In early 2024, two hard-nosed lawyers who had just helped defeat a $55bn pay package for Tesla chief executive Elon Musk gave an exultant talk at Columbia Law School detailing their stunning triumph over the world’s richest man.
Now those two star partners, Greg Varallo and Jeroen van Kwawegen, are at the centre of an ugly rupture at the powerhouse shareholder law firm Bernstein, Litowitz, Berger & Grossmann.
On Thursday, van Kwawegen announced he had departed BLB&G to form his own firm, JVK Law, and that about a dozen lawyers representing virtually the entire BLB&G corporate governance practice, as well as additional support staff, would soon join him.
The one exception to the exodus: Varallo, the group’s marquee figure and architect of the Musk lawsuit, who is remaining at BLB&G.
Coincidentally or not, a decision from the Delaware Supreme Court on Musk’s pay package is expected any day and will give final word on both the cancellation of the $55bn arrangement and a $345mn attorney’s fee award which mostly accrues to BLB&G.
In an interview with Bloomberg Law on Thursday announcing his new firm, van Kwawegen said he “had a fundamentally different vision about what the law firm should look like, what the culture is that you should have and whose interests you should be serving first”, an apparent criticism of his previous firm’s management.
BLB&G later fired back in a statement, saying it was “disappointed that Mr van Kwawegen has made misleading statements about his departure from the firm”.
BLB&G added that van Kwawegen had not left voluntarily but had been terminated after the firm’s leadership determined that he “engaged in misconduct that was inimical to the best interests of the firm”. The firm declined to specify the nature of the alleged misconduct.
It added that Varallo was remaining at BLB&G, that the firm had a “world-class trial team” and that it “anticipate[d] a strong pipeline of new cases and milestone outcomes ahead for 2026”.
“I am very excited about the future. Institutional investors increasingly seek out counsel that is creating value, client-centred and trial-ready,” van Kwawegen told the Financial Times, adding that more BLB&G lawyers could be joining his venture.
He also denied engaging in any wrongdoing at BLB&G: “Any claim of misconduct is pretextual and disappointing.”
Van Kwawegen’s quarrel is not with Varallo himself, but rather with the firm’s highest leadership, including top partners Max Berger, a co-founder, and Jerry Silk. BLB&G declined to comment beyond the statement. Any litigation between the firm and van Kwawegen would be addressed through arbitration.
“I love the man and it is unfortunate that, for reasons specific to him, Greg couldn’t be included with the rest of the Department of Governance when they decided to leave. It is a bit sad to think of him sitting in a virtually empty office in Delaware,” van Kwawegen said.
One BLB&G lawyer wondered how van Kwawegen would fund his cases as BLB&G had traditionally eschewed litigation finance, relying instead on the firm’s large partner capital base.
Another BLB&G lawyer expressed optimism about the new firm’s prospects. “The group that went is fabulous,” one lawyer within BLB&G conceded. “They will be a juggernaut.”
In any instance, the public fracas has rocked an important corner of corporate law just as regulators and politicians are seeking to shift the legal balance between companies and investors.
“Jeroen has pulled off a masterful coup. My hat is tipped,” said one rival shareholder lawyer.
BLB&G was founded in 1983 and has more than 100 lawyers across the US. It made its name in federal securities law litigation, typically bringing class action lawsuits on behalf of shareholders against listed companies, alleging that sharp drops in stock price were the result of disclosure failures.
On its website, it counts seven different cases where it won shareholder recoveries of more than $1bn, against the likes of WorldCom, Bank of America and Merck.
To their critics, such plaintiff-side firms are gadflies or “ambulance chasers” who file nuisance suits to get quick settlements and take large cuts for themselves of minor amounts won.
However, the top firms insist they are skilled at handling complex, multiyear trials over allegations of serious executive misconduct, taking on the elite New York white-shoe practices that defend Fortune 500 companies. Moreover, shareholder firms can only make money on “contingency” if their shareholder clients win a judgment or a settlement. BLB&G told the Delaware court that it spent nearly 20,000 hours on the Musk pay case.
BLB&G launched what it called its corporate governance practice to pursue state law claims of fiduciary duty breaches in the mid-2000s, hiring a then young lawyer from Skadden, Mark Lebovitch who later retired from the firm in 2023 to teach in law schools.
Van Kwawegen joined BLB&G from Latham & Watkins in 2009 and Varallo came on board in 2019 from Richards, Layton & Finger, a leading Delaware corporate defence firm.
In 2014, the Delaware Supreme Court issued a ruling that largely ended the practice of nuisance lawsuits where most challenges to M&A transactions resulted in a quickly dismissed lawsuit that still netted shareholder firms a fee of a few hundred thousand dollars.
The court, at the same time, told plaintiff’s law firms that if they could bring substantive cases showing that the corporate board had corruptly short-changed shareholders, it would approve big judgments and big awards for lawyers. In 2023, counsel to shareholders who won a $1bn settlement over Dell’s acquisition of EMC Corporation took home a fee of $267mn.
Varallo and van Kwawegen, on behalf of BLB&G, had petitioned the court for a $7bn fee in the form of Tesla shares for the victory in the pay package case, a figure that shocked even some plaintiff law firms who were otherwise sympathetic to BLB&G.
The trial court knocked down that number to $345mn, still the largest single award in Delaware history, should the state’s supreme court confirm it.
The firm, however, recently lost two high-profile cases at the Delaware Supreme Court, one against Columbia Pipeline, the other against Straight Path Communications. The losses demonstrated the tension between deciding to settle cases or rolling the dice on judicial rulings that might take years with no eventual pay-off.
Van Kwawegen had intimated in his recent public statements that he and BLB&G had disagreed on litigation tactics and strategy, though the firm has maintained that it has no hesitation in taking matters to trial.
At the same time, the future of Delaware corporation litigation remains uncertain as the state has recently enacted sweeping changes to protect boards of directors from shareholder lawsuits. The legislature is also considering a new law to potentially reduce fees paid to lawyers who win big settlements or judgments.
For now, the legal community is looking to see which clients stay with the reconstituted BLB&G governance group and which land at JVK Law, which will have to determine how to underwrite the considerable investment in contingency cases.
And then there is the future of Varallo himself at BLB&G. One person familiar with the terms of his employment contract said he had a “shitload of money” at stake that required he stay at the firm through the payment of the Musk lawsuit fee award.
Late on Sunday, BLB&G told the FT that Lebovitch had agreed to return to the firm as co-head of the group, alongside Varallo.
“In the face of the changes in Delaware law, you have got to have the best. Mark and Greg have done it before and they will do it again,” said Jerry Silk, a BLB&G senior partner and member of the firm’s management team, who added that at least one lawyer who was set to leave with van Kwawegen was now considering a return to BLB&G.
Varallo, now in his 60s, is currently representing a hedge fund in a Delaware court seeking to upend the banking merger between Comerica and Fifth Third, as well as leading a trial next year in Oklahoma challenging billionaire Harold Hamm’s 2022 take-private of his oil driller, Continental Resources.
The drama at the firm that took down Musk has not escaped the entrepreneur’s fans on X.
“When 8+ partners walk out [of BLB&G] citing concerns about whose interests the firm serves, that’s not just a personality conflict — that’s a crisis of purpose,” read one X post on Thursday.
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