The law of unfinished business, as applied to cases billed on an hourly basis, has been the subject of much commentary and case law.

In 2014, the New York Court of Appeals definitively ended the debate in New York when it held that dissolved firms did not have any right to the post-dissolution hourly billings for matters left unfinished when a firm dissolved. In re Thelen LLP, 995 N.Y.S.2d 534, 536-37 (2014). In so doing the court held in part: “We hold that pending hourly fee matters are not partnership 'property' or 'unfinished business' within the meaning of New York's Partnership Law. A law firm does not own a client or an engagement, and is only entitled to be paid for services actually rendered.” Id.

California did not definitively address this issue until this month. On March 5, 2018, the Supreme Court of California decided Heller Ehrman LLP v. Davis Wright Tremane LLP, The Supreme Court of California, S236208, March 5, 2018. In Heller Ehrman, the high California court, like the New York Court of Appeals, found that a dissolved law firm did not have a property interest in hourly matters for work performed after dissolution. Id. at 20. The case is worth exploring as it impacts, among other things, lawyer mobility and clients choice of counsel. In this month's column we summarize its finding.

'Heller Ehrman'

Heller was a global partnership with more than 700 attorneys. In 2008, it was in financial distress, and, on Oct. 31, 2008, it informed its clients that it would no longer provide them with legal service. Heller included a Jewel waiver (see Jewel v. Boxer, 156 Cal. App. 3d 171 (First District, 1984)) in its dissolution plan in which Heller waived any rights to seek payment of legal fees generated after the firm's dissolution for hourly or contingent matters. Heller Ehrman at 2-3. In the ensuing months, Heller partners joined numerous (at least 16) law firms who performed services on an hourly basis on which Heller had previously been counsel. Thereafter, Heller filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. The administrator filed adversary proceedings against the law firms in which former Heller partners were now partners claiming that the Jewel waiver was a fraudulent transfer and should be set aside. The Bankruptcy Court found in favor of the administrator and the district court reversed. Id. at 3-4. Heller appealed to the U.S. Court of Appeals for the Ninth Circuit which asked the Supreme Court of California to provide guidance. The “certified question” addressed to California's highest court was: “what property interest, if any, a dissolved law firm has in the legal matters, and therefore the profits, of cases that are in progress but not completed at the time of dissolution.”