Howrey Bankruptcy Court: Trustee can go after billables collected from firms where Howrey’s partners went

An article is here.  (Note to WSJ:  I would have linked to you but… noOOoO.)  I found the case, but only on Westlaw, not at the N.D. Cal’s bankruptcy site.  This is a potential big monkey wrench on hiring lawyers from imploding and exploding firms…

About David

Professor of Law, Mercer University School of Law. Formerly Of Counsel, Taylor English Duma, LLP and in 2012-13, judicial clerk to Chief Judge Rader.

3 thoughts on “Howrey Bankruptcy Court: Trustee can go after billables collected from firms where Howrey’s partners went

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    Yes, I want to read the case. I think he’s saying it’s not just receivables, but any future income (and not just contingent fees, which I understand). I’m downloading it from west law…

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    Interesting, but it seems reasonable to me.

    From the article:

    “He [the judge] has this idea that if you leave a law firm…and take the client with you, then the old firm has the right to all the profits on that business,” Robert Mittelstaedt, a partner from Jones Day, said about the Howrey ruling. “He is almost treating the clients as chattel.”

    I haven’t read the case, but I assume that he’s overstating the matter. Presumably this ruling only applies to matters that are in progress but unfinished at the time of the dissolution – not all future business from that client. So he’s not treating the clients as chattel, but is treating existing contracts as assets of the original firm. Further, it’s not so much that the “old firm” has the right to those profits, but that the old firm’s creditors have rights that come before those of the departing partners.

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      Oh, never mind – I see that the judge apparently said “there is no reason to limit the definition of Howrey unfinished business to matters pending as of dissolution.” That doesn’t sound right. That would suggest that the departing partner would have to refuse future work from his former clients, which in turn would mean that the clients wouldn’t necessarily be able to hire the lawyers they want.

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