The events surrounding the departure of 16 lawyers from insurance boutique Nelson Levine de Luca & Hamilton, explained Monday to be part of Nelson Levine’s interest in de-emphasizing its subrogation business, were further clarified in a complaint the surviving members of the firm filed against the departing lawyers and their new firm de Luca Levine.
As part of an announcement Monday of an overall firm restructuring that included name partners Daniel J. de Luca and Kenneth T. Levine leaving the firm along with 14 other lawyers and 12 staff members, the litigation boutique renamed itself Nelson Brown Hamilton & Krekstein, and will do business as Nelson Brown & Co. Seven of the subrogation lawyers who left the firm, including Levine and de Luca, created the law firm de Luca Levine.
Nelson Brown said Monday that it had always been difficult to accommodate the subrogation practice because of occasional conflicts with existing clients. The contingency fee structure that subrogation practices often use also “just didn’t mesh well” with what the firm was doing, Chairman Michael R. Nelson said Monday.
“Not all practices fit equally into that vision,” firm COO Kevin Toth said Monday. “We like to say that strategy is about making choices, and sometimes that means decisive choices. This positions us to invest more heavily in areas where we have high demand for our services.”
On the same day the firm was announcing its restructuring, it filed a lawsuit in the Montgomery County Court of Common Pleas against de Luca Levine LLC, de Luca, Levine and former Nelson Levine attorneys Raymond E. Mack, Michael S. Munger, Jeffrey M. Zielinski, Richard J. Boyd and Patrick A. Hughes.
The suit seeks special injunctive relief and declaratory judgment and raises a claim for anticipatory breach of contract for what Nelson Brown alleged was the defendants’ plans to continue representing current or former Nelson Levine clients on a contingency fee basis while “disregarding their contractual obligations to pay NLdH its share of any contingency fee recovery,” according to the complaint.
In June and July of this year, according to the complaint, the defendants “surreptitiously” took steps to establish their own firm, including allegedly registering as an LLC, establishing a domain name, soliciting employees to join the firm, leasing office space, securing insurance and securing financing.
Nelson “inadvertently” discovered the defendants’ formation of the LLC in July and confronted the defendants about it, according to the complaint. The defendants allegedly admitted to the steps they took to form their firm and said each was a principal in the new firm de Luca Levine, according to the complaint.
On Aug. 1, the defendants resigned from Nelson Levine. According to the complaint, shareholders Levine and de Luca failed to provide the firm with 90 days’ notice of their withdrawal, as required by the firm’s operating agreement.
Toth said Tuesday that his firm had been in conversations with the subrogation group for 12 to 18 months about the future of the firm.
“Their departure was not a surprise, it was not a secret and it was part of the firm’s strategy to focus more on the areas that we think are important” to the global insurance industry, Toth said. “The lawsuit is simply the firm’s efforts to protect its interest in the subrogation files” transferred to de Luca Levine and for which Nelson Brown has a “contractual right to protect.”
When asked how it was not a surprise that they left when the complaint alleges the departing lawyers “surreptitiously” established their own firm, Toth said there were certain aspects of the preparations of the departure that were made that were not shared with Nelson Brown, but that, from the “bigger picture perspective,” the group’s departure was not a surprise and fit with the firm’s strategy.
De Luca declined to comment on pending litigation. He said he and six other lawyers “voluntarily resigned” from Nelson Levine on Aug. 1 and “proceeded to launch” their new firm the same day. Since starting the firm, de Luca Levine has hired three other subrogation attorneys and a dozen paralegals and staff.
A fuller version of this article will be posted later when the article is completed.