Risk of Lawsuits Over Legal Recruiting Fees

In May, just 1 month after Akin Gump Strauss Hauer & Feld announced Chang-Joo Kim had joined its New York office as a partner, the law firm cut a check to recruiting firm Boston Executive Search for $227,500.

But did it pay the right recruiter? New York search firm Sivin Tobin Associates says it sent Akin Gump a package about Kim last December, along with a term sheet. Sivin Tobin is now suing the law firm, alleging breach of an implied contract. In September, Manhattan Supreme Court Justice Jane S. Solomon denied Akin Gump's motion to dismiss.

The dispute highlights the frequently less-than-well-oiled mechanics of the legal recruiting process, even as firms have become increasingly reliant on lateral partners and associates for growth. Though actual lawsuits are rare, both firms and recruiters agree clashes are common.

In an Aug. 7 affidavit he submitted as part of the suit, Sivin Tobin co-founder Eric Sivin said he spoke to Akin Gump's then-New York office head, Steven M. Vine, in 1995, at which time Vine said the firm was interested in hearing about partners with portable business. Since then, Sivin said, Sivin Tobin had forwarded 10 candidates, three of whom Akin Gump had interviewed.

One of those partners was Kim, a corporate lawyer specializing in Korean transactions who was then working in the New York office of Dorsey & Whitney.

'Sivin Tobin had several meetings with Mr. Kim,' Sivin said in his affidavit. 'We helped Mr. Kim prepare and edit his business plan and provided him with general advice regarding the law firm interview and evaluation process. Eventually Mr. Kim permitted us to submit his resume, along with materials highlighting his professional experience and qualifications.'

Sivin Tobin's package to Akin Gump was accompanied by a detailed and personalized letter. Signed by Sivin and addressed to Vine, the Dec. 19, 2005, letter said: 'Mr. Kim believes that at a firm such as Akin Gump, with its strong infrastructure practice and presence in the Middle East and Asia, could provide the right platform for his client base and enable him to generate work at his historic levels.'

The letter was accompanied by a term sheet that stated Sivin Tobin's fee for the placement would be 25% of the candidate's total compensation in his first 12 months at the firm.

Sivin said he received no response to the letter or to subsequent follow-up calls. After learning that Kim was contacted by an Akin Gump partner and an offer was likely, Sivin sent Vine an e-mail on Feb. 16 stating that Sivin Tobin would expect to receive a fee should Kim join Akin Gump.

Though the law firm did not respond to Sivin at the time, it stated in court documents supporting its motion to dismiss the recruiter's suit that, at the time Sivin proposed Kim as a candidate, the firm had already been introduced to the lawyer by another recruiter, Boston Executive Search.

'Contemporaneous' Approach

Akin Gump argued that Sivin Tobin's submission was unsolicited and the law firm never intended to be bound by the recruiter's terms.

'Plaintiff's suggestion that Defendant obligated itself to two recruiting firms is not supported by any legal authority,' the law firm said in court papers. 'Defendant was approached contemporaneously by two different firms with respect to the same candidate. It was Defendant's choice as to which of those firms it chose to discuss Mr. Kim.'

According to Akin Gump, the Boston firm was the 'procuring cause' of Kim's hiring and therefore the only firm entitled to a fee under New York case law.

'Plaintiff did not provide any services to Akin Gump,' the firm said in court papers. 'The only thing it did was send an unsolicited resume. Plaintiff never discussed the resume with anyone at Akin Gump, arranged for any interview or negotiated any details of employment.'

In a Sept. 28 decision, Justice Solomon said Sivin had adequately pleaded breach of contract, unjust enrichment and quantum meruit claims against Akin Gump.

The judge said the numerous resumes that Sivin Tobin sent to Akin Gump over the past decade demonstrated a course of conduct between the parties.

'This sufficiently pleads the existence of an implied-in-fact agreement between the parties for Mr. Kim's placement,' she wrote in Sivin Tobin v. Akin Gump, 107123/06.

For obvious reasons, legal search firms have generally avoided taking law firms to court.

