UPDATE: Jeff Kwatinetz, CEO of The Firm, issued this statement Monday: “I am sorry to lose Rick as a partner, but I remain proud to call him a dear friend. I wish him well.”

I’m told that Rick Yorn later this week will be setting up his own management company, which his ex sister-in-law Julie Yorn will be joining to run the production side of the biz. All of Rick’s day-to-day point clients will be going with him, including Marty Scorsese, Leonardo DiCaprio, Cameron Diaz, Justin Timberlake, Benicio Del Toro, and Rick’s brother, musician Peter Yorn. “It was time for them to do their own thing,” a source told me after Yorn and The Firm’s Jeff Kwatinetz made the divorce official Sunday. Also joining the Yorns will be their Firm colleague Jennifer Killoran, who co-manages DiCaprio and Timberlake with Rick as well as runs Leo’s production company Appian Way. Killoran’s clients also include director-writer Richard Kelly (Donny Darko), Robert Schwentke (Flight Plan), and writer John Orloff (A Mighty Heart). All are going with her.

I’ve been hearing buzz that the Yorns were about to leave Jeff Kwatinetz (photo left) and The Firm since May 2007. (See my previous, Is Marty/Leo Manager Rick Yorn In Play?) Then a new rash of rumors made the rounds in late summer. I had even heard that the Yorns told their close associates a month ago that they were leaving The Firm. There were many in Hollywood anxious for Rick and Julie to be “in play” because several big agencies and management companies hoped to get the Yorns to work for them. I know discussions were held over the past several years with CAA, Endeavor and ICM, for instance. But Yorn had been telling the tenpercenteries that he didn’t want to become an agent. The Yorns’ deal with The Firm was up in June 2007, sources say, and Rick was coy about signing another contract. He’d been a principal since an internal restructuring in 2005 when Kwatinetz and Yorn renewed and extended their partnership. Yorn has been there ever since he rather famously left Addis/Wechsler and joined up with Michael Ovitz’s short-lived Artists Management Group, which was then sold to The Firm in 2002. Kwatinetz for the past 18 months had been trying to knock down the bad buzz by telling Hollywood that Yorn was “solid” with his company. But many still doubted that the Yorns were going to stay. Needless to say, this is a big blow to The Firm.