Las Vegas law firm Gordon Silver, hollowed out by defections this year, is tangling in court with its former landlord and has moved to a small office suite after falling behind on the rent at its sprawling former headquarters.
It also has given a behind-the-scenes look at the resignations and the turmoil they’ve caused, as well as the financial health of the well-known, decades-old firm.
Owners of the Hughes Center office park, where Gordon Silver occupied three floors totaling about 54,000 square feet, sued the firm last month in Clark County District Court, alleging it owed about $786,000 in unpaid rent and, apparently, other fees.
The landlord said in court filings that Gordon Silver’s “failure to pay rent is the result of severe financial problems, which have been further exacerbated by the departure of numerous partners since January 2015.”
Wall Street heavyweight the Blackstone Group bought the 68-acre Hughes Center in 2013 and operates it through its Equity Office unit. An obscure limited liability company, apparently controlled by Blackstone, is suing Gordon Silver.
The landlord is seeking the appointment of a receiver, Las Vegas attorney John Bailey. His hourly rate is $650 and, if the landlord has its way, would take control of Gordon Silver’s finances, property, mail and other assets, court papers show.
A receiver is needed because Gordon Silver “may move, transfer, divert, conceal, or otherwise hide its money and property in order to avoid collection efforts,” according to court filings by the landlord.
A hearing on the possible appointment is scheduled for July 16, said Gordon Silver managing shareholder Mark Dzarnoski.
The landlord sent Gordon Silver a notice on June 4 that the firm had five days to pay rent or surrender its offices. Gordon Silver began moving out of the Hughes Center the night of June 5 and was open by June 8 in a 2,883-square-foot furnished suite at 500 N. Rainbow Blvd., near the U.S. 95-Summerlin Parkway interchange, Dzarnoski said in court papers.
Justice of the Peace Cynthia Cruz, of Las Vegas Township Justice Court, issued an eviction notice June 16.
In a phone interview Wednesday, Dzarnoski said he notified the landlord of the move around May 29.
“It’s not like we left in the middle of the night,” Dzarnoski said. “They were told what we were gonna do.”
Dzarnoski strongly disputed the landlord’s allegation that his firm would evade payments, a claim based "upon nothing but rank speculation," he said in a court filing this week. He added in the filing that, as a licensed attorney in Nevada for 27 years, he “would take no actions to hide, divert or conceal assets of G&S to defraud G&S’s creditors.”
In the interview, he said the only way the landlord could get a receiver is if there is “a danger” of that happening.
“They had to allege that ... whether it was true or false,” he said.
He acknowledged not paying the rent for June but said that amounted to roughly $100,000. The landlord has said in court papers that Gordon Silver’s monthly rent is currently about $160,000.
David Carroll and Anthony DiRaimondo, attorneys for the landlord, did not respond to requests for comment Wednesday.
Known for its bankruptcy practice, Gordon Silver had 39 local attorneys as of last spring, making it the sixth-largest in the valley at the time, according to VEGAS INC research. It now has two lawyers and 10 other employees on staff, Dzarnoski said.
Gordon Silver’s namesakes, Gerald “Jerry” Gordon and Jeff Silver, are among the many who left in recent months.
Roughly 15 Gordon Silver attorneys, including Gordon, departed to launch a new firm, Garman Turner Gordon. Thirteen other lawyers — seven in Las Vegas and six in Reno — joined rival Dickinson Wright.
Gordon Silver traces its roots to the 1960s, and Dzarnoski’s recent court filing gave a peek inside the firm’s rocky situation. As he described:
Nine shareholders, including Gordon and then-managing shareholder Greg Garman, announced at a meeting May 5 that they were leaving to start their own firm. Dzarnoski was picked three days later to replace Garman.
The day before Dzarnoski was picked, Gordon Silver chief financial officer Andrew Zimmerman told him that the firm did not pay its rent for May. Zimmerman also told him the firm had not paid rent for January through March but was negotiating with the landlord to pay those funds later.
The day he took charge, Dzarnoski paid May’s rent.
By the last week of May, “it was clear” that Gordon Silver “had been deeply wounded as an operating entity. Remaining lawyers and staff were uncertain of the future. It was becoming more and more difficult to generate new business matters. ... Even existing clients of remaining lawyers expressed concerns about keeping their matters with G&S because of the uncertainties. The remaining shareholders, associates and staff were, justifiably, actively seeking new opportunities.”
He added: “I made the decision not to pay the June lease payment, not because of insolvency or the lack of funds to do so, but rather pursuant to a developing longer term financial plan.”
Around May 29, he learned that “virtually all” of the remaining shareholders and other attorneys were in final talks to join another firm — apparently Dickinson Wright. That same day, he found and rented the new office suite.
The lease runs from June 1 through Nov. 30 this year. He paid the entire rental amount, $21,622.50, in advance.
Gordon Silver’s primary lender is Nevada State Bank, and the firm has three loans, totaling $2.5 million, from the bank. The firm owed a combined $2.17 million as of May 8 but was down to $1.53 million by June 30.
Gordon Silver had life-insurance policies acting as a collateral for the loans, but Dzarnoski sold them in May, generating $1.06 million in cash. He expects to owe Nevada State Bank just $470,000 to $500,000 by the end of July.
Despite its troubles, the law firm stayed in the black the past few months. Gordon Silver earned $261,650 in net income from May 8-31 and an additional $554,656 last month, according to Dzarnoski.
In the interview, Dzarnoski said he’s been working to collect invoices, pay bills and employees, and take care of clients.
He declined to say why so many people have quit the firm. He said he hasn’t “focused on looking backwards” but added that at some point he could talk about it.
“Until I’m done with this job, I don’t think I’m gonna be in a position to answer that,” he said.