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Dentons Loses $32 Million Challenge to Swiss Law Firm Model (1)

Nov. 8, 2022, 2:33 PMUpdated: Nov. 8, 2022, 10:36 PM

Dentons lost its latest bid to overturn a $32.3 million legal malpractice award it must pay a former client.

The Ohio Supreme Court’s decision Tuesday could have implications for the Swiss verein law firm ownership model used by Dentons and other major firms. Swiss verien firms market services from loosely affiliated legal operations under a single brand.

The ruling treats affiliated firms as the same entity for conflict-of-interest purposes. That means firms will have to drop clients or sit out matters if there is a conflict based on work that affiliates are doing for other clients.

The high court declined to reconsider the award for RevoLaze Inc., a former Dentons client. A state court ruled that Dentons had a conflict of interest when it represented RevoLaze because a Dentons affiliate in Canada represented Gap Inc., which RevoLaze had sued for patent infringement.

At least six major US law firms have adopted the Swiss verein model, including DLA Piper, Squire Patton Boggs, Baker McKenzie, Norton Rose Fulbright and Littler Mendelson.

The Patterson Law Firm, which represents RevoLaze, said in a Tuesday statement that it’s “thrilled” with what the firm believes will be the final decision in this case.

The case “helps level the playing field for small businesses who depend on their lawyers to represent them without conflicts of interest,” said Kristi Browne, a member of the Patterson firm, in the statement.

On Aug. 30, the Ohio Supreme Court decided not to hear Dentons’ appeal. The firm subsequently asked the court to reconsider.

A Dentons spokeswoman did not respond to questions.

Dentons global chairman Joe Andrew said in July interview that the firm isn’t considering changing its ownership model, which has allowed for rapid growth.

He also suggested that the firm could try to take its case to federal court.

“These issues that are existential for lawyers—you know, how you do business—are ones that do frequently end up in federal courts and frequently end up moving up pretty quickly in appellate courts to the United States Supreme Court,” Andrew said in the interview.

Browne told Bloomberg Law that she doesn’t anticipate any further appeal of the case. But she hasn’t heard “definitively” that no further appeal is planned.

Swiss verein firms are not likely to overhaul their business structures as a result of the decision, according to Cassandra Burke Robertson, director of the center for professional ethics at Case Western Reserve University School of Law,

“The potential risk of liability for conflict of interest can be managed separately, either by seeking client consent to waive potential conflicts or to limit the clients that are accepted by the firm,” she said via email.

The case may, however, serve as a “cautionary note,” Robertson said. The ruling encourages firms to conduct careful conflicts reviews before accepting a new client, she said, and to make a full disclosure to clients in the event that a conflict arises after representation has begun.

Robertson said she doesn’t see strong grounds for a cert petition to the US Supreme Court, in part because the case deals with legal malpractice, an issue on which the court typically defers to the states.

“I would guess that this is the end of the road for the case,” she said.

The case is RevoLaze LLC, V. Dentons US LLP, et al., Ohio, No. 2022-0708, 11/8/22.

(New comment from RevoLaze attorneys and legal commentators has been added throughout the story.)

To contact the reporter on this story: Sam Skolnik in Washington at sskolnik@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes at jhughes@bloombergindustry.com