News: In the News
Blank Rome Case Raises Sticky Questions on Law Firm Mergers
Offit Kurman Featured in the Legal Intelligencer
By: Lizzy McLellan | Sept 14, 2018
A recently filed lawsuit against Am Law 100 firm Blank Rome raises the question: What makes a merger?
Former partners of now-dissolved Dickstein Shapiro sued Blank Rome on Wednesday in Los Angeles, alleging that the firm’s mass lateral hire of more than 100 lawyers from Dickstein in 2016 should be treated as a merger, with all the legal obligations that entails. The plaintiffs, who are spread across New York, Florida, Washington, D.C., and California, are seeking to recover more than $4 million in capital contributions from Blank Rome.
Consultant Tom Clay, of Altman Weil, said claims by former partners of a dissolved entity against acquiring law firms are not typical, but not unheard of either. “It’s not part of the standard fare. It happens when you get unusual circumstances over moves,” he said.
The ex-partners allege Blank Rome “tried to ‘play cute’ by structuring the merger of Dickstein Shapiro into its law firm by the artifice of labeling it as an ‘asset sale,’” so it would not have to take on the liabilities of the former firm. “This mega deal was not the mere hiring of a few partners and associates from one firm to the other,” the plaintiffs argue. “Simply stated, Blank Rome did not want to pay the more than $4 million owed to former partners of Dickstein Shapiro—while it wanted the full benefits of acquiring Dickstein Shapiro.”
Blank Rome, for its part, has said the lawsuit “has no merit and we intend to vigorously defend it.”
Winners and Losers
According to Clay, whose company tracks law firm merger activity, the majority of deals are still traditional mergers, and even if the currently frenzied pace of consolidation and lateral movement continues, a wave of suits like this one is unlikely.
Still, the type of deal Blank Rome completed is not unique. Several large firms in recent years have made headlines by hiring big groups of lawyers from firms that dissolved shortly afterward.
Morgan, Lewis & Bockius did it with two large firms—Bingham McCutchen and Brobeck, Phleger & Harrison. When Wolf Block voted to dissolve almost a decade ago, several Philadelphia-based firms hired the lawyers who remained, with Cozen O’Connor taking a big chunk of them.
On a smaller scale, midsize firm Offit Kurman has recently used nonmerger affiliations to expand in markets of interest, like New York.
“Both mergers and nonmergers are much more common now than they have been in the past, and they are increasing in frequency as law firms try to adapt to market changes,” said Robert Hillman, a professor at the University of California, Davis School of Law who has extensively studied lawyer mobility and firm breakups, in an email.
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