Sidley partners under microscope

Sidley Austin Brown & Wood - one of the world's largest law firms - has been ordered to hand over private partnership documentation, including the spread of profits between the partners, in the ongoing investigation by the US Equal Employment Opportunity Commission (EEOC) into the demotion of 32 partners.

However, in requiring the firm to comply with an earlier order, the seventh circuit Court of Appeals said the EEOC at this stage could only have those documents which go to decide whether the partners were employers or employees, rather than any which deal with the merits of their demotion.

Only employees are protected by US discrimination laws; Sidley says the partners are employers.

The case dates back to 1999 and the Chicago office of pre-merger Sidley & Austin, which demoted the partners to lesser 'counsel' or 'of counsel' positions.

More than half were in their late fifties and early sixties (see [2002] Gazette, 21 February, 6).

Giving the lead judgment, Judge Richard Posner said there were arguments that the partners were employees.

He focused on the firm's 'self-perpetuating' executive committee, 'in which all power resides'.

The partnership does not elect its members; the committee does.

He noted that the only firm-wide issue on which all partners voted in the last 25 years was the Brown & Wood merger, and that it came after the EEOC began its investigation.

The ability to bind the firm and sharing profits does not necessarily distinguish partners from a regular company's employees, the judge said.

He also questioned whether the partners' personal liability was 'enough to pin the partner tail on the donkey', saying: 'These 32 partners were not empowered by virtue of bearing large potential liabilities.

The 32 were defenceless; they had no power over their own fate.'

Judge Frank Easterbrook dissented, saying the 32 were probably 'real' partners as they received a share of profits and were liable for losses.

However, he agreed that Sidleys should provide the information so the EEOC could investigate whether the firm 'designates as "partners" lawyers who are paid salaries plus bonuses rather than a portion of the profit'.

The firm argues that the demotions were triggered by shortcomings in performance.

Neil Rose