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1995 Suing the Firm Richard C. Reuben University of Missouri School of Law, [email protected]

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Recommended Citation Richard C. Reuben, Suing the Firm, 81 ABA Journal 68 (1995). Available at: https://scholarship.law.missouri.edu/facpubs/830

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reputation was intrinsic to my Chester Nosal was own. ne day in May invited1992, But it had to be done. by his partners in the "I helped build that firm and Chicago-based firm of Win- its excellent reputation over a 20- ston & Strawn to "relocate year career; I was on its hiring com- to a position of alternative pro- mittee back in the 1970s." fessional responsibility outside Winston & Strawn conceded of the firm." The euphemism nothing to Nosal's allegations of did little to conceal the fact management and accounting impro- that by ousting Nosal and 19 prieties, and successfully obtained other partners, those who re- summary judgment. Now that deci- mained could receive larger sion is on appeal. shares of the firm's profits. If a suit like Nosal's would Should the dismissed have been an aberration 20 years partners sue? Answer- ago, the same would be true of the ing the question was termination of partners and the op- agonizing for Nosal. portunity for annual draws of Prior to his dismis- $400,000. sal, Nosal says, he In the modern law firm, every- had repeatedly de- one sues, says Victor Schachter, a manded an accounting management lawyer with San Fran- of firm distributions cisco's Schachter, Kristoff, Oren- and expenses from then- stein & Berkowitz, which has rep- managing partner Gary resented a number of law firms in Fairchild, who is now in fed- actions brought by former partners eral prison for embezzling al- or employees. "The gild is off the most $1 million from the firm. lily. When you combine the inher- Filing the suit "was almost ent hostility toward lawyers with like an amputation," says Nosal, the nature of the changes in the who had been an international legal industry and the fact that law lawyer in the Washington, firms are seen as attractive finan- D.C., office. "I was cutting off cial targets, law firms of all sizes part of myself, something I have to be concerned." had worked for and whose Many believe that an increased willingness by lawyers to sue their firms is as significant an indicator of a fundamental change in the pro- She claimed bias: fession as the pressures of the bill- Nancy O'Mara Ezold able hour and market-driven "beau- ty contests" for clients. won a discrimination Among recent examples are: lawsuit against Wolf Philip Heller, a former partner at Block, but it was Richard C. Reuben, a lawyer, reversed on appeal. is a reporterfor the ABA Journal.

68 ABA JOURNAL / DECEMBER 1995 ABAJiLONDASALAMON Lawyers who once would rather take grievances against their firms to the grave are now taking them to court. Is it the death of professionalism or the dawning of accountability?

Pillsbury, Madison & Sutro in Los Both defense and plaintiffs' Angeles, who sued unsuccessfully lawyers, however, say that "work- for $4 million over an allegedly un- ing things out" is not always as just expulsion and later obstruction simple as it might once have been. of his job search; Richard G. Cohen, "When you look at the sta- a former Lord, Day & Lord tax tistics of how many wom- partner in New York City, who en or people of color sued unsuccessfully over enforcea- are partners in large bility of rules imposing financial firms, the notion disincentives on withdrawing part- of having things ners; and Houston attorneys Sid- 'worked out' often ney Ravkind and Zoe B. Littlepage, translates into peo- who settled litigation with Mandell ple in these groups & Wright over rights to about 250 folding their tents breast implant case files, then and going away worth nearly $50 million in poten- without a mean- tial verdicts or settlements. ingful vindication Not so long ago, a lawyer of their rights. would have taken a grievance to That's not 'work- the grave rather than sue former ing things out,'" colleagues. says Deborah During the past 15 years, Raskin, a part- events and determined individuals ner at Vlad- drastically changed the legal land- eck, Waldman, scape. Whether it has been changed Elias & Engel- for better or worse is a matter of hard in New controversy: Some claim law suits York City who are necessary to vindicate basic represents law- rights, while others see them as yers suing their eating away at the fabric of the pro- firms. fession. Those involved on either Peter Ben- side of litigation, though, attest that nett, a Maine de- such suits are hard-fought, and fense lawyer and carry enormous personal and pro- former chair of the fessional costs. ABA Torts and Insur- Senior lawyers lament the new ance Practice Sec- litigiousness as an affront to pro- fessionalism. 'When I was young at law, and as the years went on, I do His firm defended: not remember ever hearing of some- one who left a firm and then sued," Ian Strogatz says recalls Sol Linowitz, a retired part- Wolf Block ner at Coudert Brothers' Wash- ington, D.C., office and author of refused to settle "The Betrayed Profession." He adds: because the suit "Washing one's linens in public was not something anyone would think challenged the of doing. We worked things out." firm's integrity.

