By Stephen Nellis Friday, October 12th, 2012

The “guillotine termination” of two partners from a Ventura County law firm has erupted into an acrimonious court battle over confidential client lists and more than $4 million in alleged damages.

In a lawsuit filed in Ventura County Superior Court, Roy and Ted Schneider claim they were unexpectedly expelled from what was then Myers, Widders, Gibson, Jones & Schneider. The firm’s clients included a number of municipalities in the Tri-Counties, but the partnership has lost attorney positions in Ojai and Fillmore in the past year.

The plaintiffs allege Myers Widders set out to fire them after Ted Schneider got into a “heated argument” with Acting Managing Partner Lee Gibson over Ted Schneider’s removal from the city attorney post in Fillmore. The Schneiders allege the move cut them out of a $2.4 million share of the firm’s profits they are entitled to and that they are owed $4 million in damages.

“Lee Gibson, as managing partner, engaged in what is referred to in the case law as a ‘Guillotine Termination,’” the pair’s attorney, Michael McQueen, alleged in court papers. The papers describe the termination as “motivated by simple, unmitigated greed, and a blatant client grab.”

Myers Widders, the fifth-largest law firm in the Tri-Counties prior to the separations, has denied all the allegations and has cast the ouster as a routine separation. “This is nothing but a business divorce,” Gibson told the Business Times.

Schneiders & Associates, the new firm formed by Roy and Ted Schneider in Oxnard, said it could not comment on the ongoing proceedings.

In their complaint, the Schneiders allege that Ted Schneider was unfairly blamed for losing the city attorney position in Fillmore and that no similar accusations were made when Monte Widders stepped down from the Ojai city attorney position.

Ted Schneider, who alleges he has a depressive mood disorder that was known to the firm’s partners and that affected his ability to manage stress and anger but is now controlled with medications, confronted Gibson over what he perceived as disparate treatment. The Schneiders say the firm made no allegation of wrongdoing or incompetence against Ted Schneider, “except for having the temerity of standing up to the managing partner Gibson.”

Ted Schneider has been a partner since 2009, and his father, Roy Schneider, has been a partner for 12 years. The firm’s partnership documents required a unanimous vote to expel a partner, according to court documents. To fire Ted Schneider alone, the firm would have needed Roy Schneider to vote to expel his own son. So the firm proposed to fire them both, the complaint alleges.

The Schneiders lost a bid asking Judge Barbara Lane to issue a court order to stop the partnership vote. At a hearing on July 27, shortly after the complaint was filed, the Schneiders tangled with Gibson over access to the firm’s offices and client lists. Roy Schneider argued that he needed access to his offices and a list of clients so he could contact ones with current cases.

Gibson argued for releasing a more limited list of only clients that the Schneiders had brought to the firm. “We don’t have a definition of his or hers or theirs. They’re firm clients,” Gibson said in a court transcript.

Schneider disagreed. “Somebody may have originated a client five years ago, ten years ago, [and] I now handle the client. I opened the file for them. I’m responsible.”

Gibson later rebutted: “I have oftentimes turned over my clients that I have generated to Mr. Schneider to do corporate work or other things, and I would be offended if he contacted those who are my personal friends, my clients that I’ve built up through substantial work and handed over to him for limited work.”

In the end, Judge Lane endorsed granting access to a list of originated clients, and Gibson agreed in court to provide the list during a “cooling off” period. Or so it appeared. Within several days, the list did not appear, and the Schneiders applied for a motion to enforce the oral agreement reached in court. The judge didn’t grant the request because there had been no court order about the list, only the oral agreement.

Instead, Myers Widders has moved to place much of the case under seal before releasing any documents. The Schneiders are protesting that motion. “Despite the agreed-upon ‘cooling off’ period, [Myers Widders] have engaged in an onslaught of unreasonable and burdensome discovery, deposition notices and this bad-faith motion as a tactic to prohibitively increase costs to coerce a more favorable settlement,” McQueen, the pair’s attorney, wrote.

It is unclear from court transcripts whether McQueen consented at the July 27 hearing to a proposal to seal two specific documents, or a broader order that would seal the entire case. [See related sidebar, below.] McQueen now argues that the Schneiders did not agree to a blanket seal.

SIDEBAR: Judge aims to keep dispute under wraps

Through recent breakups and departures involving some of Ventura County’s largest firms, there’s been an unwritten rule: Members of the bar don’t air their acrimony in public.

As the bitter dispute between Myers Widders and the Schneider father-son team unfolded in court, statements from the bench from Ventura County Superior Court Judge Barbara Lane appeared to firmly support that tradition.

She made her views known nearly a month before Myers Widders moved for the court order to seal any documents that would show the inner workings of the firm. Here is an excerpt from a July 27 proceeding about public access to documents. The exchange is between Judge Lane and Michael McQueen, an attorney representing the Schneiders:

• Judge Lane: … I’m going to have my clerk sometime next week place … the [Myers Widders] partnership agreement and the Schneider declaration in a sealed envelope. And I’m also going to keep the entire file in my chambers so it’s not downstairs and available to access by the public.
And later down the road, if we get this dispute resolved, I’m not aware of any legal prohibition against our sealing the whole file … I think we just put it under seal of protective order.

• McQueen: We would have no objection to that.

• Judge Lane: So that’s how we’ll handle it. But at this point there’s going to be nothing downstairs for anyone to see. And although we haven’t really reached an agreement as to disparagement, I think the whole point of our efforts here are to enable this to become two successful new firms …