'Suing a client is not something we've ever done before,' Sivin says. 'It's not something we like to do and it's not something we're excited about.' He declined further comment on the matter.

Sivin Tobin is being represented by John M. Brickman of Ackerman, Levine, Cullen, Brickman & Limmer in Great Neck, NY. Akin Gump is represented by James J. Maloney of Kavanagh Maloney & Osnato in Manhattan.

Potential for Friction

Other firms and recruiters say the overheated lateral market, especially in New York, has created greater potential for friction.

Walter B. Stuart, the partner in charge of Vinson & Elkin's New York office, says his firm signed engagement letters with a handful of recruiters it used on a regular basis. But he says other headhunters regularly 'parachuted in' with candidates, and partners at the firm sometime cultivate their own contacts with recruiters.

'In those cases, you just work out the details later on,' says Stuart. But such ad hoc arrangements were more likely to lead to problems later, he says, and the firm was trying to more carefully coordinate its intake process.

The firm's lateral committee tries to identify duplicate candidacies early on, says Stuart, contacting the relevant recruiters as soon as possible. Many such cases, he says, turn out to involve a fly-by-night recruiter pitching a candidate without the candidate's permission. In other cases, he says, the firm asked the two recruiters to settle matters between themselves before the candidacy moved forward.

Brian Trust, the head of Mayer Brown Rowe & Maw's New York office, agrees that the best solution is for the recruiters to work out the problem, with the firm paying nobody until the situation has been resolved.

'Everyone in this community is well served to avoid litigation,' he says.

Mark Henley of New York search firm Smythe Masterson and Judd says he now only handles partners on an exclusive basis, partly to avoid such disputes. In a number of cases, he says, the candidates are at fault. 'The candidates themselves, in their desperation or strong desire to get into a firm where they feel they belong, don't watch out for how they're being presented.'

But Henley agrees that disputes need to be handled swiftly, even when litigation results.

He says Smythe Masterson had mostly maintained amicable relations with firms through four lawsuits over placement fees, including one several years ago against Kramer Levin Naftalis & Frankel.

'And we still do work for them,' he says.

In May, just 1 month after Akin Gump Strauss Hauer & Feld announced Chang-Joo Kim had joined its New York office as a partner, the law firm cut a check to recruiting firm Boston Executive Search for $227,500.

But did it pay the right recruiter? New York search firm Sivin Tobin Associates says it sent Akin Gump a package about Kim last December, along with a term sheet. Sivin Tobin is now suing the law firm, alleging breach of an implied contract. In September, Manhattan Supreme Court Justice Jane S. Solomon denied Akin Gump's motion to dismiss.

The dispute highlights the frequently less-than-well-oiled mechanics of the legal recruiting process, even as firms have become increasingly reliant on lateral partners and associates for growth. Though actual lawsuits are rare, both firms and recruiters agree clashes are common.

In an Aug. 7 affidavit he submitted as part of the suit, Sivin Tobin co-founder Eric Sivin said he spoke to Akin Gump's then-New York office head, Steven M. Vine, in 1995, at which time Vine said the firm was interested in hearing about partners with portable business. Since then, Sivin said, Sivin Tobin had forwarded 10 candidates, three of whom Akin Gump had interviewed.

One of those partners was Kim, a corporate lawyer specializing in Korean transactions who was then working in the New York office of Dorsey & Whitney.

'Sivin Tobin had several meetings with Mr. Kim,' Sivin said in his affidavit. 'We helped Mr. Kim prepare and edit his business plan and provided him with general advice regarding the law firm interview and evaluation process. Eventually Mr. Kim permitted us to submit his resume, along with materials highlighting his professional experience and qualifications.'

Sivin Tobin's package to Akin Gump was accompanied by a detailed and personalized letter. Signed by Sivin and addressed to Vine, the Dec. 19, 2005, letter said: 'Mr. Kim believes that at a firm such as Akin Gump, with its strong infrastructure practice and presence in the Middle East and Asia, could provide the right platform for his client base and enable him to generate work at his historic levels.'

