How the Lawyer Dispute Resolution Program Works

Breaking Up Is Hard To Do:
Resolving Lawyer Disputes

By Diane Molvig

Law firm partners, like spouses, can have irreconcilable differences of one sort or another. For Milwaukee attorney Tim Aiken and his now-former partners, it came down to disagreements about how much risk-taking was acceptable for their firm.

A specialist in personal injury law, Aiken was in the midst of a medical malpractice case seven years ago that even he had doubts he could win. His partners didn't want him to invest any more of his time or the firm's money into preparing for trial (the tab already was up to roughly $100,000), but to settle the case instead. Aiken, on the other hand, felt he was too far along to back down, and that he still had a shot in court.

In the end, Aiken tried the case, which eventually resulted in an $8 million recovery. He was ecstatic; his partners were furious. He'd rebuffed their wishes just once too often, and when Aiken arrived at his office the next day, he discovered his partners had locked up his files and rolodex. The message was clear: They wanted Aiken out.

Meanwhile, the clock didn't stop ticking on the case files in the locked cabinets. Some files had approaching deadlines, but Aiken couldn't get to them. "I did miss some deadlines," Aiken recalls. "But most of the defense lawyers cut me slack, and I was able to rescue some deadlines that way."

Aiken also was able to recover files through referral lawyers who'd sent him most of his cases in the first place. Within a month after the August breakup, he'd obtained most of his files, and by Thanksgiving Aiken and a former partner finally were able to work out an agreement. Among other things, they consented to cooperate in exchanging information on casework in process, for the sake of clients' best interests. Luckily, no harm had come to any clients in the interim.

"But clients could have been harmed," Aiken points out. "And we could have been fighting like cats and dogs a lot longer. I just felt like we'd dodged a bullet."

"The problem was," he adds, "that there weren't, first of all, any rules and guidelines on law firm breakups. And there also wasn't any place to go to get help quickly in this kind of situation."

A place to turn

Ultimately, Aiken brought his concerns to the attention of the State Bar Professionalism Committee. He urged the committee to create a mechanism that could ease lawyers through the always painful, sometimes tumultuous process of law firm breakups. Such a program, now called the Lawyer Dispute Resolution (LDR) program, will be operational by March 1, 1998.

"This program is geared not just to firms that are falling apart," explains Magistrate Judge Patricia Gorence of the U.S. District Court, Eastern District of Wisconsin, who chairs the Professionalism Committee and the newly formed Lawyer Dispute Resolution Committee that will oversee the LDR program. "It can also be used when any lawyer is leaving a firm and taking clients with him or her. It can deal with the question of how you resolve who gets what clients."

As Gorence sees it, LDR is a program whose time has come. Although no one has statistics on the number of law firm dissolutions occurring in Wisconsin today, the perception of Gorence and others is that breakups are happening more often than they used to. "When I finished law school 20 years ago and interviewed at one of the firms here in town," Gorence notes, "one of their primary pitches was that they had never had anyone leave the firm. That wasn't unusual then. Lateral transfers in the same community were virtually unheard of, but they have become much more prevalent. The problem is not going to go away, and that's why I think this program is important."

Not only will LDR help lawyers settle their squabbles, it also will protect clients. And that is the main thrust of the new program, Gorence emphasizes. "Our primary concern," she says, "was that clients could be seriously harmed. For instance, the lawyer could miss a statute of limitations, and the client's case would be over."

Lapsed deadlines for filing motions, missed court dates and torn allegiances the client may feel toward feuding lawyers are other ways clients end up hurt or, at least, confused. Plus, if there's disagreement about who the client "belongs" to, "not only can clients get caught in the middle," says Milwaukee attorney Daniel Shneidman, codrafter of the LDR program, "but they get caught in a 'no person's land.' Let's say answers to discovery are due in three weeks. Which lawyer is going to do that? Who's going to meet with the client to prepare for the deposition? Those are the kinds of problems you have."

Emotions run high

For the lawyers involved in firm dissolutions, tugs-of-war over clients are just one of many issues. How do you divide accounts receivable? What about time yet unbilled? Or a still unsettled contingency fee case, into which the lawyer invested lots of hours and the firm lots of money to pay for expert witnesses and other expenses? How much of that case should be considered a firm asset; what's due the lawyer who did the work? In addition, there may be bargaining with outsiders to handle, such as businesses with whom the firm has time remaining on leases.

But perhaps even more entangled than the business details is the emotional end of a firm breakup. Even the fairly amicable partings are tough, says Madison attorney Tony Brewster, who's been through two such breakups in his 42 years in practice. "They were gut-wrenchers for me," Brewster says, "because I had to say goodbye to colleagues ... to young lawyers I had a role in bringing in and mentoring. It was very difficult."

If cordial breakups are hard, then those rife with animosity become next to impossible for the lawyers involved to navigate on their own. Brewster has helped colleagues through a few of those, and he says they can be "like a divorce in a very real sense. There's anger, disappointment and a sense of betrayal that a colleague would want to break away."

The comparison to divorce is echoed by Shneidman, who has served as counsel in firm breakups on both sides of the dispute. "The most contested divorce is a cakewalk compared to the emotions that go on (in firm dissolutions)," he says. "The firm sees the lawyer who's leaving and trying to take away clients as disloyal. They think, 'How can you do this? I raised you from a pup.'"

The most volatile situations are what Shneidman describes as "Saturday night massacres" - when the lawyer sneaks into the office on Saturday night to remove files and never comes back or, conversely, a lawyer arrives at work Monday morning to find colleagues have changed the office door locks and put the lawyer's personal belongings in the hallway. "It goes downhill from there," Shneidman says. "It gets very vindictive."

