Charney v. Sullivan & Cromwell: What Lessons Lie Here for Your Firm?

As the Charney complaint related in 23 pages of detailed 'names are named' allegations, Charney became an associate in 2003 in the Sullivan & Cromwell Mergers and Acquisitions Department. By some accounts, Charney was a rising star, doing work as a second-year associate normally reserved for those several years his senior. When Charney joined Sullivan & Cromwell, he had not 'come out' regarding his sexual orientation. By the end of 2004, however, he did so.

Charney's original complaint (dismissed without prejudice by the court on motion by Sullivan & Cromwell) alleges that various partners at various times made a number of comments, which he contends were crude and harassing references to his sexual orientation. As just one example, a partner allegedly referred to Charney and another associate as being 'joined at the hip,' which Charney took to mean a reference to homosexual conduct rather than their constant close-working relationship. Charney complains as well that other partners commented on his relationship with the associate, even calling it 'unnatural,' which Charney took to mean 'homosexual.' Other more crude comments are alleged in the complaint.

In May 2006, apparently following Sullivan & Cromwell's harassment policy, Charney made an administrative complaint with the firm. Charney contends that the firm did not perform an adequate investigation and that, instead of taking remedial action, it began a pattern of retaliatory harassment against him that consisted of assigning him to a gay partner, deleting him from a published list of Sullivan & Cromwell lawyers who worked on a noteworthy transaction, excluding him from the firm's new associate mentoring program, and fabricating a review of his performance on a transaction by complaining that he and the associate with whom he had the close-working relationship spent too much time together and ran up hours needlessly.

As a result of these alleged occurrences, without further pursuit of the administrative claim, Charney filed suit against Sullivan & Cromwell in January 2007. To be precise, he did not just file the complaint. Before filing it, he first published it on several Web sites, attached a variety of internal Sullivan & Cromwell documents to it, and caught Sullivan & Cromwell by surprise. The firm then put Charney on paid leave.

A month later, after apparently digesting precisely what Charney had done, Sullivan & Cromwell filed a lawsuit of its own, charging Charney with a variety of claims, including breach of the firm's confidentiality policy, and fired him.

Subsequent Proceedings: The Amended Complaint

On motion by Sullivan & Cromwell, the trial court dismissed Charney's original complaint, without prejudice, ruling that while he had stated facts arguably sufficient to support his claims, his complaint also contained extraneous and prejudicial allegations that should be excluded from an amended complaint.

In May, Charney filed an amended verified complaint. The new complaint, however, goes beyond the scope of the original complaint, including new claims based on events occurring after the original complaint was filed. In addition to the original cause of action for discrimination and retaliation in violation of the city Human Rights Law, Charney added two new causes of action: intentional infliction of emotional distress and conspiracy to violate the Human Rights Law. Among other things, Charney alleges Sullivan & Cromwell partners conspired to undermine his claims by intimidating a prospective witness (the associate colleague), including threats to have the associate deported to Canada.

The court also dismissed Sullivan & Cromwell's claims against Charney for breach of fiduciary duty over his alleged violations of client and firm confidences, holding that no such duty exists between a law firm and an associate. Breach of contract and conversion (of firm documents) claims were preserved. (Charney had signed a firm confidentiality agreement.)

Legal Principles of General Interest to All Law Firms

Beyond the allegations in the dispute, what should be of more interest to the legal profession as a whole, however, is how this all could have been avoided. There is plenty in the Charney case that should be instructive to law firms in general. Sullivan & Cromwell might have avoided potential liability but for what allegedly happened after Charney's original administrative complaint.

