EY takes Alvarez & Marsal and former Australian partners to court
The Australian business of EY is mounting a legal challenge against market disruptor Alvarez & Marsal over a number of partnership defections and potential breaches of restraint clauses.
As per the court filings, EY is suing both Alvarez & Marsal (A&M) and five of its managing directors, who are among 17 former partners A&M has poached from the Big Four firm since ramping up its local operations.
Lodged in August and moving into pre-trial directions last week, the EY case against A&M and its former partners – which includes A&M tax leader Sean Keegan and four others who crossed in a massive raid to launch the division at the start of the year – is seeking documentation on a number of matters, including any material related to their meetings with A&M prior to officially joining.
Established in 1983 and based in the US, Alvarez & Marsal is today one of the world’s biggest consultancies, with offices in around 40 countries and a global headcount of more than 10,000 advisers. Despite this considerable footprint, the firm only had a limited presence in Australia up until late 2022, when it launched what can only be described as an all-out assault on the local market.
Since aligning its ASEAN practice with Australia and seriously setting up shop in Sydney, Melbourne and Perth roughly two years ago, Alvarez & Marsal has embarked on a giddy recruitment spree, poaching more than 30 partners from the local Big Four along with a handful of senior leaders from top-tier management and strategy consultancies McKinsey and Boston Consulting Group.
The advisory hasn’t remotely shied-away from this aggressive approach – openly boasting of its attractiveness to former Big Four professionals frustrated by audit conflicts – but will now face a court battle in Australia to determine if it has crossed the line in some fashion during or after the initial recruitment phase, when ex-partners are typically bound by a cooling off period.
Preliminary discovery
According to the discovery documents, EY’s action in the NSW Supreme Court appears to centre around concerns for breaches to client confidentiality and solicitation clauses within the now A&M managing director’s previous partnership agreements, as well as the level of engagement they had with the firm and any privileged information shared prior to formally commencing employment.
For example, EY is demanding the handover of documentation covering meetings had between the former partners and A&M, including any materials related to the defendants’ clients and the services they provided while at EY, as well as any copies or extracts of the partnership agreements themselves which A&M might possess and details of when and how they came to do so.
Further, EY is seeking any material prepared or sent by A&M to the Big Four firm’s clients offering services or ‘foreshadowing’ those which would become available prior to the partners’ termination dates, and any records concerning EY personnel referring to the proposed or actual copying of documents or the disclosure of EY information to A&M since the beginning of last year.
An EY spokesperson told the AFR that the firm was “pursuing its rights under the partnership regulations in relation to a number of former partners,” but wouldn’t comment further due to confidentiality requirements with the matter still before the courts. A&M also declined to comment, with the next scheduled hearing in the case set for the first week of March.
