476 B.R. 732
S.D.N.Y.2012Background
- Thelen LLP dissolved in 2008 while insolvent, triggering disputes over unfinished business and hourly fee matters.
- Trustee alleges Jewel Waiver transferred Thelen’s unfinished business profits to successors, enabling fraudulent transfer against Seyfarth Shaw and Robinson & Cole.
- Trustee seeks to avoid the transfer, recover value, and obtain turnover of profits from post-dissolution work.
- New York and California law govern whether pending hourly fee matters constitute partnership/property assets.
- Court grants Seyfarth Shaw’s 12(c) motion for judgment on the pleadings; denies Robinson & Cole’s 12(b)(6) motion; certifies interlocutory appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is a dissolved law firm's pending hourly fee matters property under New York law? | Trustee argues those matters are partnership assets subject to distribution. | Seyfarth Shaw contends New York law does not recognize such property interests. | Under New York law, pending hourly fee matters are not property. |
| Which law governs the property interest: New York or California? | Trustee seeks California law via Jewel doctrine transfer of assets. | Court applies New York choice-of-law rules and finds New York has greatest interest. | New York law governs the property interest in this action. |
| Did the Jewel Waiver transfer Thelen's unfinished business to Seyfarth Shaw? | Waiver effect transferred Thelen's assets to Seyfarth Shaw. | Waiver was not binding on Seyfarth Shaw and cannot create property interest. | Jewel Waiver effects do not confer a New York property interest in hourly matters; Seyfarth Shaw not liable on that basis. |
| Under California law, are pending hourly fee matters assets and did Robinson & Cole receive them? | California law recognizes such matters as assets; transfer occurred to Robinson & Cole. | RUPA abolishes no-compensation rule; profits may belong to survivors; liability uncertain on motion to dismiss. | California law may recognize assets but extent of transfer and reasonable compensation requires fact-specific inquiry; Robinson & Cole's liability denied at this stage. |
| Should the court certify an interlocutory appeal? | Controlling questions of law with substantial disagreement warrant immediate appeal. | interlocutory appeal would aid judicial economy given unsettled law. | Court sua sponte certifies order for interlocutory appeal. |
Key Cases Cited
- Jewel v. Boxer, 156 Cal.App.3d 171 (Cal.App.1 Dist. 1984) (unfinished business profits allocated to former partners absent contrary agreement)
- Santalucia v. Sebright Transp., Inc., 232 F.3d 293 (2d Cir. 2000) (pending contingent fees are partnership assets; hourly fees differ)
- Cohen v. Lord, Day & Lord, 75 N.Y.2d 95 (N.Y. 1990) (clients are not merchandise; policy against treating clients as assets)
- Shandell v. Katz, 586 N.Y.S.2d 333 (3d Dep’t 1992) (reasonable compensation concept in post-dissolution context)
- Kirsch v. Leventhal, 586 N.Y.S.2d 330 (3d Dep’t 1992) (post-dissolution profits and compensation considerations)
- In re Brooklyn Navy Yard Asbestos Litig., 971 F.2d 831 (2d Cir. 1992) (weight given to New York state court interpretations)
- Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d 553 (N.Y. 1981) (attorney-client relations and autonomy considerations in the profession)