When a Law Firm Goes Bankrupt, Who Gets the Hourly Billings on Unresolved Matters?

Sometimes businesses (including law firms) go bankrupt and sometimes…this unfortunately happens during pending litigation. This raises an interesting question — Under California law, does a dissolved law firm have a property interest in legal matters that are in progress but not completed at the time the law firm is dissolved, when the dissolved law firm had been retained to handle the matters on an hourly basis?

Recently, The 9th Circuit Court of Appeals sought some guidance, posing the question to the California Supreme Court and asking it to put the matter to bed once and for all.

According to Bloomberg News, “The answer will decide whether four law firms — Jones Day, Orrick Herrington & Sutcliffe, Davis Wright Tremaine and Foley & Lardner — should pay the estate of defunct law firm Heller Ehrman for unfinished business its former partners took following the firm’s 2008 collapse. The four law firms before the 9th Circuit, however, have refused to settle lawsuits filed against them by the bankruptcy trustee. They argue that when partners left Heller their new firms acquired their client matters, which they continued to work on.”

Chris Sullivan, a lawyer for the trustee, said, “we think that the California Supreme Court will follow the prior California decisions, and the reasoning upon which they are based, and resolve the issues of state law in our favor.”

Disputes can happen at any time and can even outlast a law firm’s ability to work on them. The next time a dispute affects your company such as a landlord/tenant matter, contract dispute, or even a debt that needs to be collected, Dean Sperling Law will be there for you to resolve that dispute with your best interests in mind.

More on the case:

California Has Some Unfinished Business with Law Firm Bankruptcies