Federal Law

From a purely federal law perspective, harassment must be sufficiently severe and pervasive in order to be actionable. In Harris v. Forklift Systems, Inc., 510 U.S. 17 (1993), the Supreme Court said that in order to be actionable under Title VII [42 U.S.C. ' 2000e-2(a)(1)] a sexually objectionable environment must be both objectively and subjectively offensive: Would a reasonable person perceive the action as hostile or abusive and did the victim actually perceive it to be so? (Of course, the latter inquiry is usually answered in the self-serving affirmative.) A repeated point in reported decisions is that 'simple teasing,' off-hand comments, and isolated incidents (unless extremely serious) will not be construed to be actionable conduct. The Supreme Court has said Title VII is not a 'general civility code' governing such conduct as abusive language, gender-related jokes, and occasional teasing. The conduct has to amount to a general change in the terms and conditions of employment.

A review of the original complaint in Charney would lead most employment lawyers to question whether the allegations were sufficient to meet that threshold. Thus, if Sullivan & Cromwell only had taken in Charney's administrative complaint, investigated it thoroughly and, because of the myriad disputed issues of fact, simply warned the involved parties not to harass, and papered the file appropriately, Charney likely would have no claim. According to the complaint and the amended complaint, after Charney complained to the firm, Sullivan & Cromwell began the alleged program of retaliation. By these actions (all of which are the subject of dispute), Sullivan & Cromwell allegedly transformed a claim that potentially was subject to a motion to dismiss or at least summary judgment, to a likely-to-be-litigated claim of retaliation.

The City of New York Human Rights Code

It is unknown whether the above federal law analysis will even be relevant to the more subjective standards found in the City of New York Human Rights Code under which ' and not federal law' Charney is suing.

The Charney case resides not under the broad umbrella of federal employment law, but in the rather unique and murky environment of local anti-discrimination laws. While New York is not alone in attempting to regulate human behavior (and arguably thought), the city of New York ordinance under which Charney is suing is a real eye-opener and a trap for the unwary. You might want to see what such local ordinances are lurking in your jurisdiction. For example, Minneapolis and St. Paul, MN; San Francisco; Chicago; and Atlanta have similar ordinances regulating private employment practices (and discriminatory issues in other areas). This is not an exhaustive list.

The New York Human Rights Law (Title 8 of the Administrative Code of the City of New York) is just under 42 pages of single-spaced type. It governs not just employment, but also housing, services, and many other areas of human and business interaction in the city of New York. The Code begins with a pretty astounding 'policy' statement which evidences that unlike federal law, the city's law does purport to be a 'general civility code' if not something more Orwellian.

Section 8.101. Policy. There is no greater danger to the health, morals, safety and welfare of the City and its inhabitants than the existence of groups prejudiced against one another and antagonistic to each other because of their actual or perceived differences, including those based on race, color, creed, age, national origin, alienage or citizenship status, gender, sexual orientation, disability, marital status, partnership status, status as a victim of domestic violence or status as a victim of sex offenses or stalking, lawful occupation, whether children are, may be or would be residing with a person or conviction or arrest record. [sic] The Council hereby finds and declares the prejudice, intolerance, bigotry, and discrimination and disorder occasioned thereby threaten the rights and proper privileges of its inhabitants and menace the institutions and foundations of a free democratic state.

The Code goes on to provide that 'alienage or citizenship status' means the citizenship of any person and even the immigration status of any person who is not a citizen or national of the United States. (Emphasis added.)

The Code further defines the term 'hate crime' to mean a crime that manifests evidence of prejudice based on race, religion, ethnicity, disability, sexual orientation, national origin, age, gender, or allegiance or citizenship status. Many of the other terms used, including 'prejudice,' 'antagonistic to' and 'perceived differences' are undefined and thus will be subjectively applied.

Sweeping definitions of unlawful discriminatory practices under the Code include not only prohibitions against discrimination in hiring but also discrimination in any number of specified, and vaguely specified, ways and broad prohibitions on retaliation in a number of circumstances, most far beyond the protections offered under federal law, including making it unlawful to discriminate against an illegal immigrant, which is ironic given that an illegal alien has, of course, violated federal criminal laws. Even the above provisions, which form only a small fraction of the entire Code, point to the inherent dangers of such a law to employers.

