July 6, 2007
In 1991, a "rainmaker" attorney became a partner in a law firm. His book of business included General Electric. The firm and the attorney entered into a special compensation agreement for the years 1994 to 2000 that was modified by written agreement in 2001. The 2001 agreement included a provision that delayed a "decompression" of income from age 65 to age 67. The partner sued the firm after he was denied a bonus in 2003 and 2004. The New York Supreme Court granted summary judgment to the firm.
The First Department reversed, holding that the 2001 agreement was susceptible to differing interpretations and that summary judgment was thus improper. The court held that, if the award of bonuses is found to be at the firm's discretion under the 2001 agreement, the firm had acted in good faith in denying bonuses as a matter of law. GE had retained another firm in the principal matter for which the partner was responsible and his fee generating ability was significantly reduced. The fact that other firm partners resented the special compensation deal or questioned the wisdom of the extended agreement after CEO Jack Welsh ("with whom the partner had a relationship") had retired did not establish the firm's bad faith.
The New York Law Journal has a article about the case linked here.(Mike Frisch)
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