Presenting a live 90-minute webinar with interactive Q&A Legal Ethics in the Era of Law Firm Mergers and Vereins: Navigating Fee-Splitting, Referral, Conflicts and Other Ethical Issues THURSDAY, DECEMBER 3, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Peter R. Jarvis, Partner, Holland & Knight , Portland, Ore. Janis M. Meyer, Partner, Hinshaw & Culbertson , New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Legal Ethics in the Era of Law Firm Mergers and Vereins: Navigating Fee-Splitting, Referral, Conflicts and Other Ethical Issues By: Peter R. Jarvis, Peter.Jarvis@hklaw.com Janis M. Meyer, jmeyer@hinshawlaw.com
We will discuss . . . • Swiss vereins and other multinational law firm structures. • Advertising and solicitation issues. • Referral fee and fee split issues. • Jurisdictional and liability issues. • Conflict of interest issues. • Within reason, whatever else you ask us about. CAVEATS: We will focus on ABA Model Rules and opinions. Jurisdictional rules and opinions may vary. Much is unknown. 6
Background • Last ten years have seen a frenzy of law firm merger activity • Many of these mergers/combinations result in one or more mega-partnerships. • Increased use of a vehicle called a "verein." 7
According to Wikipedia . . . A Swiss association ("Verein" in German, "association" in French, "associazione" in Italian) is a legal structure in Swiss law, defined in the civil code ***. It must be registered if it "conducts a commercial operation". *** As the establishment of an association involves only little paperwork and no registration or fees, it is an important legal form in Switzerland and often used by groups such as sport and social clubs. *** 8
Wikipedia (cont'd) • The association can also be used as a legal form for a business organization consisting of a number of independent offices, each of which has limited liability vis-à-vis the others. The form is often used by multinational professional firms to limit their global accountability. One advantage to the Verein structure is that because control of the firm is decentralized, offices are only bound by regulators in their country. For instance, non-US offices of accounting firms in a Verein structure are not bound by Securities and Exchange Commission subpoenas from the United States 9
Also According to Wikipedia . . . *** Since 2009, Swiss vereins have been used in several mergers of large multinational law firms, as they allow regional profit pools and their related tax, accounting and partner compensation systems to remain separate while allowing strategy, branding, information technology and other core functions to be shared between the constituent partnerships.[4] The main disadvantage of the verein structure is that profits cannot be shared between constituent partnerships, which removes incentives for partners to share clients and work between the member partnerships. Most law firms as vereins overcome this problem by sharing costs in return for work referrals, which allows for the indirect sharing of profits. Vereins are usually consolidated as single firms in law firm revenue and headcount rankings such as The American Lawyer's "AmLaw 100," while international referral networks such as Lex Mundi and informal "best friends" alliances are usually not consolidated for this purpose. However, some law firm vereins such as DLA Piper have minimal financial integration and primarily serve as referral relationships . 10
Also According to Wikipedia.. • Vereins in the legal industry also face peculiar ethical issues. The cost-sharing between verein members often has the economic effect of splitting fees between member firms in cases where work is referred between them, even though revenue-sharing between such member firms is often prohibited (this restriction being one of the major considerations underlying the verein structure). The details of cost sharing are not always clearly disclosed to clients and may result in higher fees than what would be charged outside of the verein relationship.[6] Vereins can also give rise to conflicts of interest: for example, the US arm of Dentons advised a plaintiff suing Gap Inc., a longstanding client of the Canadian arm, which a US administrative court found created a conflict despite the fact that the two arms were operationally separate. 11
And Finally, . . . As of 2014, there are seven major law firms structured as Swiss vereins, each averaging 3,100 attorneys and 46 offices in 33 countries *** : Baker & McKenzie (numerous national partnerships) Dentons (Canadian, Chinese, European, UK and US partnerships) DLA Piper (US and international partnerships) Hogan Lovells (US and international partnerships) King & Wood Mallesons (Australian, Chinese, Hong Kong and European partnerships) Norton Rose Fulbright (US and international partnerships) Squire Patton Boggs (US, UK and Australian partnerships) (https://en.Wikipedia.org/wiki/Swiss_Verein (footnotes omitted; last accessed November 11, 2015.) Note: Littler Mendelson is also a Verein (US and Latin American partnerships) (www.littler.com) 12
Alternatives to Swiss Vereins • Affiliations ( e.g ., Lex Mundi). • Single entity megafirm. • Parent-subsidiary or brother-sister with or without total common ownership. 13
Threshold Question • Is a Verein one firm? • For advertising? • For fee-splitting? • For referrals? • For conflicts? 14
Some Descriptions • "Norton Rose Fulbright is a global law firm. … more than 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin American, Asia, Australia, Africa, the Middle East and Central Asia." (www.nortonrosefulbright.com/aboutus; last accessed November 27, 2015) • " … we have the depth and breadth of lawyers you need through our more than 60 U.S. and global offices and our strong relationships with lawyers worldwide." (www.littler.com/about; last accessed November 27, 2015) • "DLA Piper is a global law firm with lawyers in the Americas, Asia Pacific, Europe, Africa and the Middle East, positioning us to help companies with their legal needs throughout the world." (www.dlapiper.com/aboutus; last accessed November 27, 2015) 15
Advertising and Solicitation Issues • ABA Model Rule 7.1: A lawyer shall not make a false or misleading communication about the lawyer or the lawyer's services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading. • ABA Model Rule 7.3(a): A lawyer shall not by in-person, live telephone or real- time electronic contact solicit professional employment when a significant motive for the lawyer's doing so is the lawyer's pecuniary gain, unless: ***. 16
Questions • In the large multinational firm context and with a multinational firm’s client base what is or might be misleading to either multinational or local clients of a firm? For example, is it misleading to say that the "firm" can offer services in multiple jurisdictions when in reality it is multiple firms? Is it misleading to refer to partners of other firms in the Verein as one's "partners"? Whose client is it? 17
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