Duke University's legal fight with John Wayne's heirs highlights potential verein pitfalls
A lawsuit involving John Wayne’s heirs and Duke University highlights the potential pitfalls for law firms that are linked in a verein structure.
The suit filed by John Wayne Enterprises sought a declaratory judgment that Duke University had no legal ground to object to the marketing of “Duke Kentucky Straight Bourbon Whiskey.” A California federal judge dismissed the case on jurisdictional grounds earlier this year, but not before questions arose about a potential conflict of interest, Newsweek reports. (The Hollywood Reporter’s Hollywood, Esq., blog had this coverage of the dismissal in October.)
John Wayne Enterprises had argued that a verein law firm that represented Duke University had a conflict of interest because its lawyers had represented the distillery producing the Duke bourbon in previous unrelated matters, Newsweek says. Fulbright & Jaworski represented Duke, and Norton Rose had represented the distillery. The two firms became Norton Rose Fulbright in 2013 using a verein structure.
Fulbright lawyers had argued there was no conflict because law firms in a verein don’t share privileged information with each other unless they are working together on the same case. A Fulbright spokesperson told Newsweek that the firm also complied with ethics rules regarding fees.
Law firms join in a verein structure to help market themselves and to allow for client referrals between member firms in different locations, Newsweek says. Verein firms have less paperwork because they deal only with taxes and ethics rules in their home countries, the story says. And they avoid the difficulties that come with joining two law firms in a merger.
But law firms in a verein that pay referral fees between offices could run afoul of ethics rules requiring written disclosure to the client, critics say.
Edwin Reeser, a former managing partner at prominent law firm Sonnenschein Nath & Rosenthal now in private practice, told Newsweek he sees trouble ahead for verein law firms. “Law firms rushed into these network combinations because they sounded like a wonderful panacea” to combat the effects of the recession while expanding. “But the U.S. law firms are going to be the losers in these structures because of conflicts of interests and ethics rules on fee splitting,” he said.
