Legal Ethics

Is popular verein structure jeopardizing big firms? Dentons challenges conflict-of-interest ruling

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In a move that could have huge repercussions for several of the largest worldwide law firms, Dentons is challenging a U.S. International Trade Commission judge’s decision booting them off an intellectual property case over a conflict of interest.

On Wednesday, Law360 reported that the megafirm had filed a motion for reconsideration with the USITC. At issue is a patent infringement lawsuit brought by Dentons on behalf of RevoLaze, an Ohio-based company, against Gap Inc. According to Law360, Chief Administrative Law Judge Charles Bullock ruled in May that Dentons had a conflict of interest because it had previously done work for Gap, and that Gap had been a longtime client of Dentons’s Canada branch.

Dentons, which officially acquired McKenna Long & Aldridge on July 1, is the product of several mergers over the last few years, including a three-way merger in 2013 of SNR Denton, Fraser Milner Casgrain and Salans. The firm also entered into an alliance with Chinese firm Dacheng, giving it 6,600 lawyers worldwide. The firm was set up as a Swiss verein, a decentralized structure which allows independent legal entities to share marketing and branding while keeping finances separate. Dentons had argued that this structure had prevented a conflict of interest because the attorneys representing RevoLaze did not have access to any of Gap’s confidential information. Gap disagreed and argued that RevoLaze had access to confidential information through the firm’s online portal.

Bullock cited ABA Model Rule 1.0 and found that Dentons had marketed itself as one law firm rather than a confederation of independent entities. According to Law360, Bullock performed an analysis of the firm’s Swiss verein structure and found that Dentons “should be treated as a single association that met the definition of a firm.”

Experts believe that this decision could prompt a re-evaluation of the popular verein structure. Several large firms, including DLA Piper, Baker & McKenzie and Squire Patton Boggs use the verein structure while emphasizing their ability to cross-sell and provide international services. “If it stands, this order should give some pause to lawyers practicing in vereins,” said Karen Rubin of Thompson Hine, to Law360. “The two Dentons legal practices in this case were completely separate operationally and financially—but the [administrative law judge] instead looked at how Dentons marketed itself.”

In its filing, Dentons stated that it had an “acute interest” in challenging Bullock’s decision. The firm decline to comment to Law360.

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