Firms Struggle to Rein in Misbehaving Rainmakers

Oct. 24, 2019, 8:51 AM

Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today we look at two proposals to rein in rainmakers’ bad behavior.

The week began with a former DLA Piper partner pushing back against allegations of sexual assault lodged by a former colleague who worked on his matters.

A day later, another Big Law firm, Freshfields Bruckhaus Deringer, proposed a response to its own scandal over misconduct allegations involving a partner and a subordinate: Hit misbehaving partners with a fine.

The Magic Circle firm’s plan would dock a partner’s compensation by 20% if an internal investigation concludes their behavior is worth a “warning.” A firm spokesperson declined to provide more details when asked if the conduct committee would have the authority to remove a partner from the firm or to force a partner vote for removal.

Details of Freshfields’ proposal were first reported by Law.com. The firm spokesperson said the report was “broadly correct.”

Firms are showing they take misconduct allegations seriously by developing processes to initiate internal investigations. But to empower employees and junior lawyers to hold misbehaving rainmakers to account, industry sources said financial penalties would not go far enough.

To do that, state bar associations may need new authority to investigate law firms and discipline them for failing to address allegations of misconduct. That’s the proposal of a former DLA Piper in-house lawyer, Leah Christensen, who on Wednesday wrote a letter to regulators saying the firm ignored reports of misbehavior by its top billers.

“Law firms really do need to pay greater attention to their cultures. And simply hitting artners in the paycheck is not enough,” said Michael Ellenhorn, who runs a company, Decipher, that conducts background checks on lateral partner candidates.

In the Freshfields case, partner Ryan Beckwith was found by a UK regulatory body to have engaged in sexual activity with a 20-year-old colleague who was intoxicated. He resigned after the Solicitors Disciplinary Tribunal ordered him to pay more than $300,000 following a nine-day trial. Soon after, Freshfields developed the plan for the new conduct committee.

At DLA Piper, an increasingly complex case is playing out after Vanina Guerrero said former DLA Piper Silicon Valley partner Louis Lehot sexually assaulted her on four separate occasions. Lehot has denied the allegations and on Monday released emails between the two that were aimed at showing their relationship was consensual. DLA Piper said it would “part ways” with Lehot on Oct. 11. Guerrero was later put on leave from the firm.

On Wednesday, former DLA Piper in-house counsel Leah Christensen said Lehot was a “bully” whose behavior was protected by firm partners because of his $20 million-plus book of business. In a letter to the Equal Employment Opportunity Commission, Christensen said she was told by top in-house lawyers at DLA Piper that Lehot was on a list of 10 partners she “should not bother” due to their status as high earners.

“If the GC and senior partners, mostly men, fear Lehot, then who is going to speak up for Ms. Guerrero or challenge Lehot?” Christensen wrote. “If lawyers in positions of power at DLA Piper are afraid to speak out, then junior female lawyers and staff must be even more afraid.”

A DLA Piper spokesperson said in a statement that Christensen’s letter contained false statements and misrepresentations regarding the culture and client intake process at DLA Piper.

“The firm adheres to applicable law and ethics rules and expects the same from each and every one of our lawyers, without exception for any partners—a fact that Ms. Christensen, as a former lawyer whose client was DLA Piper, appears to have forgotten,” the firm’s statement said.

One problem with internal investigations into misconduct by law firm partners is that their results are rarely reported to state bar associations that regulate lawyers, said Michael Frisch, ethics counsel at Georgetown University Law Center. That is despite ethics rules that often require lawyers to report others who have engaged in misconduct.

“The problem in real life is that duty to report is never enforced,” Frisch said. “It’s the rarest thing in the world.”

Christensen worked as a professional responsibility counsel at DLA Piper from 2014 to the end of July. During that time, she never saw an investigation into partner misconduct lead to the firm imposing discipline against the partner, she said in an interview with Bloomberg Law on Wednesday. DLA did not directly respond to questions about the firm’s process to investigate partners or whether it had conducted such investigations in the past.

Law firms are too conflicted to be trusted to enforce ethics rules against their own rainmakers, Christensen said.

“They want the money,” she said, referring to profits from high billing partners.

One suggestion she offered was to empower state bar associations to investigate and issue fines against law firms if they fail to investigate reports of partner misconduct or if they retaliate against victims.

“We need to have monetary sanctions in place for this type of behavior so the firm has an incentive to comply with the ethics rules,” she said.

Christensen left DLA Piper in July and now is a partner at a small California firm. She is also a professor of legal writing at University of San Diego School of Law. She said she has used her experience to warn law students about law firm culture.

“Sometimes it feels like I’m sending them into a profession that is not honorable,” she said. “And I’ve used this case as a platform to say, ‘Look, we need to do better and it is up to you to do better than this. Because I don’t want any of you to have to experience this.’”

Worth Your Time

On Bankruptcy Practices: As talk of a recession grows, so has Big Law’s investment in bankruptcy practices, my colleague Meghan Tribe writes.

On Legal Bills: The NBA season tipped off this week but it was a disappointing offseason as far as law firms were concerned. They billed about 65% less in fees to the NBA Players Association in the latest fiscal year, my colleague Brian Baxter writes.

On Lateral Moves: It was a busy week for lateral hires. Kirkland & Ellis lured Irell & Manella’s former managing partner. Skadden picked up a Weil litigator in New York. And Hunton Andrews Kurth added former Virginia Gov. Terry McAuliffe.

That’s it for this week. Thanks for reading and please send me your thoughts, critiques, and tips.

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Jessie Kokrda Kamens at jkamens@bloomberglaw.com; Rebekah Mintzer at rmintzer@bloomberglaw.com

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