ABA JOURNAL / DECEMBER 1995 69 tion's employer-employee relations federal discrimination laws, rather rules' that distinguished law firms committee, however, insists many than a professional association be- from most other businesses, we plaintiffs and their lawyers have yond the law. The chummy, close- shouldn't be surprised that it's dollar signs in their eyes. mouthed citadel of law firm part- treated by all as a business, and "A lot of employment cases re- nership had been scaled. Hishon v. that its players respond in the same sult in large verdicts, and lawyers King & Spalding, 467 U.S. 69 way that business people tend to who lose their jobs may be think- (1984). (The suit was settled before respond in such situations-and ing, 'Why not try, just for the hell of going back through the lower courts; that's with litigation." it?' " he says. "In the plaintiffs' bar, Hishon later left King & Spaulding.) The litigiousness is also a re- who is [a better target] to sue than Ronald Gilson, a Stanford Law flection of the wrenching changes a bunch of rich lawyers?" Just a few decades ago, there was little reason to sue be- cause members of firms watched out for each other like family, sharing profits as well as losses. Joining a firm was a lifetime commitment, and partners rarely forged out on their own. Moreover, the broader legal community was tightly knit, and a lawsuit against a firm was tanta- mount to career suicide. "The way you handled yourself in general made clear that this was a distinguished profession, rather than the usual business," Linowitz says. "As a member of a learned profession, members of the bar ad- hered to certain standards of civili- ty and decorous conduct. Suing one's firm just wasn't done." Elizabeth Hishon was keenly aware of those considerations in 1978 when, as a sixth-year associ- ate at King & Spalding in Atlanta, she decided to sue her firm for al- legedly violating Title VII of the Civil Rights Act of 1964. The firm had refused to admit her to part- nership, she argued, because she is Modern law firm management breeds disputes: a woman. "I had great respect for the Stanford's Ronald Gilson argues that lawsuits can result when firms firm and the lawyers there," says argue over productivityformulas, which ignore human capital. Hishon. "I believed that the firm's decision was the result of the same kind of discrimination that profes- School professor who teaches cours- firms experienced in the 1980s- sional women in a number of other es about large law firms, says at- booming at the start on the areas were experiencing. I felt that torney lawsuits are, in some ways, strength of a mergers-and-acquisi- I was in a strong position to make a inevitable in today's business cli- tions-driven economy, but wither- statement, and that I would regret mate. Where firms used to provide ing at the end in recession with the not doing so." income insurance for partners rest of the nation. While it was a tough decision, through revenue sharing, today's By 1991, firms in such metro- Hishon says she was buoyed by her view is everyone for him- or herself. politan centers as Los Angeles, commitment to her position, as well Gilson says a modern approach Chicago, Dallas and New York were as the support of other members of to firm management that empha- downsizing by laying off associates the bar-including men. sizes "eat what you kill" inevitably and giving the boot to nonproduc- Undaunted by two lower court breeds disputes and litigation. tive partners. Fights over "books" of losses, Hishon's decision to pursue "Productivity formulas are easily business and benefits became as her case resulted in a landmark manipulable, and when people dis- commonplace as lawyer mobility it- unanimous U.S. Supreme Court de- agree about productivity, they're self. cision by Chief Justice Warren talking about taking money out of At the same time, demograph- Burger to allow her claim to pro- each other's pockets. These are the ics of law firms were changing, as ceed. For the first time, the Court kinds of situations in which we see well. Baby Boom-era lawyers were held that law firms could be viewed lawsuits. challenging older partners who had like any other employer subject to "Without the internal 'sharing more experience but who were, per-

