Risk Update

Conflicts Pain or Strategic Gain? — Swiss Vereins on the Brain

Dentons’ Life on the Fast Track Has Been a Bumpy Ride for Many Partners” —

  • “Dentons’ corporate structure is one of its greatest assets in its bid to build a network of smaller firms across the United States. Swiss vereins allow for flexibility both at the local and the national level. While the new Golden Spike firms become members of the verein, the preexisting Dentons U.S. firm—the 23 offices that existed prior to Golden Spike—exists as a single member firm, parallel to legacy Golden Spike firms, according to Bill Henderson, a professor at Indiana University Maurer School of Law. Henderson wrote on the subject in late 2019 after meeting with Andrew, who is widely credited with formulating the expansion strategy.”
  • “Yet vereins can also be the source of conflicts within a law firm. Cassandra Burke Robertson, a professor at Case Western Reserve School of Law, recently noted that one Dentons experience provides the ‘most in-depth discussion’ of the conflicts within a verein structure.”
  • “Dentons U.S. had represented a client in a patent enforcement action involving denim manufacture, she wrote in a paper titled ‘Conflicts of Interest and Law Firm Structure.’ The Canadian member of the verein had long represented clothing retailer Gap, the opposing party in the patent enforcement.”
  • “In the case, In re Certain Laser Abraded Denim Garments, Gap argued to disqualify Dentons U.S. from representing its client. Because ‘Dentons held itself out to be a single firm,’ wrote Burke Robertson, ‘all of the verein members owed it a duty of loyalty and were therefore barred from accepting conflicting representation.'”
  • “Siding with Gap in 2015, the U.S. International Trade Commission agreed—as do several of the firm’s former partners, who say they were sometimes unable to bring clients to the firm because of a conflict somewhere else in the verein.”
  • “Burke Robertson says she expects vereins to become an increasingly popular structure for international law firms. ‘Having the verein structure makes it easier to operate worldwide, because you retain local control at the individual member level but have economies of scale and global coordination…It makes it easier to engage in transnational practice—which we need as business becomes ever more international… They need legal counsel that’s experienced operating in more than one country.'”
  • “However, Burke Robertson sees growing pains for the structure—particularly in the U.S., where she says conflict-of-interest laws have yet to catch up with innovation in law firms. ‘Our conflict rules already weren’t working, because they came from the time when the U.S. predominantly had small local counsel—firms with only two or three lawyers,’ Burke Robertson says. ‘Those rules already weren’t adapted to modern practice.'”
  • “Many Dentons partners who left the firm since the announcement of Golden Spike say they ran into conflict-of-interest issues that they were previously assured would not be problematic. ‘I’ve had times where I couldn’t bring on a client because there was a tiny conflict halfway around the world in another office in a completely different jurisdiction,’ says the first partner mentioned above. ‘When I joined the firm, I was assured this sort of thing wouldn’t happen.’
  • “Dentons senior management says their system for dealing with conflicts is sound, and that, statistically, the firm faces fewer conflicts by adding a whole firm than by adding a couple of new partners to an existing office in Manhattan or London, for instance.”