World’s First Publicly-Traded Law Firm Facing Securities Class Action 

There’s a cautionary tale playing out in Australia over what can happen when law firms take money from outside investors, something that’s still prohibited here in the U.S.

Slater & Gordon became the world’s first publicly-traded law firm back in 2007, after the passage of legislation that allowed Australian firms to move beyond the traditional partnership model. The United Kingdom soon followed with its own law allowing outside investors in the industry.

Now, after a disastrous acquisition and crashing share price, Slater & Gordon finds itself on the wrong end of a class action suit.

As Chris Johnson reports for Law.com, Australian law firm Maurice Blackburn filed a securities case Wednesday against Slater on behalf of 3,000 shareholders, and another law firm, ACA Lawyers, has said its looking into filing its own suit. Both firms had first threatened the litigation back in December, according to Alison Frankel at Reuters.

As Law.com explains, Slater’s trouble goes back to when the firm acquired the professional services arm of U.K. insurance claims processor Quindell for 677 million pounds. According to Law.com:

The U.K.’s Financial Conduct Authority and Serious Fraud Office both launched investigations into the business and accounting practices at Quindell over the summer. Slater was then forced to write-down more than $640 million of goodwill relating to the Quindell deal after the business, which now operates as Slater Gordon Solutions, struggled with low case resolution rates and delays in achieving settlements.

Slater then went through a restructuring and laid off staff to avoid bankruptcy, but in August the firm said it had lost more than 1 billion Australian dollars. It’s share price has gone down by more than 95% in less than a year, Law.com reports.

Slater has said it plans to sue Quindell over the deal, and said Wednesday it hasn’t yet been served with the Maurice Blackburn complaint.

The firm’s troubles may make it even harder for those hoping to see U.S. restrictions loosen on outside investment in law firms. So far, various attempts to change the rules have failed amid fears that outsiders wouldn’t adhere to the same ethics as lawyers and sully the profession.

Proponents for a change argue that giving legal organizations access to capital would help spur competition and increase access to justice for those who can’t afford it.

Source: WSJ

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