Suit Claims Clawback in Kutak Rock’s Partnership Agreement Is Anti-Competitive
A lawsuit by a former partner at Kutak Rock claims the firm’s partnership agreement contains an anti-competitive clawback provision that is an attempt to evade an ethical bar on covenants not to compete.
Plaintiff Paul Donsbach alleges that, just days after he submitted his resignation letter on April 28, the firm informed him he would have to return a $30,000 distribution he had received the prior year, the American Lawyer reports. Donsbach claims the contractual penalty is selectively enforced against partners who have the potential to compete with the firm.
The Los Angeles lawsuit (PDF posted by the American Lawyer) claims Kutak Rock did not include a covenant not to compete in its contract because of ethical prohibitions on such a provision in many jurisdictions where it had offices. “However, Kutak Rock has sought to accomplish the same deterrent and punitive effect through an anti-competitive compensation clawback provision,” the suit says.
Donsbach, a former partner in Los Angeles, also seeks to void a provision that would force him to arbitrate the dispute in Nebraska, the state where the law firm is based. The arbitration procedure “is unfairly one-sided,” the complaint claims.
A Kutak Rock representative did not comment on the suit when contacted by the American Lawyer.
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