Twenty years ago, when I was hired by The Recorder in San Francisco as a cub reporter, my beat included covering Heller Ehrman White & McAuliffe. As an institution, it seemed to me as impressive and permanent as the Golden Gate Bridge—for which firm lawyers in the early 1930s arranged financing.

The 118-year-old firm's dissolution in 2008 shocked and saddened me in a way that the fall of Brobeck, Phleger & Harrison in 2003 or Howrey in 2011, for example, did not.

The California Supreme Court justices sound like they felt the same way.

“Like 'cloud-capp'd towers,' 'gorgeous palaces,' and perhaps someday even 'the great globe itself,' many arrangements endure for some time but eventually dissolve,” is how the court (quoting The Tempest) kicked off its opinion in a closely-watched case stemming from Heller's bankruptcy.

The key question before the justices: whether a dissolved law firm retains a property interest in legal matters billed on an hourly basis that are in progress at the time of dissolution.

The court's answer—no—is not particularly unexpected, but that doesn't diminish its importance.

It's not an area of rich jurisprudence in California, which boasts 266,716 bar members. “Only twice previously—in the late 19th century—have we addressed the fiduciary duties of a dissolved law firm's former partners regarding the unfinished business at the time of dissolution,” wrote Justice Mariano-Florentino Cuéllar in the unanimous opinion.

Heller's court-appointed liquidation plan administrator, who was responsible for pursuing claims to recover assets for the benefit of Heller's creditors, sued 16 law firms that hired Heller partners post-collapse.

Represented by Diamond McCarthy's Christopher Sullivan, the administrator sought to recover from the shareholders' new firms the profits generated by ongoing hourly fee matters that former Heller partners brought with them to their new homes.

Most of the firms settled, but Orrick, Herrington & Sutcliffe; Jones Day; Davis Wright Tremaine; and Foley & Lardner opted to litigate.

The case came down to two competing principles—the client's right to choose counsel versus the unfinished business doctrine, said Blank Rome partner Les Corwin.

Before the decision was issued, I had a chance to talk at length with Corwin, who was retained by Heller in 2008 to write its wind down plan.

“I think the unfinished business doctrine is dead in the water,” he said. “Clients are not merchandise. … Clients have the right to terminate the attorney-client relationship at any time, and for any reason.”

Indeed, the court held that “The limited nature of the interest accorded to the dissolved law firm protects clients' choice of counsel. It allows the clients to choose new law firms unburdened by the reach of the dissolved firm that has been paid in full and discharged.”

Moreover, this places “partners who depart after a firm's dissolution at no disadvantage to those who leave earlier.”

The court continued, “The more fees a former partnership can claim, the less remain available to compensate the people who actually perform the work. Reduced compensation creates incentives that are perverse to the mobility of lawyers, clients' choice for counsel, and stability of law firms.”

For more on the case, see 'Unfinished Business' Claims Zapped by California Supreme Court in Heller Case

 

Quote of the Day:

From The Washington Post, which reported that former Trump campaign aide Sam Nunberg does not plan to comply with a subpoena from special counsel Robert S. Mueller III:

“I'm not spending 80 hours going over my emails with Roger Stone and Steve Bannon and producing them. Donald Trump won this election on his own. He campaigned his ass off. And there is nobody who hates him more than me.”

 

What I'm Reading

Katyal Begins Defense of New Pa. Congressional Map in Redistricting Fight Before SCOTUS

Hogan Lovells star Neal Katyal has joined Gov. Tom Wolf's efforts to defend Pennsylvania's recently re-drawn congressional districts before the U.S. Supreme Court.

Legal-Mal Experts Weigh In on Alston & Bird Trial Strategy, Outcome

“I think this case highlights the difficulty lawyers face when they fail to remember that their client is the corporate entity, not the person on the other end of the phone.”

Battles Over Jewish Religious Enclosures Test Towns Along NJ/NY Border

A trio of towns are trying to keep the local Orthodox Jewish community from constructing religious boundaries called eruvs (which allow observant Jews to do things like push strollers or carry house keys during the Sabbath)—but they require PVC piping or wooden slats to be installed on utility poles.

Miami Jury Returns $17.5 Million Verdict Against RJ Reynolds, Philip Morris

Plaintiffs lawyers said the biggest hurdle was convincing jurors, who now understand that tobacco and nicotine can lead to addiction and illness, that consumers were once in the dark about these risks.

Cohen Milstein's Opioid Work for N.H. Withstands Supreme Court Challenge

The high court declined to hear a challenge to the state's decision to hire a private law firm to investigate manufacturers of opioid medications.

Pa. Sues Uber Over Delayed Data Breach Disclosure

State Attorney General Josh Shapiro wants at least $13.5 million for the breach, where at least 13,500 Pennsylvania Uber drivers allegedly had their driver's license information accessed.

Shkreli Ordered to Forfeit More Than $7.3M for Securities Fraud

Poor baby can't keep his one-of-a-kind Wu-Tang Clan album.

Bonus: (From the Desert News) Utah State Bar investigating after topless photo is emailed to members
“We are aware of it and we are horrified,” Matt Page, communications director for the Utah State Bar, said. “Our goal is to get to the bottom of what happened and ensure that it never happens again.”