We've now had a chance to read the complaint in Sullivan & Cromwell v. Charney (PDF), the countersuit filed by S&C against its former associate, Aaron Charney. The Complaint itself is only ten pages, so it's a quick read.

Last month, Charney sued S&C, alleging anti-gay discrimination and retaliation. Last Thursday, the firm filed its own lawsuit against Charney, for breach of fiduciary duties, breach of contract, and conversion. The firm seeks injunctive relief, compensatory damages, and punitive damages. A preliminary injunction hearing is scheduled for this Thursday, at 9:30 AM, before Justice Bernard Fried (New York Supreme Court, Commercial Division).

When he first filed his own lawsuit, Aaron Charney didn't have a lawyer. But now he has two: Daniel Alterman of Alterman & Boop, and Herb Eisenberg of Eisenberg & Schnell. We aren't experts in the field, but based on their bios, Alterman and Eisenberg strike us as experienced and well-credentialed advocates.

A few random ramblings on the S&C Complaint, after the jump.

Overall Thoughts:

1. This lawsuit seems like an example of the time-honored countersuit strategy: "The best defense is a good offense." Sue the other guy, hoping you can settle both cases with a mutual release of claims: he drops his case, you drop yours, and everyone goes home happy (well, not happy; but everyone goes home).

2. Maybe our expectations were too high, or maybe we were hoping for more salacious material. But truth be told, we were a little underwhelmed by the S&C complaint.

Although there's undoubtedly a lot of factual material in here that's highly embarrassing to Charney, and that could even get him disbarred, the LEGAL claims don't seem super-compelling. Here's an interesting comment over at the WSJ Law Blog:

S&C claim[s] a breach of fiducuary duty cause of action based on violation of a Disciplinary Rule. They should see Louima v. City of New York, 2004 U.S. Dist. LEXIS 13707, 205-206 (D.N.Y. 2004) (“[defendants] have no standing to raise the issue of [plaintiff]’s alleged breach of the Disciplinary Rules;” “tactical deployment of the disciplinary rules … is highly disfavored,’ and . . . that a disciplinary rule may provide a basis for sanctions against an attorney ‘does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the Rule’”).

Also there is mixed law on the extent to which employees have “fiducuary duties” to their employers. The first cause of action is very weak.

Second, third fourth cause of action re breach of confidentiality provision and conversion are legally stronger — but what are damages? A very weak complaint overall.

3. Yes, what ARE the damages? Charney may have -- actually, he clearly has done -- some damage to S&C's reputation. But much of the damage comes from allegations in his Complaint that are not the basis of claims in S&C's countersuit. E.g., the horror stories about Eric Krautheimer and Alexandra Korry.

Paragraph-By-Paragraph Thoughts:

P3: Charney "was employed by S&C as an associate from September 2003 until today." It's official: he's been canned.

P5: S&C refers to its intial investigation into his claims as "an expedited investigation." Considering that they are now conducted another investigation, one can't help wondering whether "expedited" should be read as "cursory."

P6: After Charney initially complained about alleged discrimination and retaliation in May 2006, he "made no further complaint until the morning of January 16, 2007, when Charney posted a notice on the Greedy Associates board on infirmation.com that he had sued the firm."

Score a point for S&C. This does seem odd: he made some complaints to firm management, quietly went back to work, and then filed a full-blown lawsuit several months later. Pointing this out makes Charney look opportunistic, like he wanted a cause of action more than actual resolution of his concerns.

Update: This comment makes a good point:

[T]he claim that Charney made the official complaint in May 2006 and sat around for eight months before filing his complaint doesn't gibe with the assertion that Charney and an attorney tried to shake the firm down for eight digits. I can't recall where that assertion came from, though. Just strikes me as improbable.

The claim that Charney made "a multi-million dollar demand" of the Firm appeared in S&C's original response email.

P9: You know all that crap you sign on your first day at work -- one random form after another? If you ever get sued by your employer, some of it will undoubtedly return to bite you in the ass: "[Charney's duties to the firm] are further confirmed by numerous S&C policies to which Charney expressly agreed."

(In fact, if you read the fine print of the S&C forms, you see that each entering associate agrees to donate his or her kidney in the event that an S&C partner needs one.)

P10: "Charney has used the Charney Complaint as the centerpiece of a malicious public relations campaign, the evident purpose of which has been to embarrass and denigrate S&C, and to name S&C's clients unnecessarily as part of his campaign."

P12: "In furtherance of Charney's [PR campaign], the Charney Complaint gratuitously identifies a number of S&C clients and their personnel and reveals confidential information obtained by S&C during the course of its representation of such clients. The Charney Complaint also discusses S&C staffing issues on a number of other client matters."

Score another point for S&C. Charney's Complaint discloses more than it needs to in order to make its points. Charney could have redacted client names, described them at a higher level of generality, or reworded various allegations to avoid mentioning clients altogether.

But now that Charney has counsel, expect an Amended Complaint to get filed -- one that is more discreet, at least in terms of disclosing client information. Then Charney can chalk up his earlier indiscretions to his former pro se status and not knowing any better (although arguably even someone who doesn't practice in the area of employment law should have seen the steps that could have been taken to preserve confidences better).

P15: S&C complains about Charney's inclusion of the Partnership Agreement and argues that "[t]here is no good faith reason to attach a copy of this entire document to the Charney Complaint." This is a reasonable allegation. We agree with this comment:

s&c makes a good point about charney's attaching the partnership agreement to his complaint. it has nothing to do with his causes of action, and in any event, complaints are not allowed to have attachments.

One of you argues that the Agreement showed "that the [anti-discrimination] policy he was complaining under was never gonna be enforceable against a partner there anyway and that the partners can do anything they want." But perhaps the same point could have been made without including the entire agreement as an exhibit to a publicly filed complaint.

Also, how did Charney get his hands on the Partnership Agreement?

Additional comments will follow in a subsequent post.

Update: The subsequent post is available here.

Earlier: Sullivan & Cromwell v. Charney: S&C's Complaint