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Heller Ehrman Objections To Costs In Clawback Suits Tossed


A California federal judge on Friday ordered the defunct Heller Ehrman LLP to pay more than $147,000 in costs to four firms for Heller’s unsuccessful attempts to claw back unfinished business profits that former partners earned at the new firms.

In a series of one-paragraph orders, U.S. District Judge Charles R. Breyer granted most of Davis Wright Tremaine LLP, Jones Day, Foley & Lardner LLP and Orrick Herrington & Sutcliffe LLP’s requests to be paid their taxable costs.

Judge Breyer denied about $22,000 in reimbursements, finding that extras including rough transcripts and electronic versions of depositions were for “lawyers’ convenience” and not recoverable.

Heller Ehrman had also sought to avoid paying for some depositions and court transcript costs, arguing the costs should be split among the various firms who were at the depositions or the joint hearings. But Judge Breyer overruled those objections.

Heller Ehrman was ordered to pay Davis Wright about $37,000; Jones Day about $53,000; Foley & Lardner about $23,000; and Orrick Herrington about $34,000.

Last month, Judge Breyer shut down Heller Ehrman’s bankruptcy administrators' effort to recover unfinished business profits the firm's ex-partners earned representing Heller Ehrman's former clients at new firms, ruling the defunct firm has no claim on work it didn't perform.

Attorneys for the administrators had argued that under a California appeals court's 1984 ruling in Jewel v. Boxer, dissolved law firms are entitled to a share of the profit stream for work performed on unfinished hourly-rate cases.

But Judge Breyer ruled that Jewel is not controlling and found that a defunct firm cannot assert a property interest in hourly matters pending at the time of its dissolution, as having a client means only owning an expectation of future business.

Heller Ehrman appealed the decision to the Ninth Circuit this month.

After Heller Ehrman filed for bankruptcy in 2008, U.S. Bankruptcy Judge Dennis Montali determined in March 2013 that although Heller’s partners signed Jewel waivers, the practice of shifting client work from a dissolved firm constitutes a fraudulent transfer under the Bankruptcy Code because the attorneys did not give the Heller Ehrman partnership anything of value in exchange for the waiver, leaving the bankruptcy estate depleted.

In its adversary cases against firms that hired its partners, Heller Ehrman asked Judge Breyer to affirm Judge Montali's ruling. But Judge Breyer instead held that a judgment for Heller Ehrman, after it had been paid in full for the services it provided, would be an inequitable result punishing the defendant firms.

Attorneys for the parties did not immediately respond Monday to request for comment.

Heller is represented by Christopher D. Sullivan and Matthew R. Schultz of Diamond McCarthy LLP and Jeffrey T. Makoff and Ellen Ruth Fenichel of Valle Makoff LLP.

The cases are Heller Ehrman LLP v. Davis Wright Tremaine LLP, case number 3:14-cv-01236; Heller Ehrman LLP v. Jones Day, case number 3:14-cv-01237; Heller Ehrman LLP v. Foley & Lardner LLP, case number 3:14-cv-01238; and Heller Ehrman LLP v. Orrick Herrington & Sutcliffe LLP, case number 3:14-cv-01239, all in the U.S. District Court for the Northern District of California.