U.S. Charges Law Partnership With Age Bias

The Equal Employment Opportunity Commission has charged one of the nation’s largest law firms with age discrimination, contending that it violated the law by forcing out older partners. Legal experts said the case could have major ramifications for the legal business, which has changed dramatically in recent years.

The class-action suit -- the first of its kind against a law firm -- alleges that Sidley Austin Brown & Wood has maintained an illegal “age-based retirement policy” since at least 1978 and that the firm arbitrarily forced out 32 partners in 1999.

Based in Chicago, Sidley has 1,500 lawyers in a dozen cities, including Los Angeles, spread over three continents. It represents a number of large corporations, including Tribune Co., the parent company of the Los Angeles Times.

Historically, law firm partnerships have not been subject to discrimination laws because partners, as the co-owners of an enterprise, were considered employers.

The EEOC is alleging that the cashiered lawyers were partners in name only because they had no voice in the firm’s management -- including hiring, firing and salary decisions. Consequently, the lawyers were “employees” entitled to the protections of the Age Discrimination in Employment Act, said John C. Hendrickson, the EEOC’s regional attorney in Chicago.

New York University law professor Stephen Gillers said he thought a suit of this type was inevitable because of the massive change over the last quarter of a century in the way law firms operate.

In the old days, Gillers said, attorneys frequently would join a firm after law school and stay for their entire careers. “Partnership was for life.... That is no longer true,” Gillers said, as firms dump lawyers in an effort to become more profitable and lawyers jump from firm to firm. “The glue is gone in both directions,” he said.

Kimberly Yuracko, who teaches employment law at Northwestern Law School in Chicago, said the case had “huge ramifications” for lawyers and other professionals -- such as accountants -- particularly as law firms grew bigger and became more like corporations than partnerships. Ultimately, she said, the case will turn on the real way Sidley operated, not the titles the individual lawyers held.

Hendrickson said Sidley’s governing structure was not a partnership in the traditional sense. The firm was operated at the top by a small executive committee, he said in an interview last week.

Sidley consistently has taken the position that all its partners were employers, and therefore not covered by age-discrimination law. Paul Verbinnen, a spokesman for the firm, said: “We will vigorously defend against the EEOC action, which has no merit.

“The firm,” he added, “has always been committed to a policy of equal opportunity and nondiscrimination.”

The investigation began in the aftermath of major changes at Sidley. According to the suit filed in federal district court, the firm had always had a mandatory retirement age of 65. Then in 1999, 32 lawyers -- all over the age of 40 -- were told that their status was being downgraded from “partner” to “special counsel” or “counsel” and their pay reduced by about 10%. They also were informed that they would soon have to leave the firm.

David A. Richards, a real estate lawyer who started Sidley’s New York office in 1982, was one of those who received notice.

Richards, then 54, said he was handed a letter stating that he was resigning effective Dec. 31, 1999; “I had to sign the letter by that time or I would be fired.”

Richards said he was told by two partners that he would be given an 18-month contract as a special counsel -- renewable at the firm’s discretion -- and that he would have to leave the firm by age 60. He also was told that his hours would be reduced, that he would no longer be on any committees and would have to withdraw from the pension plan.

Richards, who is now a partner at a large law firm in New York, said that there “absolutely” was no contention by Sidley that his performance had been substandard.

Nonetheless, he said, “I signed the letter, as I think everyone else did. I never saw a list.”

At the time the lawyers were demoted, Charles Douglas -- chairman of the Sidley management committee -- was quoted in the Chicago Tribune as saying: “This puts in place a structure for the future that provides for greater opportunity for the younger lawyers down the road.”

Richards said it was his impression that the firm took the action at least in part to increase its profit-per-partner ratio. Hendrickson said the demoted partners were making $450,000 to $600,000 a year. According to American Lawyer magazine’s annual survey, Sidley partners averaged $895,000 in profit per partner in 2003, 50th in the nation.

At the time the lawyers were given notice, Sidley was run by a management committee of eight to 10 lawyers and an executive committee of 36, Hendrickson said. Those committees were “self-perpetuating,” meaning that the remainder of the lawyers in the firm had no voice in major decisions. The committees “made decisions about who got admitted to partnership, who got kicked out, how the profits were divided,” he said.

The EEOC began an investigation into the alleged age discrimination and, in 2001, subpoenaed Sidley records. The firm resisted, and the issue eventually made its way to the U.S. 7th Circuit Court of Appeals in Chicago.

That court said the EEOC was entitled to records critical to determining whether the lawyers should have been protected under age-discrimination law, but it made no judgment on the merits of the case.

Judge Richard Posner, writing for a unanimous three-judge panel, rejected Sidley’s argument that the law did not apply to any matters involving “partners.” Posner said he was particularly unconvinced by “Sidley’s contention that since the executive committee exercises its absolute power by virtue of delegation by the entire partnership in the partnership agreement, we should treat the entire partnership as if it rather than the executive committee were directing the firm. That would be like saying that if the people elect a person to be dictator for life, the government is a democracy rather than a dictatorship.”

If the suit succeeds, the firm could be required to change its policies requiring mandatory retirement, be ordered to reinstate some of the lawyers or make back-payments that could cost millions, Hendrickson said.