70 ABA JOURNAL / DECEMBER 1995 ABAJ/ARNOLDADLER haps. less hungr\ to:" xork. Freshly ing moment. "'Anita Hill's testimo- former firm of Kohn. Nast & Graf minted and less expensike associ- ny emboldened people---of all races had settled his wrongful dismissal ates- could boost profits 1h doing and genders to come forward, and claim after three weeks of trial. much of the work more cheaply continues to do so," says Nancy Juries, in particular, have \Women and minorities, who had Erika Smith of Smith & Mullin in shown little tolerance for heavy- been excluded fr-om the profession West Orange. N.J.. a plaintiffs' em- handed employment practices by until law schools began opening ployment law firm. law firms, it point underscored by their doors in the 1970s, were at- Shortly after the Disabilities former legal secretary Rena Weeks' tempting to ascend to more power- Act became effective, for example. $7.2 million sexual harassment tul pos-itions,. which some viexwed as several lawyers came forw. ard to verdict in 1991 against Baker & more threatenig. file suits against former firms McKenzie (later reduced to $3.6 In the earlyv 199s. Congrfss clot ming they had been terninated million). also expanded rights and reme- wrongfully after disclosing they "Juries are more skeptical of dies for workers through three were HIV-positive. While one suci claims of ignorance of the law when pieces of significant legislation: lawy-er. Martin Caprow of San they're being made by lawyers." The Ailernicans with Disabilities Diego, lost against Frank & Free- says one of Weeks' attorneys, Philip Act of 1990, the Civil Rights Act dus, he may well have won in the lay of San Francisco. "They expect of 1991. and the Family and Med- court of public opinion. The litiga- that if you're a carpenter, you're ical Leave Act of 1993. Each pro- tion was the model for the popular going to know how to hammer a vided nexx vehicles to challenge movie "Philadelphia," for which nail, and that if you're a lawyer, employment practlices, including actor Ton Hanks won an Academy You're going to know the law and those of law firms. A\\ ard for best actor shortly before follow it." Many ohserxers point to tes- ('aprow'. died in 1994. But these are not merely in- tinlonv hy tniversitv of Okla- In another HIV-'related dis- stances of artfully aroused jury pas- homa Coillege of Law professor missal case. members of a Philadel- sions, as some have claimed in at- Anita Hill at cunfir nation hear- pnia .ury hugged and kissed an HIV- tempts to dismiss any significance ings for U.S. Supreme Court Jus- positive law'yer known then only as in the Baker & McKenzie decision. lice Clarence 'Thomas a; a defin- "Scott I)oe upon hearing that his Philadelphiaancy O'Mara litigator,Ezold, a \%,on a bench trial for gender discrimination Mitigating Clrcumsiances in 1991 in a lawsuit against her former firrci, Wolf, While litigation againN- taw firms mitigatiol steps as other employers. Block. Schorr and Solis-Colien, may be inevitable. fhere are ways law TuEuc-ation and trinig is amust - after it denied her paitnership. finms can reduce thepossibility of for a%firm managing padiners, U.S. District Judge James Mc- bfeing next in line, execufves, deparmntaniager , and Girr 1'dfx reectedj the firm's ar- At a practical level, says Ronald others in responsibie josilioas,. gument-her purported lack of giLkn, a smaford Law School 'They need to kiow what the law legal analytical skills as pre- professor, finsrshould cotsider is from a pro-active point of view, . textual- incorporating alternative dispute about how to avoid-sexeal hamssulent The 3rd U.S. Circuit Court resolution mechanisms into on the job, how to &ope+rorrnance! of Appeals at Philadelphia re- partlnership agreements evaluations properly, and handle other versed, however, in a decision I Traditional litigation is an issues that could give rise to a liability the U.S. Supreme Court ulti- insane way of solving disputes, and situation." mately refused to review. Ezold law firm disputes are no different in The first mitigation step miglt c. Wolf Block, Schorr and Solis- th's regar-d,' he says, well involve firm culture: creating an Cohen, 983 F.2d 509 (1992). Some fins already are taking environment that does not breed the While the appeals court this step, O'Melveny & Myers, mutual contempt that can end in threw out her judgment, Ezold headquartered in Los Angeles, litigation when disputes occur. downplays the significance of recently amended its partnership 'Thekey conceptis making sure her ultimate loss. disputesagreemnwnt amongimners." to provide for ADR of -. the relationship among profesionas- "Losing one case is not a is ape rsonal onethat gepIrates reason for other plaintiffs to feel "'The privacy that ADR provqides nutual lty, Schac..ite' sys "-, they should not bring suit if the is panicnlarly appealing to both sides," "Vhere people care about one facts warrant it," she says, not- says,paltner Cathefine B. Hagen, who another, and are not just sharing spice ing that cases like hers show hr-lped draft the plan. Among the to make money, you have a stronger "we can win at trial." benefits of Uing AR. she Eays, is likelihood of being able to resolve Winning at trial feels great that it aliowx disputes to be decided by problems intemaly." for any lawyer. But this kind of people ith expertlise in law firml Gison agrees. -Afirm whose - litigation can leave even victors lat-ter - - iiternial structure is more egalitarian severely battered. Traditional Victor Schachttr, a management as to dision-making and income notions of success often blur in lawyer with S1 Francisco's Schachter, distribution likely minimizes the the bitterness of a family feud. KIistoff; Orenstein &Berkowitz, say- possibility of hostility when problems As has become common in laviros also have to recognize that arise,' lie says. such cases, much of the argu- they need to take the same litigation- -Rithard C Reuben ment in Ezold's case focused on

