On September 1 last year, Mark Rigotti, the London-based boss of top law firm Herbert Smith Freehills, received an email from Brendan Quinn, his Asian head of project finance in Melbourne.
Quinn, a rainmaker rated as "one of the best project finance practitioners in the country", was leaving to join White & Case, a Wall Street law firm that was offering to double his pay to $2.6 million.
In the next five minutes, Rigotti's inbox pinged with six more resignations from Australian project finance partners; another, Jared Muller, joined them 30 minutes later, bringing the number of total defectors to eight.
Over the next six months two more partners and 33 lawyers would follow suit, gutting one of Australia's oldest and most prestigious law firms of its star project finance team and at least $30 million a year in fees.
White & Case had been eyeing the Australian market for years. But instead of forming an alliance with a domestic firm – and taking on the overheads and dregs of a legacy firm – it was targeting star partners with impressive client lists.
Freehills is now seeking to derail White & Case's entry into the local market by stopping its Australian partners from defecting to the global law firm for at least six months.
Hitting the heart of Freehills
White & Case's raid should not have come as a surprise to anyone, least of all Freehills – whose alumni includes ANZ chairman David Gonski, cabinet minister Kelly O'Dwyer and Federal Court chief justice James Allsop – and has always been a prime target for partner poaching.
Just three years ago, US-based employment law firm Seyfarth Shaw opened an Australian offshoot with eight founding partners, five of whom were "the next generation of star partners" at Freehills.
The same year two of Freehills commercial litigation partners left to join US firm Quinn Emmanuel's new Australian shop, a high-value litigation law firm with a profit per equity partner of $US4 million.
But this time, the raid is not just targeting the firm's ancillary practice groups or chipping away at a handful of partners. The defection will hit at the heart of the firm's project finance practice.
The combined revenue generated by the leaving partners – Asia head of finance Brendan Quinn, head of projects Andrew Clark, and project finance partners Alan Rosengarten, Josh Sgro, Tim Power, Jared Muller, Joanne Draper, Joel Rennie, plus Fergus Smith in Hong Kong and Matthew Osborne in Singapore – is estimated at $30 million, which is likely to deeply cut into the firm's cashflow if the clients follow the partners to White & Case.
Freehills says the restraints in the partnership agreement means the eight Australian partners cannot work for a competitor such as White & Case, or poach clients or employees for six months, until at least September 2 this year.
The departing partners say the restraints are unreasonable because they would stop the partners from practising as lawyers in their field of specialist expertise – effectively depriving them of their ability to make a living.
They have already been sitting on their hands since September, having been ordered to serve out their six months' notice and being suspended from partnership duties.
The circumstances of the law firm's internal crumbling were detailed in a lawsuit filed by Freehills against the departing partners, which was first revealed in The Australian Financial Review earlier this month.
Departing lifers
Both firms declined to comment, citing the ongoing court case. The parties went to mediation last Monday but failed to settle. The case will be heard in the Supreme Court of NSW on February 27 and 28.
Leading the partners' exodus is Quinn, the Asia head of finance. Since joining the firm as a junior lawyer in the 1990s, he had climbed his way up the law firm's internal ladder for nearly 18 years.
By the time he resigned, he was in charge of 52 clients including HSBC, IFM Investors, ANZ, UBS and Societe Generale and was splashing out $167,000 on "business development" in the 2016 financial year alone.
Five of the other departing partners – Clark, Draper, Rosengarten, Sgro and Rennie – have been lifers at Herbert Smith Freehills, starting their legal career straight out of university as summer clerks or articled clerks back in the 1990s, and spending nearly two decades at the firm.
The court documents show the partners have been planning the defection for at least a year.
As early as September 2015, Quinn and New York-based White & Case partner Arthur Scavone were emailing each other and scheduling a meeting in October in Hong Kong to "take a deeper look at [their] respective client bases]".
By December 2015, Quinn had already convinced Clark, Sgro, Rennie and Muller to jump ship, and was scouting for more. In an email to White & Case, Quinn wrote: "At this stage, Andrew [Clark], Josh [Sgro] and I are available. I am aiming to have as many of the other potential partners available as well.
The approach
"At this stage, I have confirmed Joel Rennie, Jared Muller and I will aim to confirm at least Jo Draper, Fergus Smith, Gerard Pike and Tim Power shortly. We are still determining how we approach Tony and Matt ..."
By August 2016, Quinn was ready to leave the law firm he had been at for the past 17 years. He sent an email to his personal email address setting out the agenda, which included "update on offer letters", "finance", "capital contribution loan" and "when do we pull the pin".
Two weeks later, on September 1, all eight partners had resigned and 33 more lawyers followed suit to work for White & Case.
Three of the lawyers, former Melbourne-based Freehills senior associates Adeline Pang, Ged Cochrane and special counsel Michelle Keen, have already scored themselves a promotion to White & Case's founding partners and have been working there since December.
Freehills says based on the timing of the resignation, it is evident the departing partners "co-ordinated their resignations and departures".
The co-ordinated effect of their departure, Freehills says, "poses an increased risk of the loss of the firm's goodwill, client relationships, and its confidential information, and poses risks to the stability of its partner and solicitor working teams".
The remaining 167 partners say according to the firm's partnership agreement, for the next six months departing partners cannot work for any of Freehills clients who they had "material dealings" with in the past two years.
Not so fond farewells
Freehills says over the years the firm has poured money into developing client relationships, through countless business lunches, dinners, drinks, client secondments, training programmes, bespoke seminars and client roundtable discussions.
Freehills also says the departing partners have accumulated a lot of confidential information, including the firm's pricing models, clients' business strategies and even preferences of executives at client firms.
This information, it says, would be "highly valuable in the hands of a competitor law firm in enabling the competitor to entice clients away from [Freehills] and unfairly compete with [Freehills] for work in the competitive legal services market".
In their defence, the departing partners say it would be against public policy to enforce the restraints in the partnership agreement because they would be effectively restrained from joining White & Case "at all in any capacity", even if they perform no work for Freehills' clients.
"The effect of the clauses is to prevent the defendants from practising as lawyers in their chosen vocation in their field of specialist expertise," the defence document reads.
In an ironic nod to history, the departing partners have hired to defend their case Chris Gardner, who has quit Freehills partnership to found the Australian arm of Seyfarth Shaw.
Gardner went through a similar fight against Freehills partners when Seyfarth Shaw was forced to open doors with only two of its founding partners because the rest had been held back by restrictive covenants.
The partners' last day at work is March 1. Their farewell drinks will be interesting.
misa.han@fairfaxmedia.com.au
