In an era in which it is increasingly common for lawyers — including law firm partners — to move from one firm to another during their careers, I am a dinosaur: I have been fortunate to spend my entire attorney career at one firm. So, it is a tad ironic that despite never separating from a law firm myself, I have represented many lawyers whose relationships with their law partners are “goin’ through the Big D – and [I] don’t mean Dallas.”[i]
Like marriages, law firm partnerships often begin with warm feelings and optimism that the relationship will be long-lasting and meaningful for the parties. However, when those warm feelings grow cold, a breakup can quickly go from unpleasant to nasty — particularly when the law partners are professional litigators. When the breakup becomes nasty, both parties suffer needlessly, emotionally and financially.
While there is no single approach that will facilitate a painless separation of law firm partners, here are a few tips that can help:
1. Have a partnership agreement that is tailored to your firm and is up-to-date. After running a conflict check and engaging my attorney-client, I first review the law firm’s partnership agreement. As often as not, the terms of the partnership agreement (a) bear little resemblance to the law firm’s operations, past or present, often because the agreement was copied from another firm with a very different structure; (b) ignores the subject of a partner’s separation, or (c) describes a separation process that is incomplete or unworkable. In such circumstances, the partnership agreement can hinder, rather than facilitate, the partner’s separation from the law firm. The better course is to review your law firm’s partnership agreement every few years—during periods when there is consensus among the law firm partners—to make sure it reflects the partnership’s current operations and business model and describes a fair process for both the firm and the separating partner.
2. Keep the dispute out of the media. Few things can make a law partner’s separation from a firm nastier than media coverage, which often happens after one of the soon-to-be-former partners files a lawsuit, making an otherwise private dispute a matter of public record. Media coverage creates at least three problems for law firm partners who are separating:
(a) Their time and energies are spent drafting pleadings to grab media attention rather than overcoming the practical obstacles to their eventual separation.
(b) Rarely does such media attention positively impact the practices of the squabbling partners. This is because sophisticated clients tend to hire attorneys whose focus is on fighting for their clients and not with their law partners.
(c) Like most litigants, after having their “dirty laundry” aired in public, feuding law partners are not likely to be in a mood to settle.
3. Make early use of mediation and binding arbitration. With any luck, the applicable partnership agreement will compel the parties to mediate and arbitrate. Still, even if it does not, the parties should strongly consider doing so for three reasons:
(a) Mediation and arbitration proceedings are private, so the results will be confidential (unless or until court intervention is required to enforce the mediation agreement or the arbitrator’s award).
(b) Mediators who are prominent members of the Bar, who have experience leading law firms, or who have substantial experience litigating disputes between law firm partners, often provide invaluable guidance to the parties (and the gravitas necessary for the parties to act upon that guidance).
(c) Arbitrators who are experienced with these kinds of disputes often craft awards that resolve the disputes on terms that are more equitable (and ultimately more satisfactory) than those determined by judges or juries who are required to follow the letter of the law and/or a partnership agreement that may be out-of-date or incomplete.
If your law partnership is “goin’ through the Big D” (or is thinking about it), these tips (and seeking advice from experienced counsel) will provide for a more efficient, cost-effective, orderly, and predictable transition.
[i] Chesnutt, Mark. “Goin’ Through the Big D.” Decca Records, 1994.
Author Kevin N. Tharp
Kevin Tharp’s diverse business and litigation practice focuses on the construction industry. Kevin counsels owners, general contractors and subcontractors, and represents them in disputes involving claims for payment, delay, and design and construction defects, as well as mechanic’s liens.
Kevin also counsels clients in the selection and formation of business entities, mergers and acquisitions, business selection planning, and general contractual matters.
Kevin currently serves on the Firm’s Management Committee.
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Posted on March 15, 2022, by Kevin N. Tharp