ABA JOURNAL / DECEMBER 1995 71 the contention by Wolf, Blocl be used for fear of reprisal. to devise strategies, write letters her legal analytical skills "There is very significant fear and provide other counsel that the short of the firm's standards of being blackballed, and this is a potential lawyer-plaintiff can use result was the kind of publi very real fear," says plaintiffs' law- informally to avoid litigation. ting of competence that few la: yer Smith. "I tell prospective plain- If a grievance turns into a law- would want to experience but tiffs [their careers will be] in much suit, the litigation can be as awk- expect when they take on the better shape if they're willing to ward for the attorney-advocate as "It wasn't a pleasant e: move to another state, become a for the attorney-client. ence." Ezold says, stressing tt law professor, or do something else "We went to law school togeth- portance of personal strengtl entirely." er, sit on the same committees, and conviction. "As long as you Simply finding a lawyer will- suddenly here I am calling, saying, you're right, you can put up 'We have a problem.' This can be with the kind of testimony very difficult," Smith says. that Wolf, Block gave on the stand." thers who represent lawyer- For the firm, it meant plaintiffs also point to possi- diverting attention from ble repercussions. Loss of work for clients, hiring out- referrals is one possibility, side counsel for representa- greater hostility by oppo- tion, and getting negative nents in other litigation another. publicity. "We were defen- Such stakes are ratcheted up a dants just like any other de- notch if the representing firm al- fendants," says Ian Strogatz, ready has pending matters with the the Wolf, Block partner in firm being sued. charge of the case. "Law firms tend to put up a But unlike just any more vigorous fight than corpora- other matter, the Ezold case tions because they have the re- was different because the sources to ddfend themselves less attack came from one of the expensively, and have strong politi- firm's own, he says. "Some- cal incentives to defend themselves," one who has worked with says plaintiffs' lawyer Raskin. you for years is part of your Plaintiffs in such cases argue family, and you like to that their cases have had an impor- think that the people who tant deterrent effect that ultimate- work with you know you ly cleanses conduct within firms. well enough to know that Defendants, for their part, often in- what you're being accused sist that litigation is necessary to of just wasn't done." preserve a firm's reputation and Strogatz admits the to safeguard its very structure case could have been set- against future attacks. tled, but the firm was not Lawsuits affront professionalism: Stanford's Gilson, however, is interested. "These suits are not convinced by either argument, very personal in that they Ex- Coudert partnerSol Linowitz calling the whole litigation exercise challenge your principles says suing once would have been like a "lose-lose proposition." and integrity," he says. "We "At a time when every law firm wanted to be vindicated, washing one's dirty linen in public. consultant seems to be saying firm and we were." relationships must be based on peo- Ezold, now in a growinjg solo ing to take a case against a law firm ple getting paid what they bring in, practice that includes plaiintiffs' can be difficult, as "Scott Doe," who the only possible upside [of litiga- employment litigation, is al)le to now uses his real name of Scott tion] is that people may begin to re- look on the experience as beneficial. Burr, discovered. alize that this may not necessarily "I've had the opportunity to speak "The firms didn't want to go be the most efficient way to do busi- all over the country on the issue, out on a limb, knowing they would ness because it ignores the human and know that just bringin g the only recover if I won, because they capital that law firms are made of," suit has had a positive resuit for knew the reputation [for legal abil- he says. women and others in the la w be- ity] of Kohn, Nast, but they didn't "That would be the silver lin- cause it has led to changes in some know me or my ability, and when ing, but there is no reason to think firms." the firm said it terminated me be- that's going to happen." Others are less fortunate ,such cause I was incompetent, they be- In the meantime, however, dis- as the New York associate wh .owas lieved the firm," says Burr, now a gruntled lawyers can be expected to fired after making a sexual l irass- commercial litigator with the firm continue resorting to litigation ment complaint and is now weirking that ultimately represented him rather than "working things out"-- as a paralegal because, she ciaims, at trial, Jablon, Epstein, Wolf & because of the wall of silence so other firms won't hire her. Lik e sev- Drucker of Philadelphia. often used to bury problems within eral other plaintiffs contactEad for To counter such forces, Smith firms, and because of the all-impor- this story, she declined to diiscuss says she often ends up as a "ghost tant matter of upon whose terms her litigation, or allow her name to lawyer," working behind the scenes things are "worked out." U

72 ABA JOURNAL / DECEMBER 1995 ABAI/CA:ZI1EBOEF