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.