By Sara Randazzo

How much financial pain can a law firm inflict on a partner who jumps to a competitor?

A new lawsuit filed this week by two former Clifford Chance partners is bringing that question to the fore.

The and exhibits, filed in federal court in New York, lay out in compelling detail what Cliff Cone and Michael Sabin say happened earlier this year when they told Clifford Chance management they were leaving for Sidley Austin.

Two months after resigning, Clifford Chance’s global managing partner, Charles Adams, sent them each a letter detailing millions of dollars he said the firm was entitled to claw back under the firm’s partnership agreement, according to copies of the letters included in the court filings. Based on a complex provision in the agreement, some partners who leave for a competitor can have their compensation recalculated as if they held fewer partnership units during the prior three years.

The letters from Adams show Cone’s clawback came to $4.4 million and Sabin’s to $1.4 million, which were each broken down in a detailed chart showing how pay dating back to 2023 was being affected. The pair, who co-headed Clifford Chance’s U.S.-based funds and investment management practice group, retained a lawyer soon after and have been disputing the request ever since.

A Clifford Chance spokesman said the firm doesn't comment on pending litigation. A spokesman for Sidley Austin, which isn’t a party to the lawsuit, declined to comment. Cone and Sabin didn't respond to a request for comment.

In today’s frothy lateral market, where star partners can make investment-banker level salaries and firms vie to increase revenue each year through new hires, firm leaders are doubling down on ways to discourage their partners from leaving.

Around 4,900 partners made lateral moves in the nation’s 500 highest-grossing law firms last year, according to legal intelligence firm Decipher. That’s down a bit from 2024 but 11% more than the previous eight-year average.

Firm leaders and consultants tell me it’s become increasingly common in recent years to claw back bonuses if partners take their business to competitors. The Clifford Chance lawsuit offers a rare look into the mechanics of that practice, as disagreements between departing partners and their former firms are typically resolved in private mediation or arbitration.

Legal consultant Kent Zimmermann said he asked law firms about these practices earlier this year and found a growing trend of clawback provisions, particularly among the largest and most profitable law firms. “I don’t blame them,” he said, adding that if you pay a partner a million-plus dollars in a bonus to reward and retain them, and then they go compete against you, “that doesn’t feel right.”

Zimmermann said another lever firms can pull is delaying the return of capital contributions, the mandatory investments made by equity partners to help keep firms running.

TALENT WARS

In the lawsuit filed this week, the former Clifford Chance partners cite an interesting ethics opinion issued last year from the New York City Bar Association that doesn’t seem to have garnered much attention.

In the opinion, which isn’t binding, the bar association’s professional ethics committee warns firms that any policies aimed at discouraging or deterring competition are likely to run afoul of New York’s rules of professional conduct.

That could include clawing back bonuses, conditional loan forgiveness, deferred compensation or capital deductions, the ethics opinion said. The former Clifford Chance lawyers acknowledge in their lawsuit that they must go to mediation or arbitration but are asking a U.S. judge to issue a ruling that New York law, not English law, should govern when they do so.

The complaint points to the ethics opinion and existing New York law they say prohibits the enforcement of partnership agreement terms that impose financial disincentives on departing partners.

Leslie Corwin, a New York lawyer at Duane Morris who is representing Cone and Sabin in their dispute, said the ethics opinion reflects what he sees as a growing phenomenon of firms trying to make it more difficult for partners to leave.

U.S. law firms have long been limited in how they can restrict partner movement, with traditional noncompete clauses generally prohibited by ethics rules. The concept, Corwin said, is rooted in a desire to protect the best interests of clients.

“Every client has the right to counsel of his choice,” said Corwin, who literally wrote the book on law firm partnership agreements and has been advising lawyers on professional liability issues for decades. “That’s the real substance behind these disciplinary rules.”

Clifford Chance, founded in the UK, entered the U.S. market back in 2000 through a merger with Rogers & Wells, an old-line New York firm founded in 1873. Its U.S. partners are governed by a dense, more than 200-page global partnership agreement as well as a 20-page addendum for U.S. partners.

The main agreement, included in court filings, lays out a few other intriguing clauses impacting departing partners, beyond the clawback provision. If the firm’s managing partner “has good reason to believe that a partner is contemplating retiring from the partnership in the near future,” the agreement says, firm leaders can withhold confidential information from the partner, forbid attendance at meetings and prevent them from voting or even expressing a view on certain matters.

The financial hit comes to any partners allocated more than 300 units, on a scale that rises to 1,500 possible units per partner. Under the agreement, if Clifford Chance’s executive leadership group determines a lawyer retiring from the partnership is competing with the firm, their unit allocation can be reduced to 280 units and the firm can seek repayment of compensation attributable to units above that level from prior years.

INSIDE THE PARTNERSHIP

Beyond the issues at play in the lawsuit, reading through the partnership agreement offers a fascinating look at the inner workings of a law firm’s highest rung of power. And while I realize lawyers are a detail-oriented crowd, the level of minutiae guiding everything from profit sharing to disciplinary actions surprised me.

When it comes to partner pay, the number of units a partner can be allocated falls along a ladder ranging from 60 to 1,500, the agreement shows. According to the letters from Clifford Chance’s managing partner, the value of each unit in fiscal year 2026 was £9,600 ($12,704). That would mean any partner with the highest number of units earned £14.4 million ($19.1 million) that year. The document shows the unit value steadily rising since 2023.

I found myself wondering how many partners take advantage of the relatively generous six-month parental leave policy, and the 30 days of vacation in addition to local public holidays.

Another section dictates what happens to “an equity partner who agrees to retire essentially at the partnership’s request,” a recognition of the common practice at firms to weed out underperforming partners.

In the most amusing section for me personally, the firm's partnership agreement policies spell out when and how Clifford Chance partners can speak to journalists. Discussing confidential firm information is strictly prohibited, but publicizing the firm’s work can be done when appropriate.

“A Partner who is in any conversation with a journalist must,” the agreement states, “be polite.”

Now that’s a rule I can get behind.