Leavers’ provisions in war for talent come under scrutiny
While the first round of a case that saw Herbert Smith Freehills (HSF) pursue an action against eight partners who quit to join White & Case in Australia has concluded, the dispute has highlighted the ongoing war over talent between UK firms and their US rivals.
The interim judgment, delivered by New South Wales Supreme Court judge Justice Robert McDougall in March, has allowed eight partners from HSF’s project finance team to join White & Case’s Melbourne and Sydney offices immediately, but not as partners. Pending a permanent decision after a full hearing in June, members of the group, led by project finance partner Brendan Quinn, are able to operate as ‘senior lawyers’ and actively establish their presence in the market.
At present the lawyers are not able to access their former client base for six months. After this period, they can become full partners.
In separate statements, both sides claimed victory in the dispute, with HSF winning its bid to prevent the group from joining as partners, in addition to successfully safeguarding its clients. White & Case, however, is still able to employ the team as lawyers.
‘People are trying to work out what’s right and what’s wrong with US firms raiding UK firms and there is talk about how to deal with this.’
One City litigation partner said: ‘I don’t see this as marking a new and more aggressive trend in litigating against departing partners. Rather, it is probably more of a one-off, reflecting the particular circumstances of this case.’
However, a senior City law firm manager told Legal Business that UK legal culture is based on protecting the goodwill and confidential information of the firm when a partner exits. They said: ‘It’s not in the interest of UK firms to let people go early. It’s an industry-wide issue and people are trying to work out what’s appropriate. People are trying to work out what’s right and what’s wrong with US firms raiding UK firms and there is talk about how to deal with this. The market will shift around leaving provisions in the short-to-medium term.’
HSF partners are being represented by fellow Melbourne commercial litigation partner Michael Pryse, while the White & Case partners are being advised by Seyfarth Shaw partner Chris Gardner.
HSF and White & Case did not comment beyond their written statements.
tom.baker@legalease.co.uk