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Bankrupt Law Firm Clawbacks Take Hit in California

Bloomberg Big Law Business

California firm Heller Ehrman LLP went bankrupt a decade ago, and it’s taken that long for some of the financial repercussions to be ironed out. A major one was whether a defunct firm has any right to claw back money made from unfinished legal work that departed partners take with them to their new employers.

The California Supreme Court ruled, in March 2018, that failed law firms are not entitled to fees earned on legal matters that are in progress – but not completed – at the time the firm closes its doors.

The ruling “deals a death blow to claims by bankruptcy trustees that dissolved law firms are entitled to feed indefinitely off of hourly earnings of the law firms that their former clients choose to complete their cases,” said Steve Hirsch, of the law firm, Keker, Van Nest & Peters, who represented Davis Wright Tremaine.

Read the full report from Bloomberg Big Law Business here