Chadbourne Suit’s $155M Question: Is a Law Firm Partner an Employee?

Can a partner at a large law firm be considered an employee?

As news emerged this week about a pending merger between Norton Rose Fulbright and Chadbourne & Parke, lawyers sparred over this question in court papers filed in Manhattan federal court.

It’s one that could prove critical to Chadbourne’s financial assets as it faces liability in a closely-watched $155 million gender bias class action.

The firm’s internal workings are the subject of litigation in the Southern District of New York after one of its partners, Kerrie Campbell, sued the firm in August, saying Chadbourne underpaid her by $2.7 million when compared to her male counterparts and that the firm was run by an “all-male dictatorship,” which makes decisions regarding firm partners in a “black box.”

Now, lawyers for Chadbourne, at Proskauer Rose, are trying to convince a federal judge to dismiss the case on summary judgment, on the premise that Campbell is not an employee, and therefore cannot bring the Title VII and Equal Pay Act lawsuit under federal law.

Even though Campbell was made equity partner in 2014, the Washington, D.C. litigator argues that she was a de facto employee, saying the firm is governed by a small, five-person management committee, which controls decisions over hiring and firing.

Chadbourne, not surprisingly, sees things differently.

“No partner has been admitted to the Firm, or expelled from the Firm, absent a vote of the partnership,” wrote Andrew Giacchia, the managing partner of Chadbourne, in a Monday affidavit, the firm’s latest attempt to illustrate how it operates as a full partnership, rather than the top-down dictatorship Campbell describes.

Accompanying Giacchia’s affidavit was a 16-page court filing that objected to Campbell’s request for discovery to determine whether she is in fact an employee — a process that, if approved, could turn up internal firm documents, such as any communications about anything from billing practices, management decisions, or the completion of performance reviews.

“Plaintiffs’ speculative beliefs about what discovery might show is not sufficient to permit discovery,” said Chadbourne’s lawyers in the Monday filings.

The Monday court filings marked Chadbourne’s latest attempt to sway U.S. District Court Judge J. Paul Oetken to dismiss the lawsuit, which has been closely-watched in the legal industry as it raises broader questions about whether big law firms fairly treat their female and minority partners.

Campbell has until Monday to respond to Chadbourne’s filings, and “at that time, [the case] will be ripe for a ruling by the court,” said Alexandra Harwin, a lawyer for Campbell, of Sanford Heisler.

If the plaintiffs are successful in moving to discovery, it would significantly increase the likelihood of a settlement, said Rick Rossein, a law professor at CUNY School of Law who specializes in employment discrimination.

“They may want to settle before they turn over the documents,” said Rossein. “But the plaintiffs attorney will likely say, ‘I need the documents first,’ because then they will be in a better position to gauge the settlement amount.”

Since the case turns on whether Campbell is an employee, the litigation has focused on how Chadbourne is structured as a business.

The dispute has raised questions about how much control the management committee exerts, with Chadbourne arguing that partners voluntarily delegate management responsibilities to the firm leaders; that management committee members regularly change after two-year terms; and that plenty of firm financial information is shared with partners, including each partner’s individual compensation. Importantly, all major actions, including firm hires, are subject to a partner vote, according to court filings in the case made by lawyers for Chadbourne.

But Campbell argues that partners don’t work on the same playing field as management.

As evidence, Campbell says partners have been “forced to acquiesce to rigorous scrutiny by Firm management… on an array of matters, including billable hours, billings, collections, and case staffing.” She also claimed partners’ voting shares are “solely determined” and “can be manipulated by the Management Committee,” and that Campbell and other female partners “were granted disproportionately low voting interests.”

Even details like the firm’s partnership numbers are perceived as critical, since a smaller one could suggest partners carry more autonomy: Chadbourne said 88 partners reside in 10 offices in eight countries worldwide, while Campbell said the firm employed over 300 lawyers, 103 of whom hold the title of partner on the firm’s public website.

Another bizarre dispute is whether Campbell is even a partner of the firm.

Campbell claimed she was terminated by the firm’s management committee in February 2016, demoted to a so-called partner-in-transition. In a January 9 court filing, Campbell said “Giacchia and [Abbe] Lowell informed her that the Committee had decided she did not ‘fit’ with the ‘strategic direction’ of the Firm and had no choice but to leave.”

Chadbourne, on the other hand, had a different spin on things. Though admitting that Campbell was asked to “transition her practice,” Chadbourne’s lawyers said that she was never fired. They said that she maintains an office, is listed as a partner on the firm’s website, has billed time to clients as a partner, receives a monthly draw, and was sent a ballot to vote in partnership elections even after she filed the gender bias complaint last year.

“It’s really an open question at this point,” said Rossein, the law professor at CUNY School of Law.

“My view would be that the court is going to focus in on who has the power in this relationship? Is it a small controlled group? Lots of [firms] have an executive committee and they pretty much have all the power. The court may want to peel back those layers to see what the relationship is, and what the structure is.”

The case is not unprecedented in that other law firms have faced partner lawsuits where there was a dispute over employee status. In one such dispute, E.E.O.C. v. Sidley Austin Brown & Wood, a group of 32 partners filed an age discrimination lawsuit against Sidley Austin through the U.S. Equal Employment Opportunity Commission, and, as part of Sidley’s defense, the firm claimed that the partners were owners, and therefore not protected under the Age Discrimination in Employment Act.

In 2007, Sidley agreed to pay $27.5 million to resolve allegations that the 32 partners were forced out of the firm because of their age, and, as part of the settlement, admitted that each partner was an employee, according to a report in the legal news site Law360 at the time.

Another relevant case, which was well-cited throughout the Chadbourne litigation, was that of Clackamas Gastroenterology Associates v. Wells, which resulted in a 2003 Supreme Court ruling that set six common law factors in determining employee status.

The factors have been at the heart of the Chadbourne case.

1: Whether the firm can hire or fire the individual or set the rules of the individual’s work.

2: Whether and, if so, to what extent the firm supervises the individual’s work.

3: Whether the individual reports to someone higher in the firm.

4: Whether and, if so, to what extent the individual is able to influence the firm.

5: Whether the parties intended that the individual be an employee, as expressed in the written agreements or contracts.

6: Whether the individual shares in the profits, losses and liabilities of the firm.

“You can still be an employee” as a law firm partner, said Michael Harper, a law professor at Boston University School of Law, who specializes in labor and employment law.

“My own view is that any partner in a huge law firm is an employee,” said Harper. “She wasn’t in control of the business. Maybe at this Chadbourne firm, there were a few that did control everything, but she wasn’t on that management committee.”

Harper said that it was “formulaic” of Chadbourne to claim otherwise.

Whether or not Campbell is considered an employee, her lawsuit also faces other challenges. For instance, Chadbourne lawyers say that Campbell does not have enough class members — with 26 purported members — to meet the standards of class certification. But Campbell argues in court papers that there is no “bright-line rule” for how many members need to be in a class, and that other courts have allowed class certification with lawsuits of 10 to 40 members.

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