Brobeck hangs on to $10m of owed cash

BROBECK Phleger & Harrison is refusing to return at least $10m (£6.4m) worth of capital to scores of ex-partners as negotiations between the US firm and its former lawyers become increasingly fraught.
It is understood that Brobeck is sitting on combined profit distributions and equity injections said to be as high as $15m (£9.6m).
The figure includes an estimated $6m (£3.8m) owed to the 17 partners who left to set up Clifford Chance&#39s West Coast firm in May.
The Lawyer also understands that the 11 intellectual property partners &#45 due to join Dewey Ballantine in early October &#45 are yet to reach an agreement on the return of their income.
Including five partners known to have left the firm this year, Brobeck owes capital to 33 former lawyers.
The sum owing to partners, who are required to contribute one third of their income to the firm&#39s permanent equity, equates to a quarter of Brobeck&#39s total capital, which based on the firm&#39s figures for 2001 stood at $45.6m (£29.2m).
At the end of last year, Brobeck had 208 equity partners, and with profits per partner at $660,000, income totals $137m (£88m).
It is also unknown how much the firm expects to pay out based on 2002 earnings.
While the scale of the pay-out would be a blow to the firm, Brobeck sources say the firm is expecting to reap turnover from deals charged on a contingency basis over the past few months.
But sources have also confirmed that one to two-year equity partners, who receive a guaranteed equity contribution, have been asked to return some of the income.
Under Brobeck&#39s remuneration system, during the first quarter of the year equity partners are paid from profits from the year before.
While in the second three months, partners receive a distribution based on estimates of deals in the pipeline. This is confirmed later in the year once deals come to fruition and the firm starts to turn a substantial profit.
But Brobeck is now arguing that first and second-year equity partners had been paid in excess of the work successfully completed.
It is understood partners would receive their income monthly until all the capital has been returned. However, at this point little or no capital has yet been paid out.