Troutman Pepper Locke Navigates Sticky Conflict After Merger

Troutman Pepper Locke is using an “ethical wall” within the firm so its lawyers can represent clients on opposing sides of a bankruptcy proceeding, a firm partner told a Texas court.

The firm’s lawyers are seeking to collect legal fees from a bankrupt client while simultaneously representing some of that client’s creditors. The client and creditors had been represented by separate firms, Troutman Pepper and Locke Lord, until those two operations merged Jan. 1.

“The firm has created an ethical wall completely separating legacy Locke Lord lawyers working on matters for the debtors from legacy Troutman Pepper lawyers working on matters involving the debtors,” partner Thomas Yoxall told a Texas bankruptcy court in a Jan. 8 filing in a case involving Steward Health Care System. Yoxall and the firm didn’t respond to requests for comment on the filing.

Lingering conflicts are an increasing problem for law firms that choose to balloon in size through mergers. They pose a risk to the new firms that lawyers will need to quit to resolve the situations or that clients will file malpractice suits over the representation issues.

The merger between Troutman Pepper and Locke Lord created one of the 50 largest US legal operations, manifesting a trend in which firms merge to achieve scale and remain competitive. The predecessor operations reported more than $1.5 billion in combined revenue in 2023, and leaders of the two firms touted that post-merger they’d have 1,600 lawyers and 35 offices in the US and Europe.

Resolving potential conflicts led to a delay in finalizing Troutman Pepper Locke’s merger, with Locke Lord ultimately showing the door to some lawyers with conflicting clients, according to two sources familiar with the deal.

“It’s axiomatic in these big law firms that as they get bigger, they get more conflicts of interest,” said Ashley London, director of bar studies and assistant professor of law at Duquesne University.

Difficult Choices

Bankruptcy law requires professionals seeking payment from an estate to disclose potential conflicts. Merging firms resolve such situations by asking clients to sign conflict waivers or by creating an “ethical wall” that prevents attorneys from representing clients with adverse interests to other clients.

Weil Gotshal & Manges said it created a wall preventing its partner Mark Seidman, who joined in September after an 18-year stint at the FTC, from representing Kroger Co. in its litigation with the FTC. Seidman was among the lawyers representing the FTC when it filed its lawsuit against Kroger in Oregon federal court in February, court records show.

If firms don’t get a client’s consent regarding conflicts, they may have to drop out, said Laura Saklad, former chief operating officer of Orrick Herrington & Sutcliffe, who now leads the legal division for software provider Intapp.

“Conflicts are one of the most challenging parts for getting a merger through, especially with bigger firms,” Saklad said. “If they can’t clear the conflict, they have to make difficult choices sometimes.”

Clients are sometimes unimpressed with “ethical walls” and firms risk malpractice claims. In the last year, Cooley was sued with such claims, and Gibson Dunn & Crutcher was accused by a former client of dropping them to represent an adversary with deeper pockets.

Troutman Pepper is another of several Big Law firms facing malpractice claims from former clients over alleged conflicts of interest. Judlau Contracting is suing the firm for $59 million.

Ties to Both Sides

Healthcare network operator Steward Health Care System filed for Chapter 11 bankruptcy in May last year along with its affiliates. The company has turned to Locke Lord lawyers for representation in litigation and bankruptcy proceedings since as early as 2011, according to online press releases that have been removed from the firms’ website.

Press releases archived by Internet Archive’s Wayback Machine show Locke Lord lawyers represented Steward in the 2011 bankruptcy purchase of Quincy Medical Center. A Locke Lord team in 2017 obtained a favorable order for Steward in the litigation that followed when it was found liable for failing to hire certain executives in connection with the Quincy acquisition, another press release reveals.

Locke Lord’s relationship with Steward continued in 2024, according to court records. Yoxall defended the company in litigation over its alleged failure to pay a medical device manufacturer.

Three creditors of Steward and its affiliates—Bioventus, RevSpring, and B. Braun Interventional Systems Inc.—retained Troutman Pepper for representation in Steward’s Chapter 11 proceeding, records in the bankruptcy proceeding show.

Yoxall, who practiced as a Locke Lord lawyer before its merger with Troutman, alerted the US Bankruptcy Court for the Southern District of Texas to the combined firm’s relationships on both sides of the case. In that filing, Yoxall said Steward and the other debtors owe the firm $4.4 million in pre-petition fees and expenses.

The case is Steward Health Care System LLC and TRACO International Group, Bankr. S.D. Tex., 4:24-bk-90213, 1/8/25