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Heller Ehrman LLP Loses Battle to Recoup Profits from Unfinished Work
A federal judge in San Francisco ruled that defunct law firm Heller Ehrman LLP does not have the right to profits from any unfinished legal work that its ex-partners brought with them to new firms, according to The Wall Street Journal.
Judge Charles Breyer issued his ruling on Wednesday and dismissed the lawsuits filed by the Heller trustee against the firms of Davis Wright Tremaine LLP, Jones Day, Foley & Lardner LLP and Orrick, Herrington & Sutcliffe LLP.
Judge Breyer wrote the following in his ruling: “Heller ceased to be able to represent its clients, leaving them with no choice but to seek representation elsewhere. Defendants came to the rescue of these clients and provided them with legal services on ongoing matters. . . Defendants did the work that generated the fees at issue here. With the Defendants those fees should stay.”
This ruling could help arguments made by law firms that hire partners from defunct firms who are sued for profits stemming from unfinished work. Firms claim that this practice restricts the ability of clients to choose which lawyer they wish to hire and restricts the mobility of lawyers.
A Jones Day partner from the case, Shay Dvoretzky, said, “A firm that dissolves simply has no right to profits that somebody else earns on a client matter that the old firm abandoned. This is a very well-reasoned opinion by a respected district judge, and I hope it will be persuasive to other judges considering similar issues on other law firm bankruptcies.”
Earlier this year, the bankruptcy judge presiding over the Heller case rejected the claims by the firms mentioned in this post, ruling in favor of Heller.
Christopher Sullivan, who represents Heller’s estate, said, “We continue to believe the bankruptcy court was correct, and we expect there will be an appeal.”
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