The question for Sullivan & Cromwell was: How could it defend against such a law, and why was it not challenging the constitutionality of the New York Human Rights Law? (Or would that be just more bad PR?) Charney's complaint is based only
on two provisions of the Code: ” 8-107(1)(a) and 8-107(7). Section 8-107(1)(a) makes it an unlawful employment practice to discriminate in hiring or terminations because of an extensive list of states of being, including sexual preference. Section 8-107(7) applies only to retaliatory conduct including retaliation by a number of listed actions, also making retaliation an unlawful practice.

The Employee's Conduct

As to Charney's conduct, there are questions about how he handled things. Instead of doing what was proper ' filing a claim with the firm and then, possibly having been retaliated against, suing in an appropriate manner ' Charney first broadcasted his suit over Web sites prior to filing, naming individuals and a who's who of firm clients (including some of the best-known companies in America) that did not need to be named, and naming his associate colleague, who definitely should have been protected from this negative publicity. What he did in addition to these acts, however, was bad form from a legal sense as well.

Had he confined his actions to filing his complaint, Charney would virtually have guaranteed himself continuing employment at the firm because the minute Sullivan & Cromwell were to fire him, it would have handed him a claim of retaliatory termination that would have been cognizable in far greater money damages than his previous potential claims of harassment and retaliation. Hence, Charney would have been sitting in the catbird seat, being paid for doing nothing but watching the firm squirm.

Of further interest to law firms ought to be Charney's access to, and what he did with, sensitive firm documents. Besides posting his complaint on the Internet, and naming and potentially harming innocents, Charney went so far as to attach a copy of the firm's partnership agreement to the complaint. At this juncture, no one knows where or how he obtained it. What is safe to say, however, is that Charney is not, was not (and obviously now never will be) a partner at Sullivan & Cromwell. The document was not his. If he obtained it wrongfully and published it, he was clearly in trouble. If he was given the document by someone who had it legally but then published what he knew was confidential, then he was likely, but not definitely, still in trouble. (It has since been pointed out that the partnership agreement he used was out of date, a copy of an older Sullivan & Cromwell general partnership agreement; Sullivan & Cromwell is now an LLP.)

What is not subject to question is that Charney, like the rest of the Sullivan & Cromwell lawyers, signed a confidentiality agreement. Despite his execution of that document, Charney somehow got hold of a confidential document and published it with the complaint and on the Internet as well.

So what is the impact of this potential theft? It transformed Charney from plaintiff to defendant. He handed Sullivan & Cromwell the ability not only to countersue, but also grounds to fire him free of the taint of retaliation. His catbird seat came crashing down when he went that far. Now, instead of a potentially sympathetic plaintiff about whom some people might have doubt, he is an out-of-work defendant too. His entire future legal career is, in fact, in jeopardy.

What Can We Learn and Do?

First, there is no question that having staff and attorneys sign confidentiality agreements is a good idea. However, this will not have substantial impact because most firm documents are not confidential. In fact, many client documents ultimately become quite public. But for the documents that are confidential and maintained as such, having such agreements will facilitate a firm's ability to prevent or redress wrongful dissemination.

Second, as with every company, law firms must have comprehensive, anti-harassment and anti-discrimination policies. Not only must such policies be in place, but they must also be implemented and followed, not just paid lip service. In the wake of Farragher v. City of Boca Raton, 524 U.S. 775 (1998), it is criminal not to have such a policy in place.

Third, handle administrative complaints promptly and thoroughly paper the file. Engage all participants and admonish and counsel them, and adequately document your efforts. If a suit is later filed, you won't be as empty-handed as Sullivan & Cromwell appeared to be. Fourth, be aware of local codes and ordinances that might be far more liberal and sweeping than federal law when it comes to employment practices. Govern yourself accordingly.