Then it may evolve into the worst case scenario: lawyers duking it out in court, where it can become a public spectacle. That's happened a few times in Wisconsin; for instance, several years ago some firm breakups were described in gory detail in a series of articles in the Milwaukee Journal/Sentinel. "That is 'Exhibit A' for lawyers to look at when they're breaking up, in deciding why they should do it without going to court," notes Don Peterson, a Mequon lawyer who's helped other lawyers through breakups and been through one of his own.

Not only does avoiding a court battle save time and money, but "it's very much in the lawyers' interests as professionals to avoid running to the courthouse," Peterson adds. "They should be able to resolve their own disputes. After all, that's what they're supposed to do for other folks."

Helping lawyers settle their differences themselves is the crux of the new LDR program. As Brookfield attorney Roland Cafaro, codrafter of the program, points out, "This is a way for lawyers to say, 'Hey, let's make a clean break of it.'"

Rapid response

Timing is critical in resolving a firm dissolution dispute. The longer it goes on, the more potential for client harm and long-lasting acrimony among the lawyers involved. That's why the Bar's LDR program has short timelines built in. "Once you contact the State Bar," Cafaro says, "the ball starts rolling. The intent is to get the mediation process wound up within 30 days of the submission of the dispute. That's the benefit: to move that quickly." (See accompanying article, "How Lawyer Dispute Resolution (LDR) Works.")

If mediation doesn't work, the matter can go to arbitration. Both parties split the costs for these services. Mediation and arbitration each carry a one-time $150 administrative fee, plus mediators are paid $100 per hour and arbitrators $125 per hour. Any expenses involved also are the responsibility of the parties.

The parties select a mediator/arbitrator from a list of experienced candidates, provided by the LDR program, some of whom have undergone LDR's nonmandatory specialized training. From the time the parties get the list, they have 48 hours to notify the LDR administrator of their choice. The selected mediator/arbitrator then gets the process under way as soon as possible.

"A service like this is much needed, based on what I've seen," says Milwaukee attorney Richard Cayo, who's served as counsel in firm breakups. "And it will be best if the people who make themselves available [as mediators/arbitrators] recognize that what they're doing is managing crisis. They have to drop everything, in a sense, and really get down and hammer out agreements quickly. Because in the meantime, cases are being neglected, work is going undone, clients are up in the air. The people who do this service are going to have to regard themselves as EMTs."

The LDR program administrator will select mediators and arbitrators based upon such criteria as: years of experience practicing law, years of practice in Wisconsin, understanding of the rules of ethics, training in alternative dispute resolution and training specifically for the LDR program, the first of which was held in conjunction with the State Bar's convention in late January.

The quality of the mediators/arbitrators involved in the program will have everything to do with how the LDR program is received by the state's attorneys, points out Brewster. He says it comes down to credibility. "How does that credibility come? By saying, 'We're competent, we know what the problems are, and we've been there or at least had enough experience as practicing lawyers ourselves. We'll help you confidentially, quickly, with the best interests of the clients in mind first, and those of the firm second,'" Brewster notes.

"It has to be somebody both sides feel they can trust, number one," concurs Cayo. "In some cases, someone in the firm might be more connected to the Bar than are the other parties involved. So they [mediators/arbitrators] are going to have to not only treat everybody fairly, but make them feel like they're being treated fairly."

Preventive action

What if neither mediation nor arbitration gets results? The parties are free to proceed as they wish, even taking the matter to court if they choose. Also, participation in LDR is voluntary from the outset, and either or both parties can withdraw at any time if they feel the process isn't going anywhere. Because dragging lawyers to the mediation table under protest wouldn't work anyway, the program's voluntary nature is essential. But it also makes it easy for lawyers to shrug off using LDR in the immediate aftermath of the breakup, when they may feel eager to fight, not talk.

As Cayo notes, "Law firm breakups often are sort of spontaneous combustion because someone gets angry. There's no forewarning and very little planning involved."

That's why law firms should include language about using the LDR program in their partnership or employment agreements or the firm's bylaws, Cayo advises. "That would be a smart thing for firms to do," he says. "You could have a clause saying that in the event the firm breaks up, we're going to sit down and voluntarily resolve the issues that face us at the time. And if we're unable to resolve one or more of those issues, we'll submit the dispute to the State Bar's program. That way everybody knows what to expect."

Cayo's suggestion is precisely what the people who launched the LDR program hope will happen. Agreeing to use mediation at the outset, years before anyone's even thinking about breakup, "makes sense," Gorence notes, "because when people are in a more rational, calm state, they could agree to that. In the heat of the moment it's difficult to be objective enough to decide to use the program."

Time will tell how open attorneys are to using LDR. Many lawyers caught in disputes may not be eager to try it, at least at first, predicts Michael Gillick, a Milwaukee attorney who survived a fairly painless firm breakup 20 years ago.

"Lawyers must make noise; that's the first thing they're taught in law school," Gillick says. "So in the immediate breakup, they'll make a lot of noise. But, to quote Shakespeare, it's 'sound and fury signifying nothing.' Because behind that is the realization that we can't take the ultimate step: We can't hand over our private dealings to a judge and therefore the entire public. So sooner or later, they'll be ready to talk with a mediator. They'll get serious about it, and the service will be valuable."

For more information about LDR, contact the LDR program administrator at the State Bar at (800) 362-8096 or (608) 257-3838.

Diane Molvig operates Access Information Service, a Madison research, writing and editing service. She is a frequent contributor to area publications.