Lawyers' fight for freedom
So many lawyers. So much time.
After six weeks of trial with a daily average attendance of a dozen attorneys, high-powered lawyer Barry Hirsch’s fee dispute with his former law firm — now renamed Jackoway Tyerman Wertheimer Austen Mandelbaum & Morris — staggered to a close on Wednesday.
Trial revolved around whether clients who followed Hirsch to his new firm — Hirsch Wallerstein Hayum, Matlof & Fishman — are bound to pay the old firm 5% of the gross compensation they received from any deal negotiated while they were at the firm in perpetuity. While the old firm retained numerous clients such as J.J. Abrams, Jude Law and Sigourney Weaver, a stream including Julia Roberts, Jennifer Lopez, Barry Levinson, Dick and Lauren Shuler Donner and signature client Francis Ford Coppola, exited with Hirsch.
While the case raises interesting issues involving fee collection that are rarely litigated because the parties usually settle, the trial is most notable for the rare look it provides into life in the Hollywood trenches. Despite elaborate confidentiality provisions, the details of deals done for a slew of clients have poured out in court, several of which have been chronicled earlier in the trial by Nikki Finke in the LA Weekly. Deals include those for clients Joel Schumacher, the Donners, Francis Ford Coppola, Barry Levinson, Sean Penn, Pamela Anderson, Julia Roberts, and Shannen Doherty. Also, Tea Leoni, Richard Gere, Clive Owen, Ed Burns, Josh Lucas, Aaron Eckhart and Jude Law.
The testimony included these glimpses into Hollywood dealmaking:
- The formerly named Hirsch Jackoway Tyerman Wertheimer Austen Mandelbaum & Morris had a standard fee arrangement of 5% of all compensation under contracts negotiated by the firm, but for certain clients there were better deals:
Nicole Kidman paid a $350,000 annual retainer;
Jamie Lee Curtis, a client since 1983, paid a “reasonable fee”;
Producer Jerry Zucker paid a capped 5% fee;
Lucy Liu had a “non-standard arrangement” because of the firm’s desire to acquire a “high-profile client”;
Owen Wilson’s fee was reduced to 3% to keep his business.
- The firm that pioneered the unsigned deal — the key issue in client Coppola’s 1998 “Pinocchio” trial where he claimed he was free to shop his project to other studios because he didn’t have a completed longform agreement with Warner Bros. — has oral retainer agreements with most of its clients. Partner Alan Wertheimer testified that “very few” of his clients, which include Ron Bass, Abrams, Sigourney Weaver and writer-director Brian Helgeland, have written agreements with the firm.
- Actress Rachel McAdams was the subject of repeated testimony because her 5% fee didn’t entitle her to the firm’s ancillary services, such as estate planning, which were usually included at no extra charge, because she hadn’t yet paid enough money. Ironically, when she opted to go with Hirsch, one of the selling points in the attempt to persuade her to stay was that the Jackoway firm was a full-service firm.
- Becoming an entertainment lawyer is not necessarily a good way to hobnob with celebrities. Longtime client Sally Jessy Raphael, testifying by video, excused her fuzzy memory about the law firm’s name and those of several partners by explaining, “I don’t hang with these guys.”
- An early revenue projection for Hirsch’s new firm estimated his annual billing at $6 million, half of the new firm’s projected revenue.
- As for what happens to clients who don’t pay up after they split from their lawyer, the case of actress Doherty is instructive. After splitting from the firm, she refused to continue making payments on the TV series “Charmed.” Neither she nor any other former client for that matter has ever been sued for fees. “It’s bad for business,” said Hirsch at the time.
After listening to weeks of testimony, L.A. Superior Court Judge Robert H. O’Brien cut to the chase Wednesday, finally asking, “So, how much money are we talking about here?” Amazingly, there was no clear answer, at least not from the Jackoway firm.
In addition to nearly $1 million the Hirsch firm claims it is owed in billings, it seeks a ruling that their current clients are not obligated to continue paying the old firm. The Jackoway firm seeks approximately $7 million it claims has already been improperly paid to the Hirsch firm. As for that 5% in perpetuity, $20 million was bandied about earlier, but the firm did not offer the judge a specific number.
Questioning the parties, O’Brien expressed concern over whether an oral percentage fee agreement could be enforced indefinitely against a former client. If they weren’t enforceable against the clients, O’Brien wondered, could the new firm be forced to help collect fees for the old firm? “Doesn’t that interfere with the new attorney-client relationship?” he asked.
Following a post-trial briefing schedule, O’Brien will issue a decision in this non-jury trial.
The case has been brewing since August 2004, when Hirsch cleaned out his office on a weekend and left his firm of 24 years. In a lawsuit filed the same day, Hirsch and the other departing partners claimed that they were forced out by a change in the partnership structure that concentrated power in the hands of James Jackoway, Wertheimer, Barry Tyerman and Geoffry Oblath.
The Jackoway firm claimed Hirsch, who is now 73, left after negotiations on a retirement package failed. A suit filed by the Jackoway firm claimed Hirsch was bitter because some of his partners were standing up to him after years of letting him set his own salary and be reimbursed for huge personal expenses. The suit also claimed that Hirsch, a licensed therapist, used his knowledge of psychology to manipulate his clients into leaving the firm to join him. Hirsch and the other partners, the suit claimed engaged in a “nocturnal escapade” to loot the firm by secretly downloading confidential documents.