While every company should have confidentiality agreements and anti-harassment policies, the question becomes: What is there to be learned from this fiasco for law firms in particular? It is this. In his complaint, Charney makes the point that the Sullivan & Cromwell partnership agreement allows a committee to terminate a partner who exposes the firm to 'financial embarrassment.' The agreement fails, however, to give power to the partnership to discipline, or even expel, a partner that is found to have committed a serious wrong. A review of the Sullivan & Cromwell agreement (recognizing, of course, that it is an outdated one) does not reveal a mechanism for the partnership to take remedial action in the event of legally cognizable harassment. If a partnership agreement does not contain such a provision, then one must question whether, as a matter of law, the Farragher defense can be available. As a matter of law, can a partnership be said to have taken 'prompt, remedial action appropriate to the circumstances' as most sexual harassment policies promise, if the partnership agreement does not provide a mechanism to expel an offending partner? Possibly not.

The settlement of the case, the terms of which are confidential, brings to a close a dispute that had fascinated the New York legal community over several months, both with its allegations concerning partners at one of the city's most prestigious firms and its bizarre twists and turns in the courtroom. It leaves many questions unanswered: Was Charney telling the truth or was Sullivan & Cromwell? Why would Sullivan & Cromwell discriminate against this one talented associate when, by all accounts, it has a fair number of openly gay partners and associates? Was Charney overly sensitive, finding offense where none was intended, or at least where none was directed toward his sexual preference?

Aside from the entertainment value of the case, however, the very real question remains: Are lawyers who advise clients every day of the week on how to protect their businesses from lawsuits adequately protecting themselves?

Bruce Jackson is a partner in the Atlanta law firm of Arnall Golden Gregory LLP. He can be reached at 404-873-8590 or at [email protected]. Debra G. Buster is of counsel to the firm. She can be reached at 404-873-8606 or at [email protected].

Unless you are a regular reader of legal Web sites, you might not have followed, or might not even be aware of, a suit by former Sullivan & Cromwell associate Aaron Charney against his firm, and the firm's subsequent suit against Charney. Gossip aside, the case, which settled on Oct. 25, 2007, should be noted by law firms, if for no other reason, than to learn how not to handle discrimination and retaliation complaints. This article reviews the Charney case and applicable federal cases that might apply in such situations, and points out the hidden dangers of local ordinances that attempt to regulate human behavior, and (arguably) even thought, in the workplace.

The Two Lawsuits

In January 2007, while still employed as an associate at Sullivan & Cromwell, Charney sued his employer for discrimination based upon his sexual orientation, and for retaliation in violation of Title 8 of the Administrative Code of the City of New York, the New York Human Rights Law. Sullivan & Cromwell then filed its own separate complaint (not a counterclaim) against Charney, alleging breach of fiduciary duty, breach of contract, and breach of client confidences. Both sides dug in their heels. How all of this public and embarrassing warfare might have been avoided is discussed below.

As the Charney complaint related in 23 pages of detailed 'names are named' allegations, Charney became an associate in 2003 in the Sullivan & Cromwell Mergers and Acquisitions Department. By some accounts, Charney was a rising star, doing work as a second-year associate normally reserved for those several years his senior. When Charney joined Sullivan & Cromwell, he had not 'come out' regarding his sexual orientation. By the end of 2004, however, he did so.

Charney's original complaint (dismissed without prejudice by the court on motion by Sullivan & Cromwell) alleges that various partners at various times made a number of comments, which he contends were crude and harassing references to his sexual orientation. As just one example, a partner allegedly referred to Charney and another associate as being 'joined at the hip,' which Charney took to mean a reference to homosexual conduct rather than their constant close-working relationship. Charney complains as well that other partners commented on his relationship with the associate, even calling it 'unnatural,' which Charney took to mean 'homosexual.' Other more crude comments are alleged in the complaint.

In May 2006, apparently following Sullivan & Cromwell's harassment policy, Charney made an administrative complaint with the firm. Charney contends that the firm did not perform an adequate investigation and that, instead of taking remedial action, it began a pattern of retaliatory harassment against him that consisted of assigning him to a gay partner, deleting him from a published list of Sullivan & Cromwell lawyers who worked on a noteworthy transaction, excluding him from the firm's new associate mentoring program, and fabricating a review of his performance on a transaction by complaining that he and the associate with whom he had the close-working relationship spent too much time together and ran up hours needlessly.

