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The Zoom call to end all Zoom calls: What happened at Luthra yesterday and what it could mean

Rajiv vs Mohit: Irreconcilable split or a new beginning?
Rajiv vs Mohit: Irreconcilable split or a new beginning?

Just before 3pm yesterday (Thursday, 24 September), all staff and fee-earners at L&L Partners received an email from managing partner Rajiv Luthra, announcing a virtual townhall for 5pm that day.

The meeting would be an “important address to the firm”, and attendance of “every single member” was compulsory in the Zoom call, according to the invite.

The announcement caused a stir within the firm, particularly following our report last week about a potentially acrimonious disagreement between Luthra and senior partner Mohit Saraf about the future of the firm.

And besides the months of animated closed-door debate between the non-equity partnership and Luthra and Saraf about opening up the firm’s equity, very little had been said publicly until now.

And so, by 5pm the Zoom call had quickly hit its maximum capacity of 300 participants (the limit in Zoom’s ‘small and medium businesses’ plan). Up to around 100 to 150 other staff members and fee-earners of L&L found themselves locked out.

By the time the call ended, just over 90 minutes later, they had missed what was, by most accounts, one hell of a call (as was first broken, as usual, in the Legally India comments last night).

Their GIF game was strong

For a variety of reasons we can not really summarise in detail all allegations, claims and counter-allegations that occurred on the call but fortunately we don’t need to: this comment left by a talented Legally India reader in GIFs, sums it up fairly accurately (at least in terms of many fee-earner and partners’ reactions).

For those who don’t speak GIF, suffice it to say, according to multiple accounts:

  • Luthra publicly spoke against Saraf and his plans for the firm, primarily reiterating Luthra’s earlier claim that Saraf had not been a co-founder of the firm,
  • each of the equity partners in the separate L&L litigation partnership - HS (Bobby) Chandhok, Vijay Sondhi and Sudhir Sharma - made brief speeches supporting Luthra,
  • Saraf did not take the attacks lying down and retaliated with allegations against Luthra, and the names of a prominent businessman and a multinational bank were dropped,
  • Luthra, who hosted the Zoom call, responded and rebutted some of the allegations in detail (including apparently making a call to a client to rebut such allegation, right there on the Zoom call), and
  • the call finally ended with Luthra promising to come up with a solution to everyone’s problems and questions soon.

Much more than that happened but at the same time, in short, not much more either and importantly, no real substantive discussion about the future or equity distribution at the firm actually took place.

But worse, many of the fee-earners who had not been privy to recent discussions within the partnership were left in a state of confusion after the gloves had come off in the fight between the two senior equity partners, who had generally presented a united front until now.

The question on many lips and minds afterwards was: can L&L Partners even continue as one firm after this?

We have examined several possibilities.

We have reached out to both Luthra and Saraf but neither has responded with a comment at the time of publication.

Background: The pre-existing partnership deed

As we had reported in our story last week the (legal) crux of the disagreement between Luthra and Saraf comes down to the partnership deed they had entered into around 1999.

That deed had been circulated amongst all the partners during the months-long discussions about how (and whether) equity at the firm should be opened up.

According to that old partnership deed, as amended at least once, Luthra holds 66.6% of equity, while Saraf holds 33.4%.

The deed also covers a whole range of other issues between them, including retirement age (80 in the case of Luthra), the inheritance of Luthra’s equity by his family, if he should pass away before retirement, and under which circumstances each side could leave the partnership.

Option 1: No irretrievable breakdown

To many, yesterday’s call was evidence of an irretrievable breakdown of relations between Luthra and Saraf, which would make it very hard for them to jointly run the law firm as they had for more than two decades.

Whether rapprochement between them is still possible is very much a question of fact and one that no one will really know the answer to right now.

But in case they do make up on a personal level, there are two options.

Option 1a: Business as usual, for a while

If the firm did not break up but the equity did also not open up soon (or did not open up as much as some of the partnership and Saraf now expect), a number of scenarios could go down.

Most worryingly could be the loss of more partners, potentially many more, than the firm had been haemorrhaging for nearly a decade anyway.

Saraf’s internal pitch to partners and Luthra about equity had been that it would get increasingly harder for the firm to compete for talent without equity on the table.

According to rival firms and also partners at L&L, many CVs are currently in the market and people are definitely examining their options, which could include mass defections of entire teams (such as the one seen when nearly the entire capital markets team walked to IndusLaw).

Option 1b: Not business as usual

Considering their fundamental differences of opinion, if Saraf and Luthra stay united, realistically there would be significant pressure from Saraf and several other of the L&L equity hopefuls for Luthra to open up the equity more widely than he had currently proposed.

There would also likely be pressure on Luthra to drop and amend some of the other terms of the 1999 deed, and might result in significant dilution of Luthra’s (and also, to a lesser extent Saraf’s) equity.

If everyone were able to come to the same table and document, that might end up being the least disruptive scenario for the firm and ironically the way that business were to remain as usual, for most.

Option 2: The break-up scenarios

If Luthra and Saraf do not eventually make up, it would very quickly turn from a question of fact into several questions of law and tricky ones at that.

Option 2a: Fair re-division

Like the most infamous other law firm break up of recent memories - the Shroff vs Shroff saga - this one could get complicated.

Unlike in Shroff vs Shroff, which were several separate partnerships that had different ownerships by each brother, Luthra has a majority stake and all offices and fee-earners are under the same umbrella.

However, the partnership deed itself contains several complications.

For one, neither side has the power to remove the other side from the partnership.

From what we understand from sources, if Luthra were to leave the partnership for instance, both sides can agree for Saraf to pay Luthra a goodwill payment for the L&L Partners and the (former) Luthra & Luthra Law Offices brand. All fee-earners and clients would also remain with the firm, in such a case.

But under the deed, Luthra would only be entitled to this goodwill payment (calculated according to a formula) if he did not practice law anymore, which might be an unpalatable outcome for him.

On the flipside, since Saraf owns a third of the firm that owns the brand name, Luthra would not be able to lay exclusive claim to the brand either, without Saraf’s agreement.

In short, the deed as written in 1999, likely would not allow for a division that would be mutually acceptable and satisfactory to both parties nowadays, now having more than 300 lawyers, without significant negotiations.

If both sides were to be able to meet at a negotiating table to hash this out, it would be the least disruptive break-up.

Option 2b: Let the courts try their hand

The far worse outcome, perhaps for all concerned, would be a legal battle in the courts.

And although judges are often loathe to let public spats between lawyers drag on too long in the courts, it could still end up being a damaging and sub-optimal outcome for the firm’s lawyers.

And considering the lack of an obvious and envisaged division strategy in the deed (as outlined above), both sides might have to ultimately mediate and settle for a solution anyway.

Option 2c: Saraf & Co splits in some way

Another possible outcome that some are saying could be a possibility is that Saraf and other disaffected partners leave en masse and start a new firm.

That too would be messy and there would likely still be a dispute between Luthra and Saraf about who owns the L&L brand name.

Fork in the road

Whatever will eventually happen, it is clear that yesterday’s Zoom call represents a fork in the road for L&L Partners that will alter its future significantly.

Exactly which road it will go down is impossible to know right now.

At the same time it’s worth remembering that partnership disputes in Indian law firms may be really messy but life usually goes on in some way or another.

And if you look at Shroff vs Shroff, arguably both firms are doing better separately now than they had been while they were still together.

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