2 former partners sue Clifford Chance over alleged compensation clawbacks
Clifford Chance is facing a federal lawsuit from two former partners who allege that the law firm asked them to repay nearly $5.8 million in compensation after they left in January. (Photo from Shutterstock)
Clifford Chance is facing a federal lawsuit from two former partners who allege that the law firm asked them to repay nearly $5.8 million in compensation after they left in January.
“This action relates to the firm’s efforts to claw back plaintiffs’ already-paid and already-earned compensation, pursuant to certain provisions of the [firm’s partnership] agreements, as punitive and anti-competitive measures in apparent response to plaintiffs’ withdrawal from the firm to join Sidley Austin,” said Clifford Cone and Michael Sabin said in their June 29 complaint.
Before their departure, Cone and Sabin were the co-heads of Clifford Chance’s U.S.-based funds and investment managements practice group, according to the complaint. They were based in the firm’s New York City office, while its headquarters are in London.
In March, after Cone and Sabin moved their practices to Sidley Austin, they received similar letters from Charles Adams, the global managing partner of Clifford Chance, the complaint said. In the letters, Adams allegedly wrote that pursuant to the firm’s primary partnership agreement, the firm sought to claw back $4,356,966 from Cone and $1,398,653 from Sabin.
Under the agreement, Clifford Chance can reduce a partner’s shares in the firm from 300 or more units to 280 units if they decide to leave, the complaint said. The firm can also ask the partner to repay the difference in their compensation as a result of this shift in shares.
As part of Cone and Sabin’s suit, which seeks declaratory judgment, they are asking that New York law, rather than English law, apply to any mediation or arbitration between the parties. They are also seeking attorney fees and costs.
Leslie Corwin, who is of counsel with Duane Morris and represents Cone and Sabin, told Law.com that they think that the law in New York “is pretty crystal clear that provisions such as this in the Clifford Chance partnership agreement are unenforceable as a matter of law.”
“This is no more than a restrictive covenant in disguise, which is unenforceable,” Corwin also said.
A spokesperson for Clifford Chance told Law.com that the firm “does not comment on pending litigation and will address any issues through the appropriate legal process.”
The suit was filed in the Southern District of New York.
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