Rift between rainmakers complicates Dentons' Mexico deal

All has not been smooth with Dentons’ latest global expansion effort.

On Monday, the fast-growing 7,300-lawyer firm clinched a combination with a 13-lawyer shop based in Mexico City. But the final deal with the local firm – previously known as Lopez Velarde Heftye y Soria (LVHS) – was far from the one Dentons’ partnership voted to approve last November.

Dentons’ newest branch, known as Dentons Lopez Velarde, no longer includes former LVHS name partner Gerardo Soria, a well-known telecommunications lawyer in Mexico, and his seven-lawyer telecom, technology and media group.

Soria took his entire team out of the deal earlier this year after a bitter dispute over the handling and distribution of Dentons’ initial referrals this past winter.

The rupture, only recently disclosed publicly, reveals new details about the terms of Dentons’ combination in Mexico and may offer clues about the nature of some of Dentons’ other global affiliations. The split between Soria and his former colleagues could now turn into litigation.

Speaking to The Am Law Daily this week, Soria said he is considering suing Rogelio Lopez-Velarde, his former partner and energy practice leader, who now serves as head of Dentons’ Mexico office.

Marketing and misuse
Soria alleges that Lopez-Velarde falsely marketed and misused the telecom group’s client list, fees and other business records in negotiations with Dentons’ partnership, which voted to approve the combination on 30 November 2015.

Soria also claims that his team has operated independently of LVHS since 2003 as Soria Abogados, sharing the same office space and website but managing twin business lines separately. Soria asserts that LVHS owes him roughly $1m (£686,000) in capital still held by the firm, now part of Dentons.

It was very attractive not to be controlled by anyone, to keep our independence

Spearheading negotiations at Dentons, said Soria, was the firm’s Latin America CEO, Jorge Alers, a former co-head of Paul Hastings’ Latin America group and general counsel of the Inter-American Development Bank, who joined Dentons in late 2014 to lead the firm’s expansion efforts in the region.

Soria, a former attorney general and commissioner of Mexico’s Federal Telecommunications Commission, said he met with Alers in August 2015. Soria’s clients during the past two decades include some major Mexican telecoms companies such as Grupo Televisa SAB, as well as Spain’s Telefonica and Connecticut-based Xerox Corp. He has advised on a number of major Mexican telecom and technology transactions, while also handling cross-border investments by Mexican clients throughout Latin America.

Soria said that Alers subsequently met with Lopez-Velarde, the managing partner of LVHS and head of the firm’s energy practice. Soria said he and Lopez-Velarde agreed to jointly operate as a part of Dentons, which operates under a Swiss verein structure. But Soria added that he initially believed the partnership would allow the small Mexican firm, which had a failed association with Hogan Lovells a few years earlier, to expand into new areas. (Hogan Lovells absorbed its own Mexican firm in 2014).

A promise of freedom
To clinch a deal with LVHS, Dentons promised complete freedom on compensation, hiring and other decisions, as well as a steady stream of inbound referrals, Soria said.

“I liked the polycentric model,” he added. “It was very attractive not to be controlled by anyone, to keep our independence.”

Soria noted that becoming part of Dentons, which finalised a landmark combination with a Chinese legal giant last year, did not seem onerous. His office in Mexico City would be required to send 2% of its annual income to the global management as overhead, plus 23% of inbound referral fees.

If the lawyers do not run matters through the conflicts system, it doesn’t work

Referral work soon began flowing from Dentons to LVHS, funnelled through Lopez-Velarde as managing partner, said Soria. He asserts that two telecom transactions that should have been passed to him were instead kept by Lopez-Velarde and assigned to two junior energy lawyers, though neither had the expertise to handle such matters.

Soria also alleged that one of the transactions involving a radio station asset in Monterrey posed a potential conflict with his client work, and that a conflicts check wasn’t made as it should have been. Dentons has “systems for [conflicts] on paper”, added Soria. “But if the lawyers do not run the matter through the conflicts system, it doesn’t work.”

Locked out
A phonecall and detailed email sent to Lopez-Velarde were not returned by the time of this story. In an April story appearing in regional trade publication Latin Lawyer, Lopez-Velarde said in a statement that Soria had been working in a practice of his own, “to a large extent isolated from the rest of our firm, for quite some time”. The local firm told Latin Lawyer that the split with Soria was independent from its merger with Dentons: “For Lopez-Velarde, there has never been a more exciting and positive time at the firm.”

Soria didn’t disguise his distaste for Lopez-Velarde and admitted that the deal with Dentons exposed new rifts between LVHS’s two rainmakers. Soria said he brought his concerns to Alers’ attention on 2 Feb 2016. “I said I wouldn’t be willing to enter into an association with Dentons if they weren’t able to solve these problems,” Soria said this week.

Two days later, Soria claims, he and his team were locked out of LVHS’s building and blocked from accessing their email and office server. He broke off Soria Abogados from LVHS on 5 February, three days before the firm voted to combine with Dentons.

Dentons is pleased that Dentons Lopez Velarde has launched operations in Mexico, and this dispute has no bearing on that launch

A spokesperson for Dentons said: “Dentons rejects the baseless allegations made by a former partner of Lopez-Velarde, who has been involved in a dispute with the firm that predates the combination launched this week. We do not believe that these allegations are worthy of additional comments. Dentons is pleased that Dentons Lopez Velarde has launched operations in Mexico, and this dispute has no bearing on that launch.”

Dentons, which this week announced it would slash 50 jobs in the UK as part of a new business services centre being opened in Warsaw, has had other issues stemming from combinations closed within the past year.

The firm is currently trying to collect almost $2m from former partners at McKenna Long & Aldridge, according to a report last month by sibling publication The National Law Journal. Dentons absorbed McKenna Long last year.