Earlier this week, the New York Court of Appeals ruled that bankrupt law firms cannot claim profits from a client relationships after partners have moved on to new firms, according to Forbes.
The ruling from the court said that since clients have the right to choose representation for legal issues, a defunct firm cannot follow their former attorneys, looking for portions of their profits.
The Second U.S. Court of Appeals in New York requested that the state appeals court issue a ruling because it was considering the issue in a case involving Thelen LLP and Coudert Brothers.
“This is a major, major decision, and it’s an issue that’s been out there a long time,” Les Corwin said. Corwin is a partner at Blank Rome.
According to the New York court, bankrupt firms are not allowed to claim profits due to public policy. The court said that if this practice were permitted, it would cut down on mobility of clients and go against New York ethics rules that prohibit fee-splitting.
“If I’m representing you in a major matter in your life, I can’t pick up the phone and say `I’m going to another firm and I can’t take you because it will cost me a lot of money,’” Corwin told Forbes.