- Case Type:
- Case Status:
- Reversed and Remanded
- 15-16326 through 15-16333 (9th Circuit, Feb 27,2020) Published
- Under the law governing law firms operating under the District of Columbia partnership law, hourly-billed matters are not property of the law firm, a former partner owes no continuing duty to the former law firm to account for new profits earned on hourly-billed matters originated at the former firm, and the dissolved firm has no interest in profits earned on hourly-billed matters following dissolution.
- Procedural context:
- The bankruptcy trustee of a dissolved law firm operating under the District of Columbia partnership law sued several law firm that hired former partners of the dissolved firm alleging that the bankruptcy estate was entitled to profits that the firms earned on hourly-billed matters that were initiated at the dissolved firm. The bankruptcy court denied the defendants' motions to dismiss, but the district court reversed. On appeal to the Ninth Circuit, the Circuit held that the dispute turned on the substantive law of the District of Columbia and certified certain questions to the District of Columbia Court of Appeals, which answered the questions. Based on the answers of the certified questions, the Ninth Circuit vacated the District Court's prior decision and remanded to the District Court for further proceedings consistent with the answers given by the District of Columbia Court of Appeals.
- The Howrey law firm dissolved in 2011. As part of the dissolution vote, the remaining partners amended the partnership agreement to provide that the partnership shall not have any claim or entitlement to clients, cases or matters ongoing at the time of dissolution other than entitlement for collection of amounts due for work performed on behalf of the partnership prior to the earlier of a partner leaving the firm or the dissolution of the partnership. Several years later the bankruptcy trustee for the firm sued eight law firms that hired former Howrey partners who brought with them hourly-biilled matters that originated prior to their departure. The trustee argued that the estate had an ongoing interest in the "unfinished business" of the firm and the partnership amendment constituted a fraudulent transfer. Denying the defendants' motions to dismiss, the bankruptcy court held that under the governing law of the District of Columbia, the "unfinished business" doctrine applied and the trustee stated a claim. The district court reversed, holding that under District of Columbia law a law firm has no ongoing interest in hourly fee matters performed after the departure of the partner. On appeal to the Ninth Circuit, the Circuit certified questions to the District of Columbia Court of Appeals, which answered that (1) hourly-billed matters are not "property" of the firm because clients own their legal matters, (2) the former firm has no claim to hourly-billed matters, (3) former partners owe no duty to the former firm regarding new profits earned on hourly-billed matters, and (4) the unfinished business rule is inapplicable to hourly-billed matters. Based on the answers, the Ninth Circuit remanded to the District Court to issue a new decision consistent with the answers.
- Gould, Murguia and Freudenthal
Margaret Kinney v. HSBC Bank USA
Summarizing by Lars Fuller
3285 in the system
2 Being Processed