The legal battle between Quinn Emanuel Urquhart & Sullivan and a group of breakaway partners has presented challenges to the judge presiding over the case, including interpretation of a contract the defectors signed agreeing to forfeit a portion of their legal fees after they leave the firm—an arrangement that is prohibited under New York's attorney ethics rules.
In a Wednesday hearing, Manhattan Supreme Court Justice Saliann Scarpulla also expressed concern that allowing Quinn Emanuel to continue the firm's dispute with 10 lawyers who departed earlier this year to form Selendy & Gay through arbitration in California would leave the case before an out-of-state arbitrator or judge who doesn't understand New York's strong public policy stance against “forfeiture for competition” arrangements.
“I'm struggling with a very clear provision in a contract and some lawyers who say they have an ethical obligation,” Scarpulla said.
The rift between Quinn Emanuel and its erstwhile partners touched off both a legal and verbal battle, in which Quinn Emanuel founder John Quinn sent out a firmwide email attacking Selendy & Gay co-founder Faith Gay for “ingratitude” and expressing a “high minded sentiment” in her farewell message to the firm.
“You are now planning to take as much of our work as possible. And to recruit as many of our attorneys as possible,” Quinn said. “I can tell you that virtually all of the attorneys you name here are pretty angry with you.”
When they became partners at the Los Angeles-based Quinn Emanuel, Gay and Selendy & Gay co-founder Philippe Selendy, as well as the other partners who joined them in their acrimonious split with Quinn Emanuel earlier this year, signed partnership agreements requiring that, if they leave the firm and bring their books of business with them, for an 18-month period they must pay a 10-percent taste back to Quinn Emanuel for legal fees collected from clients originated at their former employer.
“They've cloaked themselves in high-minded principles,” said Quinn Emanuel partner Andrew Rossman during the oral arguments. “What is obviously going on is they're avoiding a contractual obligation.”
But New York's Rules of Professional Conduct prohibits attorneys from entering into agreements that restrict “the right of a lawyer to practice after termination of the relationship.”
Longtime ethics attorney Hal Lieberman submitted a declaration in the case in which he said that the provision of Quinn Emanuel's partnership agreement at issue in the case violates that prohibition and that courts in other states have found such agreements unenforceable.
“They're violating the rules themselves when they're trying to enforce this provision,” said Bartlit Beck partner Philip Beck, who represents the breakaway partners, during the arguments.
Beck said the legal dispute is “personal” for Quinn and that he has not found any evidence so far that the firm has enforced its forfeiture for competition provision in the past.
Scarpulla said that enforcing Quinn Emanuel's contract may leave the New York attorneys who left the firm open to disciplinary proceedings. But the judge also noted that, at the core of the dispute, as Quinn Emanuel argues, is that the partners who left signed a contract.
“For the life of me, I can't understand why I would void a provision of a contract where two sophisticated, smart, talented sides agreed to it,” Scarpulla said. “Why would I do that?”
Scarpulla also noted that the departing partners used Quinn Emanuel resources to cultivate their clients before leaving to begin their own enterprise.
“They used partnership money to wine and dine and buy tickets and everything that it takes to get a client in, and then they leave,” Scarpulla said.
Scarpulla reserved judgment on the motion.
Both Beck and Rossman declined to comment following the oral arguments.
Selendy was in attendance to the arguments but also declined to comment.
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Wilfred P. Coronato and Daniel M. Schwartz of McCarter & English have stepped in as defense counsel to Electrolux Home Products Inc. in a pending product liability lawsuit. The court action, filed Nov. 26 in New York Eastern District Court by Poulos Lopiccolo PC and Nagel Rice LLP on behalf of David Stern, alleges that the defendant's refrigerators’ drawers and shelving repeatedly break and fall apart within months after purchase. The case, assigned to U.S. District Judge Joan M. Azrack, is 2:24-cv-08204, Stern v. Electrolux Home Products, Inc.
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