Dentons on Tuesday lost a bid to have the Ohio Supreme Court review a $32.3 million malpractice verdict in a case with implications for law firms that use a Swiss verein model.
The decision means Dentons remains on the hook for a malpractice award given to the plaintiff in the case, RevoLaze Inc., an Ohio company that uses lasers for denim products.
RevoLaze argued that Dentons shouldn’t have taken on the company’s patent case in 2015 because one of the firm’s Swiss verein affiliates in Canada had represented Gap Inc., which RevoLaze sued for patent infringement.
The verein structure lets law operations affiliate to market services under one brand while avoiding a full-on merger. Affiliates limit liability between offices and keep separate on matters such as profits, pay and taxes.
The RevoLaze case tests whether firms using the Swiss verein model must do conflicts checks with all affiliates in their networks before deciding to take on a client.
Verein 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. law firms adopted the Swiss verein model, including DLA Piper, Squire Patton Boggs, Baker McKenzie, Norton Rose Fulbright and Littler Mendelson.
Clients of the six firms may raise new questions about the process to ferret out possible conflicts, said Cassandra Burke Robertson, director of the center for professional ethics at Case Western Reserve University School of Law. The clients may find new firms if they don’t like the answers, she said.
“What’s more important is that these law firms be more proactive with their clients” about conflicts, Robertson said.
Dentons said in a statement that the case isn’t about its structure but whether a firm can rely on a client’s consent regarding a future conflict of interest.
“This is an existential problem that will put in jeopardy the entire legal profession’s ability to rely on client consent, impacting every lawyer and every law firm—regardless of size,” Dentons said.
In a July interview, Dentons global chairman Joe Andrew said even if the firm loses after exhausting all appeals, it won’t consider changing its ownership model.
A verein is the only platform “we have found that allows us to practice in the 82 countries and 209 locations,” Andrew said then.
Appealing the case to the federal court system remains a possibility, he said. “I believe that it is unlikely, but it would not be true to say that it could not” happen, he said at the time. “It could.”
The Ohio Supreme Court’s decision did not include any reasoning. A three-judge panel in the Eighth District Court of Appeals wrote in April that the “overwhelming evidence suggests the Dentons verein operated as a single firm.”
Dentons, which has thousands of attorneys , has argued that its operations in Canada and the U.S. are completely separate.
The Cuyahoga County jury’s $32 million award for RevoLaze in February 2020 was the largest legal malpractice judgment in Ohio history, the plaintiffs counsel said.
Kristi Browne, a member of The Patterson Law Firm, which represents RevoLaze, said the firm and company are declining comment during the 10-day period Dentons has to ask the Ohio court to reconsider its decision.