As a result of these alleged occurrences, without further pursuit of the administrative claim, Charney filed suit against Sullivan & Cromwell in January 2007. To be precise, he did not just file the complaint. Before filing it, he first published it on several Web sites, attached a variety of internal Sullivan & Cromwell documents to it, and caught Sullivan & Cromwell by surprise. The firm then put Charney on paid leave.

A month later, after apparently digesting precisely what Charney had done, Sullivan & Cromwell filed a lawsuit of its own, charging Charney with a variety of claims, including breach of the firm's confidentiality policy, and fired him.

Subsequent Proceedings: The Amended Complaint

On motion by Sullivan & Cromwell, the trial court dismissed Charney's original complaint, without prejudice, ruling that while he had stated facts arguably sufficient to support his claims, his complaint also contained extraneous and prejudicial allegations that should be excluded from an amended complaint.

In May, Charney filed an amended verified complaint. The new complaint, however, goes beyond the scope of the original complaint, including new claims based on events occurring after the original complaint was filed. In addition to the original cause of action for discrimination and retaliation in violation of the city Human Rights Law, Charney added two new causes of action: intentional infliction of emotional distress and conspiracy to violate the Human Rights Law. Among other things, Charney alleges Sullivan & Cromwell partners conspired to undermine his claims by intimidating a prospective witness (the associate colleague), including threats to have the associate deported to Canada.

The court also dismissed Sullivan & Cromwell's claims against Charney for breach of fiduciary duty over his alleged violations of client and firm confidences, holding that no such duty exists between a law firm and an associate. Breach of contract and conversion (of firm documents) claims were preserved. (Charney had signed a firm confidentiality agreement.)

Legal Principles of General Interest to All Law Firms

Beyond the allegations in the dispute, what should be of more interest to the legal profession as a whole, however, is how this all could have been avoided. There is plenty in the Charney case that should be instructive to law firms in general. Sullivan & Cromwell might have avoided potential liability but for what allegedly happened after Charney's original administrative complaint.

Federal Law

From a purely federal law perspective, harassment must be sufficiently severe and pervasive in order to be actionable. In Harris v. Forklift Systems, Inc. , 510 U.S. 17 (1993), the Supreme Court said that in order to be actionable under Title VII [42 U.S.C. ' 2000e-2(a)(1)] a sexually objectionable environment must be both objectively and subjectively offensive: Would a reasonable person perceive the action as hostile or abusive and did the victim actually perceive it to be so? (Of course, the latter inquiry is usually answered in the self-serving affirmative.) A repeated point in reported decisions is that 'simple teasing,' off-hand comments, and isolated incidents (unless extremely serious) will not be construed to be actionable conduct. The Supreme Court has said Title VII is not a 'general civility code' governing such conduct as abusive language, gender-related jokes, and occasional teasing. The conduct has to amount to a general change in the terms and conditions of employment.

A review of the original complaint in Charney would lead most employment lawyers to question whether the allegations were sufficient to meet that threshold. Thus, if Sullivan & Cromwell only had taken in Charney's administrative complaint, investigated it thoroughly and, because of the myriad disputed issues of fact, simply warned the involved parties not to harass, and papered the file appropriately, Charney likely would have no claim. According to the complaint and the amended complaint, after Charney complained to the firm, Sullivan & Cromwell began the alleged program of retaliation. By these actions (all of which are the subject of dispute), Sullivan & Cromwell allegedly transformed a claim that potentially was subject to a motion to dismiss or at least summary judgment, to a likely-to-be-litigated claim of retaliation.

The City of New York Human Rights Code

It is unknown whether the above federal law analysis will even be relevant to the more subjective standards found in the City of New York Human Rights Code under which ' and not federal law' Charney is suing.

