Sonnenschein Nath & Rosenthal has filed a petition for certiorari with the Supreme Court, asking the justices to weigh in on a breach of contract dispute between the firm and a former partner.
The petition stems from a 2005 suit filed by Douglas Rosenthal, a former antitrust partner at Sonnenschein (pictured below), alleging that he was not fairly compensated for representing the families of those killed in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland. That contingency work made $18 million for Sonnenschein. Rosenthal also claimed he was owed origination credit for Sonnenschein’s representation of Sun Microsystems against Microsoft Corp. That work generated $20 million for the firm.
Rosenthal said the firm kept him at the bottom of the partner pay scale, and encouraged him to forgo the Pan Am contingency work to focus on corporate clients who would guarantee a payout.
Rosenthal, who is not related to the Rosenthal in the firm’s name, claimed in his complaint that he was owed $8.5 million. He voluntarily retired from the firm in 2005 and went to work for Constantine Cannon.
In 2008, a Washington jury determined that Rosenthal should have been paid $500,000 each year for the years 2003 and 2004, instead of the more than $400,000 he received from the firm. For 2005 and 2006, the jury decided that Rosenthal should have received $1,365,000 instead of the more than $1 million offered by the firm for each of those years.
A D.C. Superior Court judge later slashed Rosenthal’s award to $65,639 after Sonnenschein argued that Rosenthal’s award was calculated incorrectly.
In January, the D.C. Court of Appeals granted Rosenthal a new trial for a portion of what he claims the firm owes him for the Pan Am Flight 103 work. The court also gave Rosenthal the option of accepting the jury's original decision for some of those fees without the trial judge's reductions and moving on. Rosenthal opted for the retrial.
Sonnenschein filed a petition with the D.C. Court of Appeals court for an en banc rehearing, but the court denied that petition in March. Sonnenschein has filed for a stay of the retrial pending a ruling on the petition for certiorari, and briefs on that motion are to be filed soon.
In the petition for certiorari, filed on Aug. 17 by James Hamilton, a partner at Bingham McCutchen, the firm argues that that the appeals court made “egregious” errors in its January opinion that will have “significant and far reaching effects on our nation’s major law firms.”
Sonnenschein argues in the petition that the appeals court improperly nullified a Delaware law concerning the application of the covenant of good faith and fair dealing when law firms make decisions on partner compensation. The appeals court also erred, Sonnenschein argues, by allowing Rosenthal to recover compensation for work performed at the firm after he voluntarily retired. Finally, Sonnenschein contends that its due process rights were violated because the appeals court left open questions of fact that relate to whether the firm should be held liable for any alleged damages.
Hamilton writes in the petition, “The Court of Appeals’ ruling in this regard, coupled with its misapplication of Delaware law discussed above, may work to the great disadvantage of the nation’s law firms. Read together they mean that a partner . . . . can quit the firm, sue for breach of the covenant claiming unfairness, and seek compensation for future periods, even if the partnership agreement provides that he will not be compensated if not working for the firm. That is distinctly not the law in other jurisdictions. It should not be the law in the District of Columbia.”
In a statement, Sonnenschein’s general counsel John Koski said, “We have nothing to add to the legal arguments set forth in our cert. petition. We feel strongly that this is an issue of broad concern among other law firms and organizations that have non-formulaic compensation systems, like ours."
Gary Malone, a Constantine partner representing Rosenthal, said he thinks the petition for certiorari is “meritless” and is a “basically a harassing tactic” that Sonnenschein is employing against his client. “The lawyers on the other side are too good to think that this has a chance of getting certiorari granted,” Malone said.
Rosenthal’s response to the petition is due by Sept. 20.