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Firm Accuses Ex-Partners of Stealing Clients, Trade Secrets


SACRAMENTO – A Southern California-based firm that specializes in workers compensation defense has sued four ex-partners, alleging that they spent 18 months on the firm’s dime planning to launch a competing practice.

Adelson, Testan, Brundo, Novell & Jimenez says Michael Misa, Martin Stefen, Matthew Koller and Teresa Ward, all partners in the Long Beach office, used company email and phones to discuss potential office locations, to consider a name for their new firm and to schedule a meeting with a financial adviser, according to a complaint filed in Orange County Superior Court.

“In anticipation of launching their new firm, the defendants also took copies of client contact lists, forms and exemplars, and other confidential and proprietary information by sending files to their personal email accounts throughout January, February and March 16,” the complaint alleges.

After learning of the partners’ plans, Adelson Testan fired them on April 4, according to the lawsuit. The firm is seeking damages, injunctive relief and disgorgement of portions of the ex-partners’ salaries.

“Rather than resign and set up a new firm, the former partners laid in wait for almost 18 months while they collected confidential information, solicited clients and employees, all while collecting their salaries and benefits as partners of ATB,” Adelson Testan’s attorney, Daniel Callahan of Callahan & Blaine, said in a prepared statement.

The four partners have launched their workers compensation insurance defense firm in Huntington Beach. Their attorney, Daniel O’Rielly of O’Rielly and Roche, called the allegations “baseless and clearly vindictive.”

“These attorneys were highly productive at their former firm, and they decided to leave that firm in full compliance with all legal and ethical rules,” O’Rielly said in an email. “There was nothing inappropriate in the way they departed, or in the way they have conducted business since they left.”

The litigation could put in full public view a law firm management issue that is more typically handled behind closed doors: the etiquette and ethics of how partners depart.

“There’s no rule book or guidebook where somebody can say, ‘If you follow these four steps, you’re going to be OK,'” said Shari Klevens, a Dentons partner who represents lawyers and firms in legal malpractice claims.

Klevens was not familiar with the litigation and declined to comment on it specifically. In general, however, she said most issues surrounding attorneys’ departures should be governed by firms’ partnership agreements. And, she said, attorneys should not take with them “any information that the firm would consider a trade secret. Obviously what that is is going to differ by firm,” but often includes billing rates and profit margins.

Lawyers on the move also need to be clear with their soon-to-be-former firms about their intentions,” Klevens said.

“One major factor for a lot of firms is that both sides understand they’re competing,” she said.

The Adelson Testan lawsuit refers to a partnership agreement but does not detail its contents. The complaint does include a copy of the firm’s employee handbook, which talks about the protection of proprietary information as well as restrictions on the use of company cell phones and computers. Callahan, Adelson Testan’s attorney, did not return a phone call seeking additional information.

The firm is accusing its former partners of misappropriation of trade secrets, breach of fiduciary duty, unfair competition, interference with prospective economic advantage and contractual relations and breach of contract.

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