‘Needlessly filed’ partnership agreement made private in Clifford Chance’s $5.8m clawback dispute

Clifford Chance has successfully removed most of its partnership agreements from the public court record after arguing their disclosure exposed commercially sensitive information about the firm's compensation system and internal partnership arrangements.

The agreements were made public after former New York partners Clifford Cone and Michael Sabin filed them as part of a lawsuit challenging the firm's attempt to recover almost $5.8 million in profit distributions following their move to Sidley Austin in January.

Sensitive info

Proskauer, acting for Clifford Chance, argued the former partners had “needlessly filed” the full, unredacted agreements and said their actions “clearly demonstrate a lack of good faith”.

The filings included the firm's global LLP agreement and US partnership agreement, together spanning around 260 pages including numerous schedules and policies, even though only a handful of provisions were relevant to the dispute.

The agreements contain information covering the firm's lockstep remuneration model, governance, voting procedures, capital contributions, withdrawal arrangements and other internal policies.

Competitive harm

Clifford Chance argued that continued public access to the partnership agreements would cause "competitive harm", saying it “impairs the firm’s ability to compete for lateral partners, undermines the bargaining position of partners considering withdrawal, and compromises firm self-governance”.

Proskauer cited several cases in which courts permitted partnership agreements or commercially sensitive provisions to be sealed or redacted. The firm further argued that both current and retired partners are contractually required to keep the affairs of the partnership confidential.

‘No-win’ position

Cone and Sabin consented to the sealing application but disputed Clifford Chance's account of how the partnership agreements entered the public record.

Their lawyers said both sides had initially agreed to seek permission to file the complaint under seal, but that application was denied before the lawsuit was filed. They argued that publicly filing the agreements was therefore necessary to comply with the court's ruling.

Clifford Chance disputed that interpretation, arguing the earlier order did not determine whether the partnership agreements themselves should remain confidential.

The response accused Clifford Chance of placing them in a "no-win" position by claiming they breached confidentiality after the court refused to let them proceed under seal.

What’s next

While the full partnership agreements have now been removed from public view, the underlying dispute is not over.

Clifford Chance argues the matter belongs in confidential arbitration under the partnership agreements and has said it will seek to dismiss the court proceedings.

In their complaint, Cone and Sabin are asking the court to declare that New York law governs the dispute, a decision that could determine whether Clifford Chance can recover millions of dollars in profit distributions from the former partners.