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Krieg DeVault seeks private emails of ex-partners who sued for owed compensation

August 29, 2017

The Indianapolis law firm of Krieg DeVault LLP has asked a court for the private emails of former partners who are owed compensation the firm refused to pay when they left more than two years ago.

The request is part of Krieg DeVault’s counterpunch in court filings against ex-partners David Jose, Melinda Shapiro and Mark Wenzel’s allegations that the firm shortchanged them when they jumped to new firms. Recent motions Krieg DeVault filed also shed light on the sometimes-rancorous movement of vested attorneys between large firms.

Krieg DeVault on Aug. 14 moved for non-party discovery on the ex-partners’ new law firms, seeking a year’s worth of communications, including private emails between the partners and the firms they moved to in 2015 — SmithAmundsen LLC, where Shapiro and Wenzel landed; and Plews Shadley Racher & Braun LLP, where Jose practiced before also moving to SmithAmundsen. The plaintiffs object to the motion as burdensome, oppressive and untimely, because discovery in the case is scheduled to close Sept. 7.

The pleadings before Marion Superior Commercial Court Judge Heather Welch were pending Tuesday afternoon. Because a ruling on the discovery issue had not been made, neither SmithAmundsen nor Plews Shadley had been served notice regarding the request for communications.

Jose, Shaprio and Wenzel sued Krieg DeVault in 2016, a little more than a year after they departed in June 2015. They claim they were entitled to a distribution of June 2015 earnings based on partner participation units, plus the amounts in their capital accounts when they left. Instead, they received nothing in the June 2015 distribution, and their capital accounts were zeroed out to pay for other Kreig DeVault partners whose accounts had negative balances and were written off by the firm.

Welch agreed in June that Krieg DeVault must pay Jose, Shapiro and Wenzel their June earnings plus the balance of what was in their capital accounts before they left. However, she left for trial the question of whether paying the ex-partners would create a “substantial and material adverse effect” on the firm, as Krieg DeVault claims in the case.

The bid to discover the ex-partners’ communications with their new law firms came just weeks after Jose, Shapiro and Wenzel unsuccessfully moved to compel Krieg DeVault to calculate and pay the compensation, with interest, that Welch determined they were entitled to.

While Welch denied that motion, she approved Krieg DeVault’s motion to pay into a court trust $80,000 toward payment of a potential judgment. In that motion, the firm estimates that the ex-partners’ shares of June 2015 net income they were not paid was individually valued between $25,908 and $26,950.
James Fisher represents the ex-partners and said the separate amount in their capital accounts when they left totaled about $70,000. “It’s fairly stunning that a major law firm would acknowledge that $70,000 would have a substantial and material adverse effect on the firm’s resources,” Miller said.

Attorneys representing Kreig DeVault in this litigation — Krieg DeVault partners Mark J.R. Merkle and Kay Dee Baird — did not reply to requests for comment for this article.

Despite Welch’s ruling that the plaintiffs were entitled to compensation at the time they left, Krieg DeVault in its recent motions asserts the ex-partners violated their partnership agreement in the way they transitioned to their new firms.

Krieg DeVault said in court briefs that the $80,000 deposit with the court is not an admission of liability and the firm doesn’t waive its right of appeal. “Should the court determine that one or more of the Plaintiffs have not satisfied the terms and conditions of the … Partnership Agreement, or breached the Agreement, any undistributed funds plus accrued interest should be paid over to Krieg DeVault,” the firm said in its deposit motion.
“Krieg DeVault has alleged the named Plaintiffs violated their fiduciary obligations to the partnership in the course of organizing an en masse resignation from the firm and Krieg DeVault is entitled to obtain documentation evidencing the communication between the named Plaintiffs and their law firms,” the firm argued in its motion for non-party discovery.

“Plaintiffs have already produced limited documents showing that they negotiated the terms of their employment with their employers while still at Krieg DeVault. The engagement letter with Plaintiff Shapiro evidences that (she) discussed with SmithAmundsen the hiring of other Krieg DeVault employees should Shapiro take a position with SmithAmundsen. The discussion evidences that Shapiro disclosed the financial compensation of the Krieg DeVault employees so that SmithAmundsen would be able to fashion an offer to the employees and they would leave with Shapiro when she withdrew from the firm,” the motion alleges. “… To the extent the non-party law firms believe privileged communications exist within the scope of the requests, they can assert that privilege.”

The motion also alleges that before Jose withdrew from Krieg DeVault, “he sent numerous emails from his personal email account to the clients whom he served at Krieg DeVault advising them of his departure and soliciting their business to join him at his new firm[.] ... The evidence will show that Jose went so far as to have meetings with the clients” at his new firm while still a partner at Krieg DeVault.

The case is David Jose, Mark Wenzel and Melinda Shapiro v. Krieg DeVault LLP, 49D01-1609-CT-31701. A five-day trial is currently scheduled to begin June 16, 2018.

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