Clifford Chance’s compensation dispute with two former US partners arrives five months after the firm lost the pair, along with a third partner, to a rival’s funds practice and now tests how far a Magic Circle firm can go in demanding repayment from partners who leave.
Clifford Cone and Michael Sabin, the former co-heads of Clifford Chance’s US funds and investment management practice, have sued the firm after it demanded they repay a combined $5.8 million in compensation following their departure.
Cone and Sabin left Clifford Chance for Sidley Austin effective January 20, alongside a third Clifford Chance partner, Daniel Drabkin, who is not a party to the suit.
Sidley brought in all three as partners in its New York investment funds group, with Sidley executive committee chair Brian Fahrney and global investment funds head Elizabeth Fries describing the hires at the time as strengthening the firm’s coverage of registered funds, private equity and credit fund formation.
Cone and Sabin’s client list at Clifford Chance had included BlackRock and Blackstone, among other asset managers with substantial fund-formation work. The $5.8 million figure reflects compensation Clifford Chance sought to claw back under terms tied to the partners’ exit.
Sidley has spent the past year building out its New York funds bench with hires from Kirkland & Ellis and Weil Gotshal, making this dispute a test case other firms in that hiring race will watch closely.
Clifford Chance’s clawback demand is now being fought in court rather than negotiated privately, which changes the calculus for any partner weighing a lateral move with unresolved compensation terms still on the table. Law firm management drafting partnership agreements, and general counsel reviewing indemnification language for incoming laterals, have a live ruling to point to once the case resolves.
Clifford Chance’s general counsel will need to defend the clawback terms in court, with the outcome likely to shape how firms on both sides draft and enforce similar provisions going forward.