Former Dickstein Lawyers Sue Over Capital Contributions

More than a dozen former Dickstein Shapiro lawyers sued Blank Rome this week, alleging it refused to return $4 million in capital contributions by characterizing the 2016 combination of the two firms as a sale of assets rather than as a merger.

Blank Rome chairman Alan Hoffman called it an asset acquisition at the time of the February 2016 deal. The combination resulted in a combined firm of more than 620 lawyers in 14 offices. Hoffman reiterated that the deal “was not a merger” in an interview with Big Law Business.

Washington-based Dickstein Shapiro, founded in 1953, had wavering fortunes in the years prior to the merger. It attracted some noteworthy figures, including former House Speaker J. Dennis Hastert, who worked for the firm as a lobbyist between 2008 and 2015.. He was later convicted of violating banking laws in an effort to conceal payoffs for past personal misconduct.

Dickstein Shapiro also had government contracts, insurance coverage and intellectual property practices. At its height, in 2010, Dickstein Shapiro employed about 400 lawyers.

But its finances slid dramatically, suffering in part from losses of contingency fee patent cases, from $350 million in 2012 to $192 million two years later, according to American Lawyer figures.

In the combination, Blank Rome took on more than 100 Dickstein Shapiro attorneys and staff, the lease obligation for Dickstein Shapiro’s offices in Washington, and a number of other commitments.

That is enough to show that the firms merged, and that new entity must honor the earlier partnership agreements to pay the $4 million plus six percent interest over a four-year period, argued Brian S. Kabateck, a lawyer for the former Dickstein Shapiro attorneys.

To characterize the combination of the two firms as something other than a merger is “a manipulation of the process and a very deliberate attempt not to pay the money,” Kabateck said in a phone interview with Big Law Business. Kabateck is with the Los Angeles firm Kabateck Brown Kellner LLP.

The partners involved, including one who retired, all left Dickstein Shapiro before the merger, but expected the return of their capital contributions based on the partnership agreements they signed, Kabateck said.

“This lawsuit has no merit and we intend to vigorously defend it,” a Blank Rome spokeswoman responded.

To bolster its contention that it did not merge, Blank Rome has argued that it did not take over the lease obligation for Dickstein Shapiro offices outside of Washington leaving those responsibilities to the lawyers who occupied them. The defunct firm was sued for $8.4 million for breaking a real estate lease in Manhattan in 2016, but that dispute was settled out of court.

The combination went smoothly, and Dickstein Shapiro “ceased its ordinary law firm operations as soon as Blank Rome took over the firm,” Kabateck said.

He pointed to the fact that some Dickstein Shapiro partners segued into the same or similar positions at Blank Rome. For example, James D. Kelly, the head of Dickstein Shapiro’s Washington office became head of Blank Rome’s Washington office.

The “seamless” consolidation of management and operations underscores the fact that Blank Rome’s description of the entity as an assets sale “is nonsense and a thinly veiled ploy to seek avoidance of the only remaining large Dickstein Shapiro liability,” Kabateck.

Those suing include former partners Steven Weisburd of New York; Bernard Nash of Boca Raton, Fla.; Neil Lefkowitz of Washington; Andrew Zausner of Washington; and Larry Eizenstat of Washington.