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Court rejects lawyer’s claim for payout from firm

|Written By Robert Todd

The Ontario Superior Court has rejected a lawyer’s claim for a payout from his former firm that alleged his performance before leaving merited a bigger share of partnership units.

Linda Rothstein says her clients Aird & Berlis are relieved by the decision.

Former Aird & Berlis LLP partner Harold Springer initiated the claim, alleging he was entitled to more units than were given to him for the years 2001 and 2002, according to the decision of Justice Frank Newbould.

He sought payment of the added income he would have received. Springer also issued a claim for more money through a withdrawal payment under the firm’s partnership agreement, which he said should have been higher for the year 2002.

Springer’s lawyer, Gowling Lafleur Henderson LLP counsel Thomas Dunne, says he will appeal the decision. Dunne says he cannot comment on the case due to the pending appeal proceedings.

“We will wait for the final chapter in the Court of Appeal.”

 Paliare Roland Rosenberg Rothstein LLP managing partner Linda Rothstein, who represented Aird & Berlis, says her clients are relieved by the decision.

“It’s a very thorough and carefully reasoned analysis of the evidence and the law,” she says. “In the end the judge agreed with Aird & Berlis that it had treated Mr. Springer fairly in every way.”

Springer, who was called to the Ontario bar in April 1986, worked at the Outerbridge firm until November 1998, said Newbould. He moved on to Aird & Berlis, where he specialized in insolvency litigation and restructuring. He became partner in January 1990, which he remained until his 2002 departure.

From 1996 to 2001, Springer worked extensively on a big file, called the “H” file, according to Newbould. By 1999 his work on the file gave him the largest personal billings of the firm’s lawyers, which continued in 2000 and 2001.

The firm’s management committee traditionally allocated partnership units each January, said Newbould. But in May 2000, the nine-partner, yearly elected management committee was replaced by an executive committee, consisting of five partners elected for a three-year term. The new executive committee made the unit allocations in January 2001 and 2002.

Also, in 1998 the firm began allocating “limited life units,” on top of the ordinary “hard” units, as a “bonus awarded in circumstances in which the management committee felt that the particular partner had achieved extraordinary results in the prior year that should not be reflected in the normal or ‘hard’ units,” said Newbould. But, the firm ended the practice of issuing limited life units in 2001, replacing them with a bonus system consisting of a year-end cash bonus.

The firm introduced a new compensation system in December 2000, in which four threshold levels with extensive criteria were used by the executive committee to determine the allocation of partnership units, said Newbould. Springer said that new system was used in 2001, but the firm argued it was not used until 2002.

Springer received 185 normal units and 65 limited life units in January 1999, said Newbould. The value of those units was not included in the decision. In January 2000, Springer received 225 normal units and 200 limited life units, each of which was worth $2,600. In January 2001, he got 400 normal units, worth $2,895 apiece, and a bonus of $560,000.

Springer decided to leave the firm in 2001, opting to run a start-up private equity restructuring company, said Newbould. He planned to start work at the new business no later than April 1, 2002. “He did not provide the firm with notice of this agreement before his withdrawal,” said Newbould.

On Jan. 25, 2002, Springer received 175 partnership units from Aird & Berlis, and on the same day he advised the firm he would be leaving as of Feb. 28, 2002.

Springer claimed he was entitled to 100 more units in January 2001 and 325 more in January 2002, said Newbould.

“Under the firm’s partnership agreement, the amount of the withdrawal payment that was payable to him was based on the number of his units at the time of his withdrawal and it was paid out to him over 36 months on the basis of him having 175 units,” the judge wrote. “He claims to be entitled to a larger withdrawal payment based upon an extra 325 units.”

The firm’s partnership agreement did not stipulate any appeal rights from an allocation of units, noted the judge.

“Mr. Springer’s claim is based on promises or representations said to have been made to him by certain members of the management and executive committees regarding the number of units he would be awarded . . . ” said Newbould.

He said Springer’s claim “rests in large measure on oral conversations that he said he had with various people in the firm . . . ” However, Newbould said he had “considerable difficulty accepting much of Mr. Springer’s evidence as reliable.”

Stated the judge, “He purported to have detailed recollections of conversations that took place many years ago, to the point that he recited conversations verbatim from their beginning to end, including the order in which everything was said. This included detail such as people shrugging their shoulders or having a quizzical look or turning to say something or being asked how they were and answering ‘tired.’”

The judge continued, “Yet when pressed on cross-examination on certain matters, his memory eluded him.” He added, “In my view Mr. Springer’s evidence of what was said in his conversations with other partners was in large measure not recollection but reconstruction, carefully crafted and rehearsed.”

Newbould criticized all lawyers who testified in the case, however. “All of the witnesses in this case were lawyers who are or were partners of the firm and they all suffered to some extent from lapsing into argument rather than simply answering questions put to them,” said Newbould.

“This is perhaps understandable as it is part of a lawyer’s job to argue or try to persuade someone of their client’s point of view. Mr. Springer, however, particularly engaged in this conduct.”

The judge also found that Springer “often refused to acknowledge an obvious point that was not supportive of his case.” An example, said Newbould, was his testimony regarding Aird & Berlis partner Jack Bernstein, who received the highest number of partnership units in the firm for a number of years.

The judge said Springer urged the executive committee for at least two years to raise his own unit allocation to 500, on par with Bernstein’s, arguing his overhead contribution was in line with Bernstein’s.

But the judge said Bernstein, an international tax expert, was recognized as “by far the largest rainmaker in the firm,” providing work for various areas of the firm’s practice. Newbould contrasted this with the fact that Springer’s practice was focused almost exclusively on the H file during his final years with the firm.

Aird & Berlis lawyers testified that Springer “was not comparable to Mr. Bernstein because of Mr. Bernstein’s international reputation as a tax expert, his publications and speaking engagements, and the fact that he was the firm’s best rainmaker. I accept their evidence on this point,” said Newbould.

The judge also sided with the defence on the effective date of the new compensation system.

“The evidence is clear, and I so find, that the new compensation system was first used to set the number of units allocated to partners in the January 2002 allocation of units,” said Newbould.

The judge rejected Springer’s claims for negligent misrepresentation, breach of contract, breach of fiduciary duty, and unjust enrichment, and also denied a claim for punitive damages.

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