The NSW Supreme Court upholds a six-month restraint period that ends 1 September
The eminent lawyers joined the Wall Street firm on Friday, but NSW Supreme Court Justice Robert McDougall sided with their former partnership that they can’t act for their HSF clients and poach HSF employees to W&C until 1 September, when a six-month restraint period lapses, said The Australian Financial Review.
Melbourne partners Andrew Clark, Brendan Quinn, Alan Rosengarten, Josh Sgro, Tim Power, Jared Muller and Joanne Draper, and Sydney partner Joel Rennie were sued by the HSF Australia partners to enforce terms from the firm’s Australian Partnership Record and the Global LLP Members’ Agreement.
HSF Australia has a six-month notice period and a six-month restraint period, which could be implemented consecutively. The partners tendered their resignation letters almost simultaneously on 1 September last year.
McDougall said the lawyers who entered into agreements with HSF as partners were “commercially and legally sophisticated” and said that restraints were necessary to stop young would-be defectors from leaving HSF to go to W&C.
He also said that it is unrealistic that the high-flying lawyers be expected to become “suburban solicitors” in the meantime, but said that they must have considered the risk of being restrained when they were deciding to leave. The court cannot “relieve them of the consequences of what must have been a careful decision,” he said.
HSF is understandably pleased with the decision.
“Today’s decision prevents the departing partners from joining White & Case as partners, and from soliciting our clients for a six-month period. These proceedings had the objectives of protecting the firm’s interests, including protecting our valued relationships with clients,” it said.
A spokeswoman for Seyfarth Shaw, which represented the departing partners, said clients were prepared for the outcome.
“We expect all of the former HSF partners to commence with W&C in March, noting they are free to do so now since His Honour's orders have been made in chambers. Further, what His Honour had ordered is effectively what our clients were prepared to agree by way of undertaking before the hearing this week,” the firm told the AFR.
The case will have a seven-day final hearing on 26 June to decide whether the restraint clauses in HSF’s agreements are judicious, and whether the partners have been effectively suspended from the partnership since their resignation.
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