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A former Rogers & Wells partner who was asked to resign over a series of client overcharges may be entitled to lifetime retirement benefits, a Manhattan appellate court has ruled. John J. Sheehy, who stepped down as head of litigation at Rogers & Wells in 1993 and agreed to take early retirement in 1995, sued the firm shortly after its 2000 merger with London’s Clifford Chance, claiming it had breached an oral agreement to pay him lifetime benefits under the Supplemental Retirement Payment (SRP) provision of its partnership agreement. In May 2002, Manhattan Supreme Court Justice Karla Moskowitz granted summary judgment to Clifford Chance, which had argued that an oral agreement was insufficient to bind the firm. But Thursday, in Sheehy v. Clifford Chance, the Appellate Division, 1st Department, found that the relevant articles of the firm’s partnership agreement did not require a writing to grant SRPs, and reinstated the plaintiff’s top breach of contract claim. “Article X(b) [of the partnership agreement] does not declare that the only way in which a partner may receive SRPs and other amounts beyond those provided in Article X(a) is by written agreement,” the court wrote in an unsigned majority joined by Justices John T. Buckley, Angela M. Mazarelli and Richard T. Andrias. According to the agreement, partners who retire at age 65 or older are entitled to four years of payments equal to 37.5 percent of the partnership distribution that they would have received as active partners. Thereafter, for the rest of their lives, they receive SRPs, a fixed sum arrived at by a formula set forth in the retirement plan, which is part of the partnership agreement. They also continue to participate in the firm’s medical and life insurance plans, and have access to secretarial support. The agreement further stated, “[SRPs] shall not be paid to a partner who takes Early Retirement, except at the specific written request of the Executive Committee.” In January 1995, when he was 57, Sheehy claimed that he and the firm entered into an oral agreement, whereby, in exchange for his departure, he would be deemed to have taken early retirement at the executive committee’s written request and entitled to SRPs. Edward O’Sullivan, the firm’s then-director of finance, testified that James Asher, the managing partner at the time, had told Sheehy he would receive SRPs. The firm’s controller also sent a memorandum to Sheehy outlining how much he would receive in SRPs. The firm denied making any agreement and refused to pay Sheehy SRPs when they were due to begin on Jan. 1, 2000. The panel found the requirement of a “specific written request” referred to the firm’s asking Sheehy to take early retirement, not to the payment of SRPs. It also noted other partners who took early retirement had received SRPs without a written agreement. Sheehy had himself received profit distributions not covered by written agreement. Moreover, the court wrote, nothing in the partnership agreement barred oral modifications. The court also rejected the firm’s argument that the oral agreement was invalidated under the Statute of Frauds because the lifetime benefits were not capable of complete performance within one year. The justices said the oral agreement applied to Sheehy’s change in status as a partner, not the benefits, which were already governed by the existing retirement plan. DISSENTING OPINION In dissent, Justice Joseph P. Sullivan said Sheehy’s claim should be barred by the Statute of Fraud. He wrote: “Plaintiff, an experienced and sophisticated commercial litigator and partner in the firm for 25 years, familiar with the provisions of the partnership agreement relating to the SRPs, must have known that the statute of frauds would require a writing to make enforceable a purported oral agreement for the payment of SRPs that would not even begin until four years after he withdrew from the firm and, in any event, could not be completed before the end of his lifetime.” Justice Sullivan also referred to any arrangement the firm might have had with Sheehy as “a face-saving device designed to disguise his expulsion.” Sheehy was represented by Kenneth E. Warner of Coblence & Warner, Eric J. Warner and Lewis Fischbein. Thursday, Warner expressed satisfaction with the court’s decision. “We’re gratified that John will have an opportunity to prove to a jury that he was deeply wronged and he is entitled to the lifetime benefits he was denied,” he said. Warner declined to discuss the sum owed his client in SRPs, except to say it was a “substantial amount.” Citing a sealed record, Warner also refused to discuss the overcharging incidents for which Sheehy’s resignation was requested. But he said his client “took responsibility because of his position,” but did nothing wrong himself. The incidents apparently came to light in late 1993. Ironically, Sheehy was quoted in a September 1993 BusinessWeek article about efforts corporations were making to prevent overbilling. “I’ve tried to tell my people not to view [client fee audits] as an insult but as a challenge,” he told the magazine. Barry H. Vasios of Holland & Knight represented Clifford Chance. He declined to comment.

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