Posted February 8th, 2018.
By Andrew Strickler
Law360 (February 8, 2018, 6:02 PM EST) — BigLaw’s embrace in recent decades of a top-down management style and ever-looser definitions of what constitutes a true “partner” have emerged as key questions in a handful of pay and gender discrimination cases brought by female lawyers, and the answer could decide the scope of such suits and whether they end up in arbitration.
With plaintiffs’ arguments that so-called “income” or nonequity partners are more rightly seen as employees still percolating in the courts, industry watchers say suits targeting Winston & Strawn LLP, Proskauer Rose LLP and others challenge a fundamental reality of the modern large-firm business.
In short: Many, if not most, big-firm lawyers with “partner” in their title have little of the kind of authority on business decisions held by their predecessors in an era before aggressive consolidation in the U.S. legal industry created multinational megafirms like Dentons and DLA Piper.
The mutations in the definition of “partner” have in turn opened the door to arguments that those outside the full-equity partnership should be seen as employees — a key point for plaintiffs seeking the higher legal protections afforded employees and to avoid the strictures of partnership contracts, including arbitration.
Among the firm-targeted cases in which the partner-or-employee issue has been raised is a California state case in which a former Winston & Strawn partner is arguing that an arbitration clause in her contract shouldn’t apply because she never got a split of profits or had a say in management decisions.
In a D.C. federal court, a Jane Doe plaintiff opposed Proskauer Rose’s stance that she can’t sue the firm under laws that protect employees because she has an equity stake in it. Details in the complaint closely track the biography of Connie Bertram, a government contracts, employment and whistleblower attorney in Washington, D.C. The suit is ongoing.
And last summer, a New York federal court said discovery was needed to determine whether a group of lawyers alleging gender discrimination at Chadbourne & Parke LLP qualify as employees protected by Title VII and other statutes. Norton Rose Fulbright absorbed Chadbourne last year.
“What it means to be a law firm partner has become completely fluid,” said employment attorney Adam Herzog of Katz Marshall & Banks LLP. “Junior partner is a pretty nebulous concept, and how it’s defined is going to range a lot from law firm to law firm.”
The shifting power dynamics, in which more committees of full equity partners make most decisions for “partnerships” with hundreds or thousands of members, is also apparent in firm contracts giving lawyers profit-sharing opportunity and limited voting rights but little if any real say in running the business, said Ron Minkoff of Frankfurt Kurnit Klein & Selz PC.
“What used to be a simple analysis, found all over New York law, of what is a partner — you share in the business’ profits and its losses and have a say in the management of the firm — has become a much more multifaceted analysis,” he said.
Many newly minted partners find their contracts “really delegate all the actual management authority to someone else,” he said.
In many ways, the shifting concept of a BigLaw partner mirrors firm growth itself. Since the mid-1990s, the top of the U.S. legal industry has exploded in terms of lawyer rosters, office counts and gross revenue, among other metrics.
With sprawling businesses to manage, leaders have in recent decades added layers of administration, invested in business development and pricing expertise, hired nonlawyer executives and taken other steps to bring scattered partners more in line with corporate practices. Inevitably, more day-to-day decision-making power has also been consolidated at the top, leaving full partner votes to a small category of major decisions like mergers.
A strong desire among leaders not to dilute per-equity-partner profits has also prompted many firms to employ more titles, particularly “income partner” — those without a capital stake in the firm and varying degrees of partner-like ability to vote or share in profits. Others have also created multitiered partner systems.
Between 2010 and 2016, the number of BigLaw nonequity partners grew at a faster rate than any other law firm job title, according to a report from Citi Private Bank’s law firm group.
While that nonequity trend now appears to be on the outs, experts said the blurred lines around partial-equity partners, of counsels, firm shareholders and others have helped sever the connection between BigLaw’s more corporate style from the old-school concept of a firm partner as someone with a clear ownership stake.
“As BigLaw has evolved into more of a big business, and a more competitive industry, the enterprise is run more often by executive directors and management committees or groups of delegated partners, than all partners sitting around a conference table. The economic realities require lawyers to focus on their practices and generating revenue,” said labor and employment lawyer Louis DiLorenzo of Bond Schoeneck & King PLLC.
That shift “may also mean more exposure to these kinds of claims,” he said.
But Allison Martin Rhodes, co-chair of the legal profession group at Holland & Knight LLP, said partnerships can and do ask incoming partners to agree to leave “partner-like” authority to others, as long as some key rights are preserved.
“That’s totally consistent with the concept of a partnership, even if it’s not consistent with the image of a bunch of guys sitting around a conference room smoking cigars and making decisions together,” she said.
The partner-versus-employee issue is also key to venue. Mandatory arbitration clauses are ubiquitous in BigLaw partnership contracts, putting disputes among partners out of the public eye. Depending on the wording, arbitration can also mean limited discovery and “no fee shifting” requirements. That means lawyers suing firms and subject to arbitration are on the hook for big arbiter bills, regardless of outcome.
Herzog also noted that the D.C. version of Title VII allows liability for individual employers who engage in discrimination.
“If you’re a high-level firm manager, that could mean in D.C. you’re more likely to be sued under your individual capacity as well, so that’s also a factor here,” he said.
Some of these concerns underlie the Winston & Strawn case. A onetime income partner in California, Constance Ramos, is now appealing a San Francisco Superior Court decision that she was in a “partnership relationship” with the firm, sending her suit to arbitration.
Her petition argues that Winston capital partners had “absolute power” to hire and fire her and other income partners. Ramos has also said she never got any share of firm profits in her year-and-a-half at the firm or had any influence in the business.
“Holding the title of ‘partner’ in a law firm does not a fortiori preclude such a person from the benefit of the protections of California’s employment laws,” the petition says. “In this case, the facts show that title of ‘income partner’ at Winston does not carry with it the status of actual ‘owner’ or ‘employer.’”
In yet another ongoing suit, Ogletree Deakins Nash Smoak & Stewart PC employment attorney Dawn Knepper has accused her firm of having a “grossly over-represented” male leadership that discriminates against female lawyers in pay and promotions. The federal suit filed last month in California alleges violations of Title VII and the Equal Pay Act as well as various state statutes, and seeks to represent some 100 nonequity shareholders.
With many of the BigLaw gender cases still at an early stage, Rhodes said the partner-versus-employee issue is better seen at this point as a question of whether nominal partners can make viable wage-and-hour type claims as employees, or have to allege breach of fiduciary duty and other claims in the context of a partnership relationship.
“If there is a pay gap, and a firm is paying women less than men, I don’t really see that as a partnership question,” Rhodes said. “Ultimately, if there is discrimination, no law firm is going to be able to hide behind their partnership structure, and whether someone in equity or nonequity, and all those kinds of arguments that only a lawyer would love.”
An attorney representing Ramos declined to comment. A Winston counsel was not available for comment.
David Sanford, who represents plaintiffs in the Chadbourne, Ogletree and Jane Doe Proskauer suits, and a lawyer for Proskauer did not respond to messages. A Chadbourne spokesperson declined to comment.
–Additional reporting by Vin Gurrieri and Aebra Coe. Editing by Brian Baresch and Jill Coffey.