Heller Case To Arm Hiring Firms In Clawback Fights

Law360
June 12, 2014
"Heller Case to Arm Hiring Firms in Clawback Fights"

Farella Braun + Martel's Gary Kaplan, chair of the firm's restructuring and insolvency group, explained the impact of a California court's ruling that refused to let Heller Ehrman LLP’s bankruptcy administrators claw back profits from client matters that ex-partners took with them to new law firms.  According to Kaplan, this holding is groundbreaking because up until now, rulings have almost all held that a law firm that took in partners from a firm that went bankrupt is liable for unfinished business profits under the Jewel doctrine, and many law firms have written checks in the millions of dollars as part of settlements with bankruptcy trustees based on that belief.  “Now we’re learning that the rule, at least in the Northern District of California, doesn’t apply and that a new firm doesn’t have any liability to account to the old firm based on work brought over by its lawyers because it’s not a property interest of the old firm,” said Kaplan. 

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