A judge has refused to throw out key claims in a lawsuit accusing Obermayer Rebmann Maxwell & Hippel of cheating on associate bonuses, though the case was whittled down.
The Philadelphia Court of Common Pleas, in a Monday order, granted Obermayer Rebmann’s motion for judgment on the pleadings with regard to former associate Ryan Leonard’s claims of breach of fiduciary duty, fraudulent misrepresentation and fraudulent inducement. It denied the motion with regard to Leonard’s claims of fraudulent conversion and misappropriation.
Leonard’s complaint alleged the firm would bill associates’ time to clients using one rate, and then lower that rate internally when calculating what was referred to as a lawyer’s “prorated credit.” The higher the credit—a function of hours worked multiplied by rates charged—the more profitable the lawyer appears, and the more likely to receive a bonus.
Leonard also brought breach of contract and wage-and-hour claims that were not included in Obermayer Rebmann’s motion for judgment on the pleadings.
Leonard worked at Obermayer Rebmann from 2008 until 2014. The suit said he was told associate compensation was based largely on the associate’s profitability.
“However, numerous partners at the firm, including partners on the management committee, engaged in a practice known as ‘reallocation of pro-rated credit,’” Leonard said in the complaint.
Leonard said he didn’t know about the practice until he saw internal documents outlining the method, contributing to his decision to leave the firm.
In its motion for judgment, Obermayer Rebmann said Leonard’s claims must fail because an employer doesn’t owe a fiduciary duty to an employee, and because he didn’t plead reliance on Obermayer Rebmann’s alleged misrepresentations.
“Plaintiff admits that he entered his own time and that the firm’s accounting system showed him his client-authorized hourly rate for each matter on which he entered his time,” the firm’s motion, filed in November, said. “Based on his own allegations, it would have been obvious to plaintiff if his bonus were inadequate.”
The motion also argued that the allegedly incorrect calculation of a bonus does not constitute conversion and misappropriation under the law.
In his response, filed in December, Leonard argued that when he worked for Obermayer Rebmann, he was only given information showing the prorated credit he received, and not what his credit would have been if it was not recalculated. He argued that the reallocation of prorated credit was a conversion of his property interest, and that the firm misappropriated his compensation by reallocating credit and adjusting hourly rates internally.
“This practice of reallocating prorated credit and/or internally adjusting hourly rates was done without the knowledge or consent of firm clients,” Leonard’s response said. “This calculated and concealed manipulation of defendant’s entire compensation structure resulted in reduced bonuses and annual compensation to plaintiff.”
Leonard declined to comment on the judge’s order. A spokeswoman for Obermayer Rebmann did not respond to requests for comment.
Lizzy McLellan can be contacted at 215-557-2493 or firstname.lastname@example.org. Follow her on Twitter @LizzyMcLellTLI.