Clifford Chance accuses ex-partners of trying to ‘hijack’ $5.8m pay dispute

Clifford Chance has hit back at two former partners challenging nearly $5.8 million in profit clawbacks, accusing them of trying to use the New York courts to gain a “tactical advantage” ahead of an agreed arbitration.

Proskauer, acting for the Magic Circle firm, filed a motion on 14 August asking the US District Court in New York to compel former US funds partners Clifford Cone and Michael Sabin to arbitrate their dispute in Geneva and dismiss their lawsuit. Alternatively, it has asked the court to decline jurisdiction.

The filing is the latest development in the dispute between Clifford Chance and Cone and Sabin, former co-heads of its US funds and investment management practice who left for Sidley Austin in January.

The pair sued Clifford Chance in June after the firm sought to recover almost $5.8 million in profit distributions following their departures.

‘Tactical advantage’

Clifford Chance argues that questions of which law applies should be left to an arbitrator under its partnership agreement.

In its filing, the firm says Cone and Sabin agreed to dispute resolution procedures culminating in confidential arbitration in Geneva and accuse the partners of attempting to “hijack” the arbitration process before it even begins.

The firm accused the pair of “misguidedly” seeking a “tactical advantage” by asking the court to determine the applicable law before arbitration begins, arguing that doing so would “supplant the role of the arbitrator”.

Geneva showdown

Cone and Sabin are bound by both Clifford Chance LLP’s main partnership agreement, which is governed by English law, and the Clifford Chance US LLP agreement, which is governed by New York law.

The US agreement provides that claims arising from the partnership relationship should be resolved using the dispute procedures in the main agreement.

Cone and Sabin contend that applying New York law could make the clawback and forfeiture provisions unenforceable because of the state’s restrictions on financial penalties for lawyers who move to rival firms.

Clifford Chance says the choice of law should be left to the arbitrator, even if it could ultimately determine the outcome of the dispute.

Partnership precedent

The firm has also pointed to a recent partnership dispute involving US firm Katten that was decided by the same district judge overseeing the Clifford Chance case.

In that case, a former Katten partner brought claims relating to his termination and alleged denial of benefits despite a partnership agreement containing a broad mandatory arbitration provision. The court ultimately upheld an order compelling arbitration.

Clifford Chance argues the same principle should apply here.

The firm also rejects the former partners’ reliance on New York public policy, pointing to a 2019 dispute involving Quinn Emanuel in which a New York court left an arbitrator to decide the governing law in a fight over partnership provisions restricting competition.

Clifford Chance describes Cone and Sabin as “sophisticated lawyers” who accepted the arbitration provisions and argues they should not be able to rewrite that bargain because “its terms are now inconvenient to them”.