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Titans clash over terms of exit

Titans clash over terms of exit

The details over why eight ex-HSF partners have been dragged to court by their former employer after departing for global firm White & Case have been revealed.

A legal stoush between some of Australia’s top lawyers will play out in the NSW Supreme Court later this month.

Herbert Smith Freehills is pursuing a civil action against eight former partners who were head-hunted by global rival White & Case last year.

Andrew Clark, Brendan Quinn, Tim Power, Joanne Draper, Jared Muller, Alan Rosengarten, Josh Sgro and Joel Rennie form part of the talent squad hired by White & Case to establish new offices in Sydney and Melbourne.

Lawyers Weekly reported on the opening of the White & Case Melbourne office in December last year. At the time, representatives from the US-headquartered global firm made clear that their strategic interest in Australia was principally driven by the location of the talented lawyers they had courted from HSF, whose combined practice value is worth an estimated $30 million.

New details about the dispute have emerged in court documents accessed by Lawyers Weekly. Pleadings in a 41-page statement filed on behalf of HSF Australia’s 166 partners claim the resignation of the eight lawyers took place “en masse”. The document also suggests ex-HSF partner Brendan Quinn facilitated White & Case's courting of the firm’s talent as early as October of 2015.

Referring to an exchange of emails commencing from September 2015, HSF alleges that the partners variously met with leading White & Case figures in Hong Kong, the Mornington Peninsula in Victoria and Florida.

HSF rely on email extracts sent by Mr Quinn, including one sent to White & Case partner Eric Berg saying that he will have “as many of the other potential partners available [for the meeting] as well”. A number of the defendants to the HSF action are also named in that December 2015 email.

HSF also referred to an email Mr Quinn sent from his work account to a personal email address on 14 August last year, listing words which implied a pending move to White & Case.

“Update on vote, update on offer letters, staff, accommodation, capital contribution loan, finance, set up,” the email read.

Mr Quinn, who is the fifth defendant to the proceedings, admits to having sent the specified emails.

HSF claims the partners quit one day after the HSF Australia board determined White & Case to be a “specified competitor” under the terms of its Partnership Record and Global LLP Members’ Agreement. Notice of that decision was posted on the HSF intranet on 31 August 2016, the firm said.

According to the filing, HSF believes that what transpired the following day was a co-ordinated departure, with seven partners resigning in a succession of 5 minute intervals from one another. Former partner Jared Muller gave his notice half an hour after the other seven letters of resignation had been received on 1 September 2016, HSF claims.

Court documents filed by HSF indicate that a total of 33 other lawyers from HSF have since quit to join White & Case Australia. The ex-HSF partners acknowledge that “some HSF lawyers have resigned since 1 September 2016” but otherwise deny the claim in their response to the court.

HSF wants the eight defendants to be subject to certain restrictions according to the partnership agreement, as interpreted by the remaining 166 Australian partners.

“The departing partners intend from 2 March 2017 to commence work together and to join a global competitor and new Australian legal market entrant, White & Case, contrary to the protective restrictions [of the partnership agreement], unless restrained from doing so,” the HSF claim reads.

“Unless the defendants are restrained from acting contrary to the protective restrictions as set out [in the] orders sought, [Herbert Smith Freehills] will suffer irreparable loss and damage.”

In dispute is whether the nature of the partners’ departure breaches certain provisions of HSF Australia’s Partnership Record and the Global LLP Members’ Agreement.

HSF contends that under the agreement, from 1 September 2016, the date of the eight-partner resignation, until 1 March 2017, the group are classified as “departing partners”. That status will change after March, HSF says, when the lawyers are considered “retired partners” and continue to be subject to certain restrictive provisions under the partnership agreement.

Dealings with “clients" are also a sticking point between the parties.

According to the HSF pleadings, "partners of HSF Australia, including the defendants, by reasons of their activities as partners are placed in a relationship of trust and confidence with clients." 

“They have the opportunity to form strong professional relationships with the clients of HSF Australia of the kind which would last for at least six months after a partner retired from the partnership.”

The HSF pleadings also argue that the provisions intended to preserve unique client relationships with HSF were created with a partner exit in mind.

The eight ex-HSF partners, whose legal representatives have proposed certain undertakings to overcome the challenges in the matter, argue that a number of the restrictive provisions are unreasonable. In their response to the action, the eight lawyers specifically deny the validity and enforceability of clause 13 of the partnership record. HSF is asking the court to uphold and enforce 14 clauses of the two agreements in total. 

“The [defendants] say that obtaining repeat business from clients is not solely dependent on the strength of relationships, if at all,” the response from the eight former HSF partners read.

The new White & Case partners also deny that any of the specified clauses “protect any legitimate interest of HSF Australia and/or the Global LLP”. The clauses, they argue, are against a number of public policies, including the imposition of an effective block on their ability to practise law and service clients unrelated to HSF.

“Upon the plaintiff’s construction of the clauses and the orders sought by them, the defendants are to be restrained from joining White & Case at all in any capacity, even if they undertake or perform no work for or on behalf of 'clients' of HSF,” the response said.  

“The effect of the clauses is to prevent the defendants from practising as lawyers in their chosen vocation in their field of expertise […] and from providing services to persons and entities who have never been 'clients' of HSF (as defined in the Partnership record and the Global LLP Members’ Agreement).”

Supreme Court documents suggest that attempts between the parties to mediate the dispute out of court on 13 February have been unsuccessful.

An exchange of letters outlining undertakings that the ex-HSF partners proposed to enter into appear also to have been rejected by their former partnership.  

“On a without admission basis, [the defendants] preferred certain undertakings to [HSF] as set out in a letter from their solicitors, Seyfarth Shaw Australia, dated 9 January,” the new White & Case partners said.

“Subject to compliance with the undertakings proffered by them, […] the restraints sought to be enforced by the plaintiffs are invalid and unenforceable in that they do not protect any legitimate interest.”

Christopher Gardner from Seyfarth Shaw Australia is representing the eight White & Case partners in the dispute.

Seyfarth Shaw is an international firm with headquarters in Chicago. HSF also felt the effects of that firm’s arrival to Australian shores, when it lost Mr Gardner, himself a former employment relations partner with the firm, in 2013.

When Mr Gardner resigned from the HSF partnership, he did so with a contingent of the firm’s employment team – three other partners and a senior associate. Prior to his resignation, he had worked in HSF’s Melbourne and Sydney offices for more than 18 years.

The matter will proceed to hearing in the equity division of the Supreme Court on February 27.

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Titans clash over terms of exit
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