In Re Howrey LLP
- James Donato
- 3:14-cv-04882
- U.S. District Court · Northern District of California
- 4
In re Howrey LLP: Judge Donato reversed the bankruptcy court and entered judgment for eight law firms in disputes over former Howrey clients.
The eight law firms that appealed—Hogan Lovells US LLP, Pillsbury Winthrop Shaw Pittman LLP, Seyfarth Shaw LLP, Perkins Coie LLP, Neal, Gerber & Eisenberg LLP, Kasowitz, Benson, Torres & Friedman LLP, Sheppard Mullin Richter & Hampton LLP, and Jones Day—received judgment in their favor; the trustee for Howrey LLP could not pursue the requested profit recovery.
What happened
In re Howrey LLP involved eight law firms that had hired former Howrey partners and represented former Howrey clients. Howrey’s bankruptcy trustee sought to recover profits from those firms, arguing the work belonged to the former partnership.
The court applied District of Columbia law and concluded that the new firms’ legal work was new business, not property of the former Howrey partnership. The partnership therefore could not recover profits connected to either former partners who joined the new firms after dissolution or partners associated with Howrey before dissolution.
Judge Donato reversed the bankruptcy court’s order denying dismissal and said an amended judgment would be entered for the eight law firms. The court’s earlier summary states that the cases were dismissed with prejudice.
The detailed version
- In Re Howrey LLP · No. 3:14-cv-04882
- James Donato
- June 15, 2020
Background
Eight law firms appealed the bankruptcy court’s denial of their motions to dismiss complaints brought by the trustee for debtor Howrey LLP. The trustee sought to recover profits from the firms after they hired former Howrey partners and were engaged by former Howrey clients.
Legal question and reasoning
The dispute concerned whether a bankrupt partnership had a property interest in substantively new legal representations of its former clients by competing firms. The court applied District of Columbia law because Howrey had operated there as a limited liability partnership before dissolving.
The court concluded that the legal services provided by the new firms were new matters rather than property of the Howrey partnership. It also concluded that the partnership could not recover profits associated with post-dissolