Document Type
Research Memorandum
Publication Date
2015
Abstract
(Exceprt)
It is no secret that the legal industry has experience financial difficulty following the great recession. Many law firms have been less profitable, and in some extreme circumstances, have filed for bankruptcy. The worlds largest law firms are of no exception to this recent phenomenon. The collapses of the mega-firms Dewey & LeBoeuf, Coudert Brothers LLP, Heller Ehrman LLP, Howrey LLP, Thacher Proffitt & Wood LLP, and Thelen LLP are prime examples.
Since most law firms, especially large firms, do not reorganize in bankruptcy, a bankruptcy trustee will often be appointed to administer the firm’s estate. In order to maximize the estate, the trustee in many cases will pursue claw-back actions against the former law firm’s partners and creditors. In addition, bankruptcy trustees have turned to the “unfinished business doctrine” as a tool to recover value from former partners and their new firms. When a law firm dissolves, its attorneys naturally must find new firms to call home. Likewise, the dissolved firm’s former clients’ legal issues do not disappear along with the firm. Accordingly, many former partners of the dissolved firm will take these former clients along with them to their new firms. Many bankruptcy trustees, however, have sought to recover the profits earned on the matters taken by the former partners to their firms from these new firms under the unfinished business doctrine, which provides that the dissolved firm could be entitled to recover the profits earned on the pending hourly matters of its clients.