Herbert Smith is threatening to bar star real estate partner Chris de Pury from joining a rival firm for up to two years, it has emerged, in what would be the toughest exit terms yet publicly imposed on a City lawyer.
The top 10 City firm is in “bitter” exit negotiations with de Pury over his move to Berwin Leighton Paisner (BLP), which is thought to have resulted in de Pury consulting legal counsel.
Herbert Smith has indicated that it may enforce a rare restrictive covenant that would prevent him working as a lawyer for one year after his 12-month notice period.
The dispute will be watched by City law firms looking to gauge the extent to which tough restrictive covenants are enforceable.
De Pury — who handed his notice in to leave for BLP in March — is one of the top real estate lawyers in the City and talks over his exit from Herbert Smith have become increasingly acrimonious, with lawyers in the firm describing the situation as “bitter”.
It has been claimed that Herbert Smith is looking to make an example of de Pury as it very rarely loses equity partners to rivals.
De Pury’s clients include Hammerson and Chancerygate Group and he has just secured one of the most coveted real estate mandates of the year after being instructed by Qatari investment group Delta Two on its £12bn bid for Sainsbury’s, which has major property issues.
It is understood all Herbert Smith equity partners agree to an unusual restrictive covenant limiting their ability to work as a lawyer at a rival firm for a year after they leave. This is in addition to their notice period. Herbert Smith insiders have indicated, however, that it is more likely de Pury will be held to just one year’s notice period.
Partnership expert Ronnie Fox said: “The leading case on restrictive covenants with regard to law firms says this would be enforceable, but it was decided 20 years ago. Most partnership lawyers think that it would be decided differently today.”
The City has seen a number of heated debates over exit terms in recent years. Examples include the Norton Rose securitisation team that joined Baker & McKenzie after six months’ notice in late 2005 with restrictive covenants about approaching clients for a year on top of this.
Herbert Smith itself was on the receiving end of Denton Wilde Sapte’s partnership terms when the firm enforced the notice periods of leveraged finance partners Chris Fanner and Ian Yeo, who both quit to join Herbert Smith in 2005.
One partner at a magic circle firm told Legal Week: “Most firms have restrictive covenants but it is unusual to hold someone to them. To be enforceable, they have to be reasonable and I would not have thought this would be reasonable.”
Herbert Smith confirmed discussions about a possible early exit were ongoing. All parties declined to comment further.
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