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May 11th, 2017

Cellino and Barnes Collapses (Updated)

Cellino and Barnes, perhaps New York’s largest personal injury firm, collapsed yesterday. Ross M. Cellino Jr. brought an Order to Show Cause asking why the firm should not be dissolved. The Buffalo based firm –  fueled  by a massive multi-million dollar advertising and marketing budget — expanded in recent years to open offices around New York and now in California.

Cellino’s partner, Stephen Barnes, is scheduled to respond in court on May 19th to the petition for dissolution of the firm. Details of the reason for the collapse will most surely come out in the lawsuit, along with accusations of some kind as between the two.

At stake in the suit are potentially thousands (tens of thousands?) of injured clients, whose cases now face the prospects of chaos, delay and disarray. It could be years before the entanglements of the two are sorted out, as issues involving its very expensive phone number (all 8s), marketing campaign (and jingle) and leases are sorted out while the lawyers jockey over how to manage the clients.

(Not all of its advertising revolved around its hokey jingle.)

The dissolution will also have to deal with potential future business — notwithstanding the disarray — and that such business was generated by the years-long marketing campaign.

Most assuredly, lawyers at the firm are now contacting high-value individual clients in efforts to persuade them to stay at one of the new firms bound to be birthed from the tumult and pandemonium that is likely taking place.

The firm currently has 70+ lawyers listed on its website — not large by BigLaw firms but ginormous in the personal injury field where firms of 1-5 attorneys are most common.

But it isn’t as if those lawyers can simply divvy up the clients — for it is the clients that get to choose the lawyers. If clients do not believe they’ve been treated well with personal attention in the past, they may flee the firm altogether.

Both Cellino and Barnes have a checkered history, notwithstanding their success in building their mega-firm. In 2005 Cellino was suspended from the practice of law for six months while Barnes was censured. (In re Cellino)

The two of them had, in violation of the Rules of Professional Conduct, advanced loans to numerous clients. Part of this was having a relative set up a high interest funding company for clients, and then directing clients to that funding company without informing them of the relationship.

Barnes was also cited for ambulance chasing (“Barnes sent a letter to a hospitalized surgical patient and concluded that such conduct was an impermissible solicitation of legal employment in violation of Code of Professional Responsibility.”)

My speculation: There are two main reasons for a law firm to dissolve — money and ego. So the leading contenders are that there are financial problems of some kind lurking in the background, or that Cellino (or Barnes) feels he deserves a bigger piece of the pie for some reason. Time will tell.

This story is one to follow given the inevitable problems that will result in the dissolution of a firm with thousands of clients.
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Update (5/12/17)As per the Buffalo News, the dissolution issues started when Cillino wanted to hire his daughter, a recent SUNY Buffalo law grad, and Barnes said no:

Cellino went to Stephen E. Barnes in 2015, asking that the law firm hire his daughter, Jeanna Cellino, a cum laude graduate of the University at Buffalo School of Law, one of the sources said.

“Steve said absolutely not,” the source said, adding that the disagreement became a major bone of contention between the firm’s two founders.

In addition, there are apparently issues over finances (no great surprise):

Some disputes over finances in the law firm also are part of the disagreement that prompted Cellino to file a lawsuit against his own law firm this week, seeking to dissolve the Cellino & Barnes law firm, the legal sources said.

There’s also a short quote from me in the story coming off of this blog.

And from the NY Post comes a confirmation of sorts from the comments about Barnes wanting the California business and Cellino wanting New York:

Barnes wants to focus on the California end of the business, Cellino wants the East Coast, and the partners simply want a judge to referee the complicated split, [Cellino’s father]  said.

But the scuttlebutt around the Buffalo personal-injury and defense pubs is that Cellino Jr. — a minority partner in the firm’s San Francisco and Los Angeles offices — is feuding over money with Barnes, who has already moved to the West Coast.

This, of course, doesn’t explain why the split isn’t amicable.

One thought on “Cellino and Barnes Collapses (Updated)

  1. Latest buzz is Barnes wants to focus on the Cali offices (and already lives there?), Cellino stays in NY. But compensation for equity in the different states for a split appears to be an issue.

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