The Los Angeles County Bar Association and the Bar Association of San Francisco have teamed up in the Ninth Circuit to weigh in on the fallout from the bankruptcy of Heller Ehrman LLP.
In brief: After Heller Ehrman went out of business in 2008, a number of its partners joined other national firms. Some of Heller’s clients then moved their pending hourly matters to the new firms. The bankruptcy trustee, on behalf of Heller’s creditors, now asserts a claim to all profits earned by the new firms working on matters formerly pending at Heller. Relying on an old California partnership case, Jewel v. Boxer, 156 Cal. App. 3d 171 (1984), the trustee claims these hourly matters were a “property interest” of Heller’s that was fraudulently transferred to the new firms.
Last summer, Judge Breyer of the N.D. Cal. ruled against the bankruptcy trustee, concluding that California did not recognize any such property interest.
The issue is now before the Ninth Circuit. LACBA and BASF filed a joint amicus brief last week urging affirmance and focusing on client rights and legal ethics. The organizations argue that what Heller’s creditors seek is inconsistent with the client’s absolute right to hire and fire counsel, allows the bankrupt firm to earn fees for work it never performed, limits client choice, implicates prohibited fee-sharing, and ultimately will destabilize firms facing financial stress.
Dick Rothschild, of the Western Center for Law & Poverty, served as LACBA’s point person on the brief. His counterpart at BASF was Christine Van Aken of the San Francisco City Attorney’s Office. Josh Benson, of Taylor & Company Law Offices, and Stephen Bundy, from UC Berkeley School of Law, authored the brief as pro bono counsel.