A Swiss structure that lets law firms affiliate to jointly market services is facing a second legal test in less than a year that threatens the viability of the model.
Baker McKenzie, the first major US law firm to adopt the Swiss verein structure, is accused of legal malpractice through an alleged Russian member of its network. London-based Lehram Capital Investments faults the law firm for its loss in ownership of a Siberian coal mine.
Baker contends that the Russian law firm that handled the mine matter, Baker & McKenzie-CIS Ltd., was a separate entity. A failure to prove that could have Baker facing tens of millions of dollars or more in damages.
The case shows that a key selling point of the verein structure—that affiliates are completely separate from one another on matters such as profits, pay and taxes—could be undermined when it comes to the critical matter of legal liability.
Verein issues are “front and center” in the Baker case, said Cassandra Burke Robertson, director of the center for professional ethics at Case Western Reserve University School of Law. “If the plaintiffs’ theory prevails here, I think it does create a risk for firms adopting a verein structure.”
The lawsuit, if pressed successfully, would mark the second legal finding in less than a year that works against the model. The Ohio Supreme Court in August declined to review a $32.3 million...
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