The letter was accompanied by a term sheet that stated Sivin Tobin's fee for the placement would be 25% of the candidate's total compensation in his first 12 months at the firm.

Sivin said he received no response to the letter or to subsequent follow-up calls. After learning that Kim was contacted by an Akin Gump partner and an offer was likely, Sivin sent Vine an e-mail on Feb. 16 stating that Sivin Tobin would expect to receive a fee should Kim join Akin Gump.

Though the law firm did not respond to Sivin at the time, it stated in court documents supporting its motion to dismiss the recruiter's suit that, at the time Sivin proposed Kim as a candidate, the firm had already been introduced to the lawyer by another recruiter, Boston Executive Search.

'Contemporaneous' Approach

Akin Gump argued that Sivin Tobin's submission was unsolicited and the law firm never intended to be bound by the recruiter's terms.

'Plaintiff's suggestion that Defendant obligated itself to two recruiting firms is not supported by any legal authority,' the law firm said in court papers. 'Defendant was approached contemporaneously by two different firms with respect to the same candidate. It was Defendant's choice as to which of those firms it chose to discuss Mr. Kim.'

According to Akin Gump, the Boston firm was the 'procuring cause' of Kim's hiring and therefore the only firm entitled to a fee under New York case law.

'Plaintiff did not provide any services to Akin Gump,' the firm said in court papers. 'The only thing it did was send an unsolicited resume. Plaintiff never discussed the resume with anyone at Akin Gump, arranged for any interview or negotiated any details of employment.'

In a Sept. 28 decision, Justice Solomon said Sivin had adequately pleaded breach of contract, unjust enrichment and quantum meruit claims against Akin Gump.

The judge said the numerous resumes that Sivin Tobin sent to Akin Gump over the past decade demonstrated a course of conduct between the parties.

'This sufficiently pleads the existence of an implied-in-fact agreement between the parties for Mr. Kim's placement,' she wrote in Sivin Tobin v. Akin Gump, 107123/06.

For obvious reasons, legal search firms have generally avoided taking law firms to court.

'Suing a client is not something we've ever done before,' Sivin says. 'It's not something we like to do and it's not something we're excited about.' He declined further comment on the matter.

Sivin Tobin is being represented by John M. Brickman of Ackerman, Levine, Cullen, Brickman & Limmer in Great Neck, NY. Akin Gump is represented by James J. Maloney of Kavanagh Maloney & Osnato in Manhattan.

Potential for Friction

Other firms and recruiters say the overheated lateral market, especially in New York, has created greater potential for friction.

Walter B. Stuart, the partner in charge of Vinson & Elkin's New York office, says his firm signed engagement letters with a handful of recruiters it used on a regular basis. But he says other headhunters regularly 'parachuted in' with candidates, and partners at the firm sometime cultivate their own contacts with recruiters.

'In those cases, you just work out the details later on,' says Stuart. But such ad hoc arrangements were more likely to lead to problems later, he says, and the firm was trying to more carefully coordinate its intake process.

The firm's lateral committee tries to identify duplicate candidacies early on, says Stuart, contacting the relevant recruiters as soon as possible. Many such cases, he says, turn out to involve a fly-by-night recruiter pitching a candidate without the candidate's permission. In other cases, he says, the firm asked the two recruiters to settle matters between themselves before the candidacy moved forward.

Brian Trust, the head of Mayer Brown Rowe & Maw's New York office, agrees that the best solution is for the recruiters to work out the problem, with the firm paying nobody until the situation has been resolved.

'Everyone in this community is well served to avoid litigation,' he says.

Mark Henley of New York search firm Smythe Masterson and Judd says he now only handles partners on an exclusive basis, partly to avoid such disputes. In a number of cases, he says, the candidates are at fault. 'The candidates themselves, in their desperation or strong desire to get into a firm where they feel they belong, don't watch out for how they're being presented.'

But Henley agrees that disputes need to be handled swiftly, even when litigation results.

He says Smythe Masterson had mostly maintained amicable relations with firms through four lawsuits over placement fees, including one several years ago against Kramer Levin Naftalis & Frankel.

'And we still do work for them,' he says.