Kaye Scholer Is “Friend of the Court,” and of Law Firm Client Interests, in “Unfinished Business” Litigation
On July 1, in In re: Thelen LLP, the NYS Court of Appeals ruled that, for the purposes of administering a related bankruptcy, pending hourly fee matters are not partnership “property” or “unfinished business” within the meaning of New York’s partnership law. Kaye Scholer Special Counsel James Catterson, with assistance from Associate Margaret Rogers, submitted an amicus curiae brief on behalf of fellow law firms and amici curiea DLA Piper, Drinker Biddle & Reath, Hogan Lovells, Holland & Knight, Mayer Brown, Proskauer Rose, Schulte Roth & Zabel, Sutherland Asbill & Brennan, Venable, Weil, Gotshal & Manges and Willkie Farr & Gallagher—all of whom had agreed to represent clients whose former firm had failed and dissolved, and who had hired partners from those failed firms.
In the brief, Kaye Scholer argued against the Bankruptcy Trustee’s position that former partners’ new firms are required to turn over to creditors all of the “profits” (if any) earned for work performed by these new firms after dissolution, on the grounds that these hourly fee matters constitute the “unfinished business” and property of the former firm. We stressed, successfully, that the Trustee’s proposition must fail because diverting attorney compensation to the repayment of debt unrelated to the representation would prevent attorneys from representing clients who desire their services, thereby running afoul of nearly a thousand years of jurisprudence upholding the right of clients to retain the counsel of their choice.
Immediately following the decision, Catterson spoke to several reporters including journalists at New York Law Journal, Dow Jones/Wall Street Journal, Thomson-Reuters and Bloomberg, as this case was being closely watched by everyone in the legal industry, given the recent Dewey bankruptcy and concerns about other law firms failing in the future.
“The Court of Appeals’ decision in this case reaffirmed the one essential truth about the attorney client relationship: it is the client’s interests that are paramount in any attorney-client relationship,” said Catterson, following the ruling. “The client has the unfettered right to choose his or her attorney and any claim that infringes on that right has been completely rejected by the Court. In holding that clients are simply not firm property, the Court effectively curtailed any further attempts by the trustees of defunct firms to penalize the former clients of those firms.”
A copy of the ruling and our Amicus brief can be found below: