Biglaw, Headhunters / Recruiters, Law Firm Mergers, Lawsuit of the Day, McKee Nelson, Money

Lawsuit of the Day: Bingham Must Pay Seven-Figure Sum to Legal Recruiter

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Legal recruiters find work for lawyers — and sometimes they create work for them. We previously covered, for example, the litigation between mega-recruiter Major Lindsey & Africa and one of its former employees, Sharon Mahn.

Sometimes recruiters go after each other, and sometimes they go after law firms — firms that don’t pay them the placement fees to which they’re entitled. Recruiter Alan Miles, principal of Alan Miles and Associates, went after Bingham McCutchen — and won, big time.

How much did Miles win? And on what grounds?

Quite a pretty penny — almost $2 million, including interest and costs. “This is actually very big news in the legal recruiting world,” a legal recruiter not involved in the case told us. “Probably the highest award ever.”

Am Law Daily has the story:

An arbitrator has ordered Bingham McCutchen to pay nearly $1.9 million to a legal recruiter for his role in the firm’s 2009 merger with McKee Nelson.

In a final ruling dated May 17, the arbitrator, retired U.S. district court judge Lourdes Baird, wrote that recruiter Alan Miles, “established by a preponderance of the evidence that Bingham breached the agreement” between his company and the firm.”

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Alan Miles takes home millions. He works in Santa Monica, a beautiful beach city. Not a bad life.

(If Judge Baird’s name rings a bell, it should. Before leaving the bench, she was named the #3 superhottie of the federal judiciary — the third most-attractive female federal jurist, after Judges Kimba Wood and Kim McLane Wardlaw.)

[Miles] alleged in November 2009 that he was stiffed on his fee for setting up a meeting that led to the firm’s July 2009 acquisition of the 120-attorney firm McKee Nelson.

The arbitrator’s final decision comes after four days of hearings in early December 2010 and late January 2011 that included testimony by Miles and Gary Miles, his nephew and associate, as well as Bingham chairman Jay Zimmerman, former McKee Nelson co-managing partner and current Bingham partner Reed Auerbach, former McKee Nelson name partner and current Bingham partner William Nelson, and Ari Katz, national director of legal recruiting for Bingham.

That’s a lot of billable hours. Query why this didn’t settle before the hearings.

At issue in the arbitration was the validity and applicability of an August 6, 2007, agreement signed by both parties that governed the placement of lateral attorneys at Bingham by Miles’s recruiting company. The agreement asserts that Miles is entitled to his “…fee on the sole basis of the introduction” between the firm and lateral candidates who ultimately joined the firm. According to the agreement, that fee was to be 30 percent of a candidate’s projected annualized base compensation.

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Making millions for making introductions? Am I in the wrong line of work? If any legal recruiter out there is interested in hiring a former blogger with 4,300 Facebook friends and 4,400 Twitter followers, many of whom are lawyers, you know where to reach me.

The contract also provided a fee formula for the hiring of lateral attorney groups, capping the total payment to Miles at $1.5 million. Based on this formula, Miles sent Bingham an invoice for $1.5 million on September 30, 2009, about two months after the union between the two firms was finalized. Bingham refused to pay the invoice (though, according to sources connected to the case, the firm initially offered to settle the matter for $500,000) and argued during the arbitration that the agreement should not be enforced because of mutual mistake between the parties and because the course of performance between the parties does not include mergers.

Mutual mistake — this is bringing back hazy memories from 1L contracts of ships named Peerless (that were not so peerless after all). What was the nature of the supposed mistake in this case?

According to Bingham, the inclusion of the terms “merges” and “mergers” was a “mutual mistake” of Miles and Katz and did not reflect their mutual intent at the time the agreement was signed. The firm relied on evidence that the parties lacked a complete knowledge of the difference between the terms “group placement” and “merger,” which caused the “mutual mistake.” But Baird writes that Bingham’s reliance on the “purported lack of sophistication of Alan Miles and Katz regarding the intricacies of a merger versus group placement in support of mutual mistake is misplaced.”

One of our recruiter sources (not involved in the case) agreed with Judge Baird:

The ‘mutual mistake’ defense is laughable. Jay Zimmerman thought Alan Miles would not want to challenge Goliath, but he’s one of the few recruiters who had the guts to stand up for what was right, financially and ethically. Bingham has typically been a very recruiter-friendly firm, but the type of behavior displayed in this particular circumstance is deeply troubling.

What does Bingham have to say about all of this? The firm issued the following statement to Am Law Daily:

Alan Miles & Associates demanded $5 million and received $1.5 million. Throughout this process, we have made reasonable and fair settlement offers, which were rejected. We have put this issue behind us and are moving on.

(For the record, Miles denies that he demanded $5 million, claiming that he has been seeking $1.5 million the whole time.)

Bingham is a large and successful law firm — they can probably find the $1.9 million in the couch cushions — and the McKee Nelson absorption that Alan Miles helped orchestrate seems to have turned out well. So moving on sounds like a good idea.

P.S. Props to Bingham for its recent adoption — see the update — of the gay gross-up.

P.P.S. Here at Above the Law, we like legal recruiters — especially the ones that advertise with us. If you’re a lawyer thinking about making a move, consider working with our friends at Kinney Recruiting or Lateral Link.

Bingham Ordered to Pay Recruiter $1.9 Million [Am Law Daily]
Bingham Must Pay Recruiter $1.9 Million for McKee Acquisition, Arbitrator Orders [ABA Journal]

Earlier: Lawsuit of the Day: Major Lindsey Files RICO Action Against Former Employee
Major Lindsey Drops RICO Action Against Ex-Employee

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