Dentons' $35 million ex-partner disagreement returned to Arbitration

Dentons' $35 million ex-partner disagreement returned to Arbitration

A California appeals court recently ordered the wrongful termination claim to be brought back to New York, which will restart a protracted legal struggle between Dentons and ex-partner Jinshu "John" Zhang.

Zhang, when employed at Dentons, was paid a contingency fee of $35 million, which is what sparked this lawsuit. What transpired next has been disputed, with opposing accounts coming from both the sides.

Former employee Zhang had fought to maintain the lawsuit in a California court, but Dentons is pressing for it to be settled in private arbitration. When the Supreme Court of California temporarily halted an arbitration proceeding in New York and asked the appeals court to once again rule on where the matter should be conducted, he came out on top.

The case was remanded to the New York arbitrator for further proceedings on the issue of jurisdiction.

The question of whether or not the former Denton partner was truly an "employee" of the firm will be decided by an arbitrator. If that's the case, the case will be heard in California. If he is not an employee, then the case will be heard in New York, according to the California appellate judges' opinion.

Paul Murphy of Murphy & Rosen, who represents Zhang, said in an interview that his client intends to challenge the decision to the California Supreme Court.

The court of appeal was expressly instructed by the California Supreme Court to respond to a considerably more comprehensive question, Murphy said. "They sidestepped the query. They did not answer it."

Zhang's lawyers claim that there is an inconsistency between a requirement in the California Labour Code that requires all disputes involving California employees to be resolved in California courts and a rule in the California Code of Civil Procedure that requires California trial courts to halt litigation when a petition to compel arbitration is underway in a court in another state.

Zhang allegedly used "self-dealing" to obtain a significant chunk of the $35 million contingency fee award for himself, according to Dentons. Zhang's work with the customer, a multinational corporation, has been shrouded in secrecy and nothing is known about it.

Zhang claims he was let off because he reported that the company's previous US CEO, Mike McNamara, had instructed a payment to be made to the law firm by writing to a counterparty of Zhang's client.

A redacted version of the email seen by Bloomberg Law revealed that Zhang had called it a "huge fraud" to the Dentons US board. Zhang's charges, according to Dentons, are "false and defamatory."

Following his dismissal as US CEO, the company's global chairman, Joe Andrew, stated that they were unable to comment on McNamara's departure because of the ongoing litigation with Zhang.

The same week, Andrew made public his intention to step down as worldwide chairman. As far as his legal career goes, he plans to stay at Dentons.

Dentons won the verdict in the partner disagreement case, but it lost an appeal to overturn a $32.3 million legal malpractice judgement last week.