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A court battle between Herbert Smith Freehills (HSF) and eight of the firm’s former partners who quit to join White & Case has ended, with HSF reaching a settlement with the departing group.

According to orders made in the Supreme Court of New South Wales, the claimants, a group of 167 current HSF partners represented by Michael Pryse, came to agreement with the defendants, a group of eight former HSF partners including key project finance partner Brendan Quinn.

Under the terms of the settlement, the White & Case-bound partners will be restricted by a set of injunctions that were imposed at a previous hearing, including a condition that prohibits them from soliciting their former client bases. In addition, the group will be unable to join White & Case officially as partners until after 1 September 2017, but will still be able to practise in a general capacity. The injunctions had originally been interlocutory, but will now be made permanent until the end of 1 September 2017.

Aside from Quinn, the other defendants were Andrew Clark, Joanne Draper, Jared Muller, Tim Power, Joel Rennie, Alan Rosengarten and Josh Sgro.

A HSF spokesperson said: ‘We are pleased to announce we have reached a settlement in our proceedings. Under the settlement the current interlocutory injunctions will be made final. We are happy to bring this matter to a conclusion.’

A White & Case spokesperson added: ‘We are pleased that the parties have reached a settlement and that the matter has been resolved. All involved have agreed to keep the terms of the settlement confidential. The current interlocutory injunctions have been made final by the court and will continue to 2 September 2017. We are extremely pleased that the eight lawyers were able to join the Firm as of 2 March 2017 and are making a significant contribution to the Firm and its clients. We are happy to bring this matter to conclusion.’

Earlier this year, court documents revealed that the decision to classify White & Case as a ‘specified competitor’ was taken by the HSF Australia board on 31 August 2016, one day before the eight partners resigned en masse, within half an hour of each other.

White & Case’s move last year to hire the project finance team from HSF was considered one of the largest legal moves ever in the Asian market.

tom.baker@legalease.co.uk

As judgment is expected tomorrow in a court battle between a group of Herbert Smith Freehills (HSF) partners and their former colleagues who quit for White & Case, the documents from case reveal how the group quit, and what HSF wants to do to restrain them.

A group of 167 HSF partners took action in mid-February against eight former partners who resigned from HSF to join White & Case, including key project finance partner Brendan Quinn. The case has been heard in the New South Wales Supreme Court before Justice Robert McDougall this week, with HSF wanting to stop the White & Case partners from joining on their planned start day – tomorrow (2 March) and instead have them join on 1 September this year. At issue is whether certain clauses in HSF’s partnership deed are enforceable.

HSF claims the partners co-ordinated their exits, citing emails from Quinn to White & Case partners, and a Legal Business article where the hires are first revealed.

HSF suggests Quinn had been preparing the exits as early as September 2015 this year, as evidenced by emails between Quinn and senior management at the US firm. Quinn had also sent an email to his personal email account recording an agenda with the following items ‘update on vote, update on offer letters, staff, accommodation,’ and with the closing item ‘when do we pull the pin.’

According to the documents, the board of HSF Australia amended the firm’s partnership deed to make White & Case a ‘specified competitor’ on 31 August 2016, the day before the eight partners resigned. According to the deed, former HSF partners can’t work for ‘specified competitors’ for six months after they resign.

On 1 September, the partners resigned within five minutes of each other, except Jared Muller, who quit about half an hour later.

HSF is also trying to restrict White & Case partners from working in particular areas, with maps annexed to the documents indicating restricted zones where HSF believes the partners should not work.

HSF argues that the location clauses are reasonable because outgoing partners ‘may, post-retirement, tend to be able to maintain a higher level of connection with HSF’s clients…in closer proximity to his or her former HSF Australia office’ and ‘restraints against working in competition within a restricted area are difficult for HSF Australia and/or the Global LLP to police.’

In a December 2016 letter addressed to the HSF Board, Seyfarth Shaw, the law firm representing the eight former partners, said the defendants did not regard these clauses because ‘they do not protect any legitimate business interest of Herbert Smith Freehills.’

HSF partners are being represented by Michael Pryse, while the White & Case partners are being advised by Seyfarth Shaw partner Chris Gardner. A mediation scheduled for 13 February failed.

White & Case’s move late last year to hire the 10-partner project finance team from HSF was one of the largest legal moves ever in the Asian market. A senior partner at White & Case has indicated that the team controls around £30m of business, while HSF put the figure at around £20m when calculated using an average of the team’s billings over three years.

Legacy Herbert Smith had some of the toughest exit terms in the City which led to a stand-off when property partner Chris de Pury quit for Berwin Leighton Paisner. Herbert Smith had threatened to enforce a 12 month convenant on top of a year’s notice.

However the firm’s merger agreement with Freehills overhauled the terms, cutting the notice period from 12 months to six, making it easier for partners to quit at a vulnerable moment.

tom.baker@legalease.co.uk