The Charney case resides not under the broad umbrella of federal employment law, but in the rather unique and murky environment of local anti-discrimination laws. While New York is not alone in attempting to regulate human behavior (and arguably thought), the city of New York ordinance under which Charney is suing is a real eye-opener and a trap for the unwary. You might want to see what such local ordinances are lurking in your jurisdiction. For example, Minneapolis and St. Paul, MN; San Francisco; Chicago; and Atlanta have similar ordinances regulating private employment practices (and discriminatory issues in other areas). This is not an exhaustive list.

The New York Human Rights Law (Title 8 of the Administrative Code of the City of New York) is just under 42 pages of single-spaced type. It governs not just employment, but also housing, services, and many other areas of human and business interaction in the city of New York. The Code begins with a pretty astounding 'policy' statement which evidences that unlike federal law, the city's law does purport to be a 'general civility code' if not something more Orwellian.

Section 8.101. Policy. There is no greater danger to the health, morals, safety and welfare of the City and its inhabitants than the existence of groups prejudiced against one another and antagonistic to each other because of their actual or perceived differences, including those based on race, color, creed, age, national origin, alienage or citizenship status, gender, sexual orientation, disability, marital status, partnership status, status as a victim of domestic violence or status as a victim of sex offenses or stalking, lawful occupation, whether children are, may be or would be residing with a person or conviction or arrest record. [sic] The Council hereby finds and declares the prejudice, intolerance, bigotry, and discrimination and disorder occasioned thereby threaten the rights and proper privileges of its inhabitants and menace the institutions and foundations of a free democratic state.

The Code goes on to provide that 'alienage or citizenship status' means the citizenship of any person and even the immigration status of any person who is not a citizen or national of the United States. (Emphasis added.)

The Code further defines the term 'hate crime' to mean a crime that manifests evidence of prejudice based on race, religion, ethnicity, disability, sexual orientation, national origin, age, gender, or allegiance or citizenship status. Many of the other terms used, including 'prejudice,' 'antagonistic to' and 'perceived differences' are undefined and thus will be subjectively applied.

Sweeping definitions of unlawful discriminatory practices under the Code include not only prohibitions against discrimination in hiring but also discrimination in any number of specified, and vaguely specified, ways and broad prohibitions on retaliation in a number of circumstances, most far beyond the protections offered under federal law, including making it unlawful to discriminate against an illegal immigrant, which is ironic given that an illegal alien has, of course, violated federal criminal laws. Even the above provisions, which form only a small fraction of the entire Code, point to the inherent dangers of such a law to employers.

The question for Sullivan & Cromwell was: How could it defend against such a law, and why was it not challenging the constitutionality of the New York Human Rights Law? (Or would that be just more bad PR?) Charney's complaint is based only
on two provisions of the Code: ” 8-107(1)(a) and 8-107(7). Section 8-107(1)(a) makes it an unlawful employment practice to discriminate in hiring or terminations because of an extensive list of states of being, including sexual preference. Section 8-107(7) applies only to retaliatory conduct including retaliation by a number of listed actions, also making retaliation an unlawful practice.

The Employee's Conduct

As to Charney's conduct, there are questions about how he handled things. Instead of doing what was proper ' filing a claim with the firm and then, possibly having been retaliated against, suing in an appropriate manner ' Charney first broadcasted his suit over Web sites prior to filing, naming individuals and a who's who of firm clients (including some of the best-known companies in America) that did not need to be named, and naming his associate colleague, who definitely should have been protected from this negative publicity. What he did in addition to these acts, however, was bad form from a legal sense as well.

Had he confined his actions to filing his complaint, Charney would virtually have guaranteed himself continuing employment at the firm because the minute Sullivan & Cromwell were to fire him, it would have handed him a claim of retaliatory termination that would have been cognizable in far greater money damages than his previous potential claims of harassment and retaliation. Hence, Charney would have been sitting in the catbird seat, being paid for doing nothing but watching the firm squirm.

