$32 Million Dentons Malpractice Verdict Weighs Against Swiss Verein Structure

On June 10, lawyers for Big Law firm Dentons U.S. requested that the Ohio Supreme Court set aside the verdict in a former business client’s malpractice case, arguing that the $32 million judgment constitutes “serious threats” to the legal profession if it stands. The filing came after an appeals court upheld a previous disqualification of the Dentons U.S. practice, which stemmed from that practice’s failure to disclose conflicts connected to its counterpart Dentons Canada. Jones Day represents Dentons U.S. and says the latter wants guardrails regarding evidence and damages standards to be established for alleged malpractice cases.

A central issue connected to the case is the “Swiss verein” structure, through which big U.S. law firms treat as separate entities their affiliates in other countries. In 2004, Baker McKenzie was the first major U.S. law firm to adopt the model, and at least five large U.S. firms followed: Dentons, DLA Piper, Norton Rose Fulbright, Squire Patton Boggs, and Littler Mendelson. The $32 million verdict against Dentons tests whether law firms using the verein structure must complete conflicts checks with all their affiliate members before accepting a new client.

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In their initial malpractice claim, former Dentons U.S. client RevoLaze LLC argued that Dentons’ disqualification cost it millions of dollars involving patent-related litigation. The Ohio-based company patented laser technology to make jeans appear faded, and it hired Dentons U.S. in 2014 to pursue cases against The Gap Inc. as well as other clothing companies.

In 2015, The Gap successfully got Dentons U.S. disqualified from a RevoLaze patent suit because Dentons Canada represented The Gap in other matters. RevoLaze subsequently alleged that Dentons U.S. shouldn’t even have taken its initial patent case due to conflict of interest and accused the law firm of malpractice.

Dentons U.S. argued that its verein affiliate in Canada was a distinct and separate entity. Dentons also stated that its U.S. practice had disclosed the affiliation to RevoLaze. However, an Ohio state court judge agreed with RevoLaze, and a Cuyahoga County jury awarded the company $32.3 million in February 2020. Commenting on the Ohio Supreme Court appeal filed by Dentons, law firm consultant Peter Zeughauser said, “Firms worry a lot about their reputations for trustworthiness and integrity—and because of that, they worry about conflicts.”