Opinion
S236208
03-05-2018
HELLER EHRMAN LLP v. DAVIS WRIGHT TREMAINE LLP
Opinion filed
Under California partnership law, a dissolved law firm does not have a property interest in legal matters handled on an hourly basis, or in the profits generated by formers partners who continue to work on these hourly fee matters after they are transferred to the partners' new firms. To hold otherwise would risk intruding without justification on clients' choice of counsel, as it would change the value associated with retaining former partners - who must share the clients' fees with their old firm - relative to lawyers unassociated with the firm at its time of dissolution who could capture the entire fee amount for themselves or their current employers. Allowing the dissolved firm to retain control of such matters also risks limiting lawyers' mobility postdissolution, incentivizing partners' departures predissolution, and perhaps even increasing the risk of a partnership's dissolution.
So, with the exception of fees paid for work fitting the narrow category of winding up activities that a former partner might perform after a firm's dissolution, a dissolved law firm's property interest in hourly fee matters is limited to the right to be paid for the work it performs before dissolution. Consistent with our statutory partnership law, winding up includes only tasks necessary to preserve the hourly fee matters so that they can be transferred to new counsel of the client's choice (or the client itself), to effectuate such a transfer, and to collect on the pretransfer work. Beyond this, the partnership's interest, like the partnership itself, dissolves.
Majority Opinion by Cuéllar, J.
-- joined by Cantil-Sakauye, C. J., Chin, Corrigan, Liu, Kruger, and Manella*, JJ.
* Associate Justice of the Court of Appeal, Two Appellate District, Division Four, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.