Dentons intends to appeal a record-breaking $32.3 million verdict in Ohio to defend the Swiss Verein structure that has been instrumental in taking the firm to new heights, but that also resulted in Dentons being disqualified in 2015 due to a patent case involving RevoLaze, a small Ohio tech company that owns patents that have changed the denim industry.
Introduction to Dentons
Dentons is one of the largest and most well-recognized legal firms out there. It proudly highlights its “polycentric” model, which has helped the company grow internationally with a presence in 75 countries.
Instead of mergers and acquisitions, it prefers to combine or associate with local firms. With over 10,000 lawyers working for the firm, it is a reliable name and works with a bunch of international brands.
Dentons has employed a Swiss Verein structure under which its finances are clearly separated but its strategy and branding are united.
The History of the Case
The story started in 2015 at the U.S. International Trade Commission when a judge disqualified Dentons from representing RevoLaze, one of the firm’s most prestigious clients, rejecting the law firm’s case that its US and Canada branches were separate.
The firm’s branch in Canada worked with Gap, a renowned denim retailer sued by RevoLaze for patent rights.
RevoLaze sued its former legal help a few months after the court announced its disqualification.
A jury in Cuyahoga County, Ohio, awarded a massive $32.3 million victory to RevoLaze on Feb. 13. According to The Patterson Law Firm, the new legal counsel for RevoLaze, this is “ the largest legal malpractice judgment in Ohio history.”
Dentons to Appeal?
Dentons gave several statements regarding the outcome in a very defiant tone. It pointed out that the ITC vacated the judge’s findings and promised to appeal the decision.
“We will appeal. The verdict was simply wrong. Just as our position was vindicated on appeal by the International Trade Commission, we will be vindicated on appeal in this matter,” read an official statement from the company.
How The Situation Intensified
Dentons’ unified structure and brand did not sit well with ITC Judge Charles Bullock.
In his 2015 judgment, he announced that Dentons US could not continue to represent RevoLaze because the firm’s Canadian branch had provided legal support to Gap.
Denton responded that its Canadian and US offices were separate from each other and they didn’t share client files or finances unless they provided co-counsel. The judge rejected Dentons’ arguments announcing that the legal firm “holds itself out to the public as a single firm.”
This forced RevoLaze to seek new legal help and caused the company to pay additional charges.
Longford Capital, a growing litigation financier with a presence throughout the country, helped RevoLaze’s litigation efforts against retailers including Gap.
According to reports, the original agreement between RevoLaze and Longford Capital was pretty strict under which the financier was to pay for the firm’s legal bills at a pre-agreed rate. Dentons agreed to these terms, essentially putting a cap on expenses.
This resulted in RevoLaze and Gap settling their case in 2015. Not happy with the happenings, Dentons went ahead and appealed Bullock’s ruling.
RevoLaze took a bold step in 2016 and sued Dentons’ current chairman, Mark Hogge, and the enterprise in Ohio over a conflict of interest that resulted in the firm’s disqualification and forced the company to pay more in legal fees and settle its lawsuit with Gap under bad conditions.
“Up until this point, there was very little law on whether Swiss Verein was one law firm or many,” Browne said. “A court might not agree with this, that ‘we’re separate law firms,’ which is where I think one of the major failings came in.”
When ITC Decided to Vacate Bullock’s Decision
Nine days after the original decision, on April 13, The International Trade Centre vacated the judge’s decision.
According to a statement released by the commission, the judge did not have enough evidence about Dentons’ structure. However, the ITC did not “decide whether the disqualification in this investigation was appropriate since the case had already been resolved.”
“The commission has decided that the added delay, burdens, and expenses that would be incurred by the parties and the commission in resolving these issues are unjustified given the termination of the investigation as to all respondents,” the ITC found.
What The Jury Announced
The jury that consisted of eight individuals found that “Hogge was negligent in his representation of RevoLaze and that his negligence was the direct cause of the company’s damages.”
This wasn’t a “complete victory for RevoLaze,” according to Browne since the jury announced that RevoLaze did not suffer any damages due to jettisoning Dentons.
RevoLaze originally sought over $50 million in damages.
“Importantly, the jury was not asked to make any determination regarding our firm’s structure or conflicts clearance process and its decision in no way undermines the ITC’s reversal of the improper initial disqualification,” Dentons said. “The firm has a robust and sophisticated conflict clearing process that has enabled it to open tens of thousands of matters every year without incident.”
On February 20, Dentons filed a motion in order to “maintain the status quo pending the outcome of the anticipated post-judgment motions and during the pendency of their stay request.”
The firm added there was “no question as to defendants’ ability to pay the judgment, given Dentons US’s resources and presence throughout the United States.”
Conclusion
Sarah Dunkley and Kristi Browne of The Patterson Law Firm won this $32.2 million legal malpractice jury verdict against a firm that claims to be the largest law firm in the world.
The trial lasted about three weeks and was ‘gratifying’ in the words of Browne.
“The verdict did not surprise me. The jury was particularly attentive throughout the trial, asked good questions, and thoroughly deliberated,” said Browne.
“The case is important because it shows that a law firm cannot evade its duty of loyalty by organizing itself as a Swiss Verein,” said Dunkley.
