Ninth Circuit Routes 'Unfinished Business' Question in Howrey Bankruptcy to DC Court of Appeals
The Ninth Circuit asked if partners who leave a dissolving firm have a duty to account for profits earned post-departure on matters subject to hourly billing under D.C. law.
February 27, 2018 at 01:59 PM
2 minute read
The U.S. Court of Appeals for the Ninth Circuit has asked an appellate court in the District of Columbia to weigh in on whether D.C. law allows estates of dissolved law firms to pursue legal claims related to unfinished client matters that partners take with them to new firms.
The Ninth Circuit on Tuesday certified three separate questions to the District of Columbia Court of Appeals in the bankruptcy of defunct intellectual property and litigation powerhouse Howrey. The move echoes a similar tack the Ninth Circuit took in the Heller Ehrman bankruptcy, where the federal appellate court asked the California Supreme Court to consider questions about whether so-called “unfinished business” claims are legitimate under California law. The California Supreme Court held arguments in the Heller case in December, but has yet to rule.
Jones Day has taken the lead in fighting unfinished business claims in both the Heller and Howrey bankruptcies on behalf of separate coalitions of large law firms who scooped up partners in the wake of those dissolutions. Jones Day partner Shay Dvoretzky, who argued the Heller case at the California Supreme Court, didn't immediately respond to a message seeking comment Tuesday morning.
Diamond McCarthy's Christopher Sullivan, who represents the trustee in both the Howrey and Heller bankruptcies, said that he was “very pleased” the Ninth Circuit's questions for the D.C. Court of Appeals took forms similar to what the trustee asked for at oral argument in the case.
In Tuesday's order, the Ninth Circuit asked if partners who leave a dissolving firm have a duty to account for profits earned post-departure on matters subject to hourly billing under D.C. law. If that is the case, the court asked if a dissolved firm in Howrey's position can collect from a new firm that benefits from the hourly work under an unjust enrichment theory. Finally, the Ninth Circuit asked what interest, if any, a dissolved law firm has in profits on hourly matters that were in progress at the time of dissolution that partners take with them to new firms under D.C. law.
The D.C. Court of Appeals can now decide whether or not to take up the Ninth Circuit's request to review the case.
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