Dentons lost its appeal Thursday of a $32.3 million jury award in a case that tests whether firms using a Swiss verein model must do conflicts checks with all affiliates in their networks before deciding to take on a client.
“Dentons US’ protestations to the contrary, the overwhelming evidence suggests the Dentons verein operated as a single firm,” a three-judge panel with Ohio’s Eighth District Court of Appeals in Cleveland found.
Swiss verien firms risk losing business if they’re required to disclose conflicts related to affiliates’ work. Existing clients may balk at other representations, and potential clients could decide to go elsewhere.
At least six major U.S. firms affiliate with other law operations under the Swiss verein model. Other vereins besides Dentons include DLA Piper, Baker McKenzie, Norton Rose Fulbright, Squire Patton Boggs, and Littler Mendelson.
The case, RevoLaze v. Dentons US, involved malpractice claims from the Clearlake, Ohio-based company that although it had enlisted Dentons in the U.S. to represent it in a patent case, the firm shouldn’t have taken the matter because its verein affiliate in Canada represented Gap Inc., which RevoLaze sued for patent infringement.
The verein structure lets several operations affiliate to market their services under one brand. The Dentons verein includes its operations across the U.S., about 125 offices in more than 74 countries, and more than 6,600 attorneys, according to the panel’s decision.
The model lets firms avoid a full-on merger. Verein affiliates limit liability between offices and keep separation on matters such as profits, pay and taxes.
But the three-judge panel found that verein firms aren’t separate when it comes to conflicts checks.
“We find Dentons US’ membership in a verein, with a common conflicts base, that shares client confidential information throughout the organization, is irreconcilable with Dentons US’ contention that it was separate from Dentons Canada,” the judges found.
Dentons said it intends to appeal the decision to the Ohio Supreme Court.
“The essential issue in this case is whether a law firm can rely on one client’s written consent regarding a future conflict of interest,” a firm spokesperson said in a statement. “We acted properly, ethically and consistent both with our duties to our clients and with our firmwide conflicts policy in relying on such a consent.”