Clifford Chance is charged with sealing Brobeck's fate
13 October 2003
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Clifford Chance is charged with sealing Brobeck's fate" />It has been a threat that has hovered over the West Coast for the longest time. But last week, the remnants of Brobeck Phleger & Harrison, the 77-year-old institution that ignominiously collapsed in February, finally fired a poison-tipped arrow at Clifford Chance.
In a searing complaint filed on 8 October, first revealed on www.thelawyer. com last week, staff and partners from the now-deceased firm threw a barrage of claims at Clifford Chance and Brobeck's former chairman Tower Snow.
Both are charged with starting the rot that finally enveloped the firm, forcing it to close its doors on Valentine's Day this year.
"We expect it will be a ferocious fight," Mark Lanier, name partner of the Houston firm acting for the plaintiffs told The Lawyer.
Seeking $100m (£60.1m) in damages is a collection of 11 retired partners, seven employees and trustees of the Brobeck Phleger & Harrison Claim Liquidation Trust, which represents scores of former partners and staff. The claims of a conspiracy are breathtaking in their range: breach of fiduciary duty, unfair competition, intentional interference with prospective business advantage and tortious interference with a contract.
For its part, Clifford Chance and Snow are vehemently denying the claims.
Clifford Chance said in a statement: "We have undertaken an initial review of the allegations in the complaint. The allegations are without merit. We find the notion that Clifford Chance is responsible for the collapse of Brobeck Phleger & Harrison to be absurd. We believe we acted appropriately in our dealings with Brobeck and with the former Brobeck partners who joined Clifford Chance. We will defend ourselves vigorously against this complaint."
The plaintiffs claim that it was Snow's act of leading a 16-partner team of securities litigation partners to Clifford Chance in May 2002 that triggered the firm's collapse. The claim alleges: "They were directly exposing Brobeck to a default in its loan agreements, which Snow had personally negotiated on Brobeck's behalf. During a period of rapid expansion under Snow's leadership when Brobeck became highly leveraged, Snow specifically negotiated loan agreements which provided for default if 15 per cent of the partners left the firm.
"Snow and Clifford Chance understood, thereby, that if they were successful in convincing a large group of partners to move to Clifford Chance, they would trigger defaults under the loan agreements."
The detailed allegations also purport to surmise the run-up to the defections, stating that Snow, who served as chairman from 1998 to November 2001, was "disaffected" after resigning. On 11 January 2002, Snow made contact with James Benedict, managing partner for the Americas at Clifford Chance, offering to open a San Francisco office for the UK firm, "with 50 to 175 Brobeck lawyers, few of whom had been informed of, let alone consented to this offer".
Clifford Chance apparently knew that through such actions Snow was breaching his fiduciary duties.
In a parting shot, the suit, which is demanding a trial by jury, says "the misconduct" of Clifford Chance and Snow led the firm to suffer economic damages. These include: loss of Brobeck's business, loss of good will, loss of the value of its trade secrets proprietary and confidential information, damage to its good will and reputation in the community, among others. And as a result of these losses, the firm met its end.
Clifford Chance and Brobeck have been locked in mediation for months in the hope of retrieving former partners' capital in the defunct firm.
Ironically, it was only five months ago that Brobeck found itself on the receiving end of similar allegations.
Nearly eight years ago Brobeck took on Debra Pole and William Fitzgerald from Dickson Carlson & Campillo, who brought with them Baxter Healthcare, a major client of the firm. When the firm later went out of business, it filed a suit against Pole, Fitzgerald and Brobeck. The jury found some misconduct in the case, awarding damages of $153,688 (£92,331).
But with the boot now on the other foot, Brobeck is going for the jugular with its $100m claim.
"A case like this, against a law firm of the size and reputation of Clifford Chance and a lawyer with the reputation of Snow, is not filed lightly," said Lanier.