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Guest post: ‘Seamless’? The unintended consequences of Norton Rose Fulbright’s ‘combination’ argument

A few weeks ago reports surfaced about a motion seeking to compel Norton Rose Fulbright to withdraw from representation of its client Duke University in a case brought against the university by the estate of John Wayne, which wants the right to market alcoholic beverages branded with Wayne’s ‘Duke’ nickname — a textbook trademark dispute.

The Wayne estate sought to disqualify Norton Rose Fulbright on the straightforward grounds of a conflict, namely that legacy Fulbright & Jaworski had long represented Duke University and Norton Rose Fulbright Canada was a longstanding advisor to a minority shareholder of the distillery producing what would be Duke whiskey.

The response of Norton Rose Fulbright US LLP to the purported conflict? I’m afraid I must quote from coverage of the dustup in some detail:

In the course of the dispute, the firm said that the June 2013 tie-up has been ‘mischaracterised’ as a merger – a claim that is likely to prompt questions over the level of integration at Norton Rose Fulbright and other Swiss verein firms. […] The motion, which cites press releases issued by Norton Rose Fulbright at the time of the go-live date of the tie-up, said: ‘The Fulbright firm promised it would provide “seamless” legal services flowing from each of their member firms to the others.

‘In a later release, the managing partner of Norton Rose Fulbright Canada stated, “[…] Our Canadian clients now have new north/south access to the Americas seamlessly with lawyers who are based in each country’s key markets”.’

It said Fulbright seemed to want ‘all the benefits of combining its member firms’ and to market itself as a legal services ‘behemoth’, but is ‘unwilling to accept the accompanying burdens of the merger’.

However, Fulbright argues that the estate’s claim shows a misunderstanding of how Swiss verein arrangements function, pointing out that the firms operate as separate legal entities that do not share confidential information with each other. […] The filing continued: ‘In short, while Mr. Woodbridge may be a client of [Norton Rose Fulbright Canada], he is not a client of Fulbright & Jaworski and never has been.’ […] It adds that the estate’s case ‘improperly relies on hearsay “news accounts” mischaracterising the combination as a “merger”’.

A Norton Rose Fulbright spokesperson said the union between the firms has ‘always been seen and referred to as a “combination”’, adding that ‘any misrepresentation has probably been made by the media’.

And from coverage in Law360 (metered paywall), we have this:

‘Despite plaintiff’s bald assertions to the contrary, Fulbright & Jaworski LLP did not merge with [Norton Rose Fulbright Canada LLP] or any other firm when it became a part of the verein,’ the motion to deny DQ said. ‘Importantly, member firms do not share privileged information with other member firms unless they are retained by and working together for a client on the same matter.’ […] The structure of the Norton Rose Fulbright verein and the ethical rules that bind the attorneys at issue assure that there will be no disclosure of confidential information to Duke’s counsel,’ the defense motion argued.

Now, the law of conflicts is not my thing. But this does set one thinking.

If the Norton Rose Fulbright ‘combination’ wasn’t a ‘merger,’ and if ‘the structure of the Norton Rose Fulbright verein and the ethical rules that bind the attorneys’ is something they pay attention to and abide by, then what about other ethical rules about sharing across the boundaries of two or more law firms? Specifically, ABA Rule of Professional Conduct §1.5(e) reads as follows (emphasis mine):

(e) A division of a fee between lawyers who are not in the same firm may be made only if:

 (1) the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation; (and)

 (2) the client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and

 (3) the total fee is reasonable

We can question—and on another day and in a different context I certainly would—whether this type of presumptive prohibition on fee-splitting actually does anything to advance efficiency and/or client utility one iota, but it is currently in effect and binding on members of the bar, like it or not.

We also don’t know the inner workings of Norton Rose Fulbright, and the degree to or circumstances under which money moves between firms, but assuming one of the primary purposes of the verein is to enhance depth in client relations and build revenue through a common brand and a larger ‘seamless’ global platform, it would seem to be Management 101 that incentives ought to be in place to encourage people to refer work across the platform.

On their face, such incentives would seem to constitute:

  • a division of fees
  • between lawyers not in the same firm
  • without regard to proportionality of services performed
  • and without client consent as to amount and pro rata share, much less memorializing such consent in writing.

[Point of clarification: I’m not talking about payments assessed in the regular course of business for the privilege of belonging to the club (‘dues’ or other imposts which elsewhere in the economy are often labelled or thought of as franchise fees). Those are presumably fine and I don’t see how they could pose an issue.]

The question seems simple to me: If a compensation structure rewards lawyers for cross-firm referrals and if funds to pay those rewards cross firm boundaries, I don’t see how §1.5(e) doesn’t come into play.

Could it be that Norton Rose Fulbright disclaims to clients, perhaps in fine print on their website or in their engagement letters, that they are not a single firm, legally speaking, despite their talk about seamless, one-firm service?

I hope for their sake that’s precisely what they say. Lord knows if lawyers excel at anything, it’s generating legal fine print and burying Talmudic distinctions in a virtual hairball of prose. Let’s assume for purposes of discussion that Norton Rose Fulbright has done just that—I’ll even spot them doing it with effective and binding language.

This doesn’t really address the core problem, does it?

In fact, if you look at what’s going on here from a client (read: human) perspective and not a legalistic-hairsplitting perspective, this strikes me as precisely the kind of ‘trying to have it both ways’ behaviour that the disqualification motion accuses the verein of:

Both ‘having all the benefits of combining its member firms’ and marketing itself as a legal services ‘behemoth’, but ‘unwilling to accept the accompanying burdens of the merger.’

Lawyers get enough of a bad rap in the public imagination for this very kind of behaviour: Saying one thing for widespread public dissemination and standing on contradictory legalistic distinctions invisible to anyone who’s not a lawyer, and implausible to many who are, when that tactic suits their self-interest. Taking off my ‘thinking like a lawyer’ hat and putting on my common-sense economic/management 101 hat, it’s not much of a stretch to imagine some people would actually find this behaviour off-putting at best and insulting at worst. Either way, I won’t be planning to nominate this for the profession’s most shining hour.

Audience participation time: What am I missing here?

Bruce MacEwen is the president of Adam Smith, Esq. You can read his blog here.