Of further interest to law firms ought to be Charney's access to, and what he did with, sensitive firm documents. Besides posting his complaint on the Internet, and naming and potentially harming innocents, Charney went so far as to attach a copy of the firm's partnership agreement to the complaint. At this juncture, no one knows where or how he obtained it. What is safe to say, however, is that Charney is not, was not (and obviously now never will be) a partner at Sullivan & Cromwell. The document was not his. If he obtained it wrongfully and published it, he was clearly in trouble. If he was given the document by someone who had it legally but then published what he knew was confidential, then he was likely, but not definitely, still in trouble. (It has since been pointed out that the partnership agreement he used was out of date, a copy of an older Sullivan & Cromwell general partnership agreement; Sullivan & Cromwell is now an LLP.)

What is not subject to question is that Charney, like the rest of the Sullivan & Cromwell lawyers, signed a confidentiality agreement. Despite his execution of that document, Charney somehow got hold of a confidential document and published it with the complaint and on the Internet as well.

So what is the impact of this potential theft? It transformed Charney from plaintiff to defendant. He handed Sullivan & Cromwell the ability not only to countersue, but also grounds to fire him free of the taint of retaliation. His catbird seat came crashing down when he went that far. Now, instead of a potentially sympathetic plaintiff about whom some people might have doubt, he is an out-of-work defendant too. His entire future legal career is, in fact, in jeopardy.

What Can We Learn and Do?

First, there is no question that having staff and attorneys sign confidentiality agreements is a good idea. However, this will not have substantial impact because most firm documents are not confidential. In fact, many client documents ultimately become quite public. But for the documents that are confidential and maintained as such, having such agreements will facilitate a firm's ability to prevent or redress wrongful dissemination.

Second, as with every company, law firms must have comprehensive, anti-harassment and anti-discrimination policies. Not only must such policies be in place, but they must also be implemented and followed, not just paid lip service. In the wake of Farragher v. City of Boca Raton , 524 U.S. 775 (1998), it is criminal not to have such a policy in place.

Third, handle administrative complaints promptly and thoroughly paper the file. Engage all participants and admonish and counsel them, and adequately document your efforts. If a suit is later filed, you won't be as empty-handed as Sullivan & Cromwell appeared to be. Fourth, be aware of local codes and ordinances that might be far more liberal and sweeping than federal law when it comes to employment practices. Govern yourself accordingly.

While every company should have confidentiality agreements and anti-harassment policies, the question becomes: What is there to be learned from this fiasco for law firms in particular? It is this. In his complaint, Charney makes the point that the Sullivan & Cromwell partnership agreement allows a committee to terminate a partner who exposes the firm to 'financial embarrassment.' The agreement fails, however, to give power to the partnership to discipline, or even expel, a partner that is found to have committed a serious wrong. A review of the Sullivan & Cromwell agreement (recognizing, of course, that it is an outdated one) does not reveal a mechanism for the partnership to take remedial action in the event of legally cognizable harassment. If a partnership agreement does not contain such a provision, then one must question whether, as a matter of law, the Farragher defense can be available. As a matter of law, can a partnership be said to have taken 'prompt, remedial action appropriate to the circumstances' as most sexual harassment policies promise, if the partnership agreement does not provide a mechanism to expel an offending partner? Possibly not.

The settlement of the case, the terms of which are confidential, brings to a close a dispute that had fascinated the New York legal community over several months, both with its allegations concerning partners at one of the city's most prestigious firms and its bizarre twists and turns in the courtroom. It leaves many questions unanswered: Was Charney telling the truth or was Sullivan & Cromwell? Why would Sullivan & Cromwell discriminate against this one talented associate when, by all accounts, it has a fair number of openly gay partners and associates? Was Charney overly sensitive, finding offense where none was intended, or at least where none was directed toward his sexual preference?

Aside from the entertainment value of the case, however, the very real question remains: Are lawyers who advise clients every day of the week on how to protect their businesses from lawsuits adequately protecting themselves?

Bruce Jackson is a partner in the Atlanta law firm of Arnall Golden Gregory LLP. He can be reached at 404-873-8590 or at [email protected]. Debra G. Buster is of counsel to the firm. She can be reached at 404-873-8606 or at [email protected].