brobeck partners, said he “can’t comment on any of that.” Asked if he was consulted about it, he said “no.” Snow and other Brobeck partners who joined Clifford Chance sued Brobeck for $10 million for breach of contract and defamation, and Brobeck countersued for $10 million. The claims had been in arbitration, but Long said both sides have put the dispute on hold. While Snyder reportedly held the meeting with retired partners and former Brobeck staff in a Morgan Lewis conference room, the firm said it was not aware of the discussion. “We have no knowledge of what Brobeck’s former partners may be considering with respect to starting litigation or other Brobeck liquidation matters because we are not involved in any of those matters,” Morgan Lewis spokeswoman Eleanor Kerlow said.

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