Breakups are hard to do, whether romantic or ‘legal’ in the sense of law firm partnerships. But the bitter breakup of a US personal injury firm is demonstrating the need to prepare for the worst.
There are some things you can do to avoid the sort of acrimony and scorched earth acrimony that is being played out with one personal injury law firm in the US currently.
Breakups can be extremely painful and carried out in an ’emergency fire drill’ manner which simply serves to make the whole process worse.
In the case of Buffalo-based law firm Cellino & Barnes the fighting has gone public and nasty, with a media engagement accompanying the court actions – exactly what firms do not want when going their separate ways.
Stephen Barnes has been trying to stop partner Ross Cellino from dissolving the 20-year-old firm.
Cellino wants to start a new firm with family members and move right away from Barnes, who claims Cellino threatened to burn the firm to the ground in August and also accused him of hiring an IT expert to allegedly try and steal proprietary information for his new firm, the Buffalo News reports.
‘It is of vital importance to note that Ross, on multiple occasions, has expressed his desire to “burn C&B to the ground,”‘ Barnes claims in court documents.
He added that Cellino said: ‘I don’t give a f**k, I will burn the place to the ground and start over with one lawyer. I have the resources. F**k it, f**k Steve and f**k Daryl. Let all these f**king lawyers spend the next 20 years with Steve.’
‘Ross is 60 years old; I am 59 years old. It has taken us more than 20 years to build the firm to the place where it is today.’
Cellino has said he can no longer work with Barnes because of numerous business disputes that have arisen between the two men.
Earlier reports about the breakup speculated that the rift was due to ‘years of hard feelings’ between the pair ever since Barnes refused to hire his partner’s daughter in 2012 to avoid nepotism.
But Barnes’ girlfriend has worked at the firm for a number of years as does his brother.
A State Supreme Court judge is set to hear arguments for both sides this month.
Cellino & Barnes was established as a personal injury law firm in the mid-1990s and has beeen able to secure multimillion-dollar compensations for their clients. The firm claims to have made more than $2 billion for its clients who have brought personal injury cases such as car accidents, industrial accidents, airplane crashes and others.
The messy fight is similar to others, such as Napoli Bern’s messy breakup
There are some key lessons in the nasty public spat that has dominated the firm’s breakup.
Here are five.
1. Have a Plan –
Not everything will work out and for a variety of reasons firms will break up. So prepare instead of having a public battle that simply airs dirty washing and creates angst, lost business, public embarrassment and of course expenses. Lawyers should be prepared for the worst and ensure they have a proper partnership plan permitting wind-downs or partnership terminations and that the orderly and ethical transfer of client files will be done.
As Thomas Berman of Berman Associates says, have a plan that will permit the dealing with circumstances that may be tough, but are nevertheless vitally important.
2. Consider the ethical obligations –
A range of ethical obligations arise when firms leave, such as the use of the firm’s reputation and IP. In cases when all the partners decide to end the partnership and either retire, establish new separate practices, or for other reasons, then in the US the firm enters dissolution and the firm assets are typically governed by the applicable provisions of the Uniform Partnership Act (UPA), which is in effect in nearly every state.
3. File Transfers –
The need to ensure files are transferred properly or to the clients is an issue that can arise and create monumental workloads and issues. Ensure there is a plan and ability to transfer files in a way that will not lead to ethics and other complaints arising, which is a frequent occurrence. Statute of Limitation issues and other problems can arise leading to potential liability for partners.
4. Client Grabbing –
Grabbing clients and ‘reverse grabbing’ where files and clients are neglected, but which can lead to subsequent liability issues, is something that needs to be attended to in a proper and ethical manner.
In most jurisdictions from the UK Law Society and US bar association requirements to others, there will be a clear requirement to ensuring departing lawyers take all necessary and reasonable steps to protect client interests during the wind-down or departure.
5. Fiduciary Obligations –
Remember your fiduciary obligations. Lawyers who change law firms also have fiduciary duties toward the lawyers they leave behind that may overlap with their ethical obligations. For example, in Graubard v. Moskowitz, 653 N.E. 2d 1179 (1995), the New York Court of Appeals provided a “sliding scale” analysis it applied to a withdrawing partner’s conduct it found to be objectionable.
Conclusion
Breaking up a law firm is never easy – or at least not to our knowledge – but having a plan that deals with the significant issues and concerns involving partners, staff and clients alike is the most important single step that should be taken to avoid the sort of bitter meltdown occurring with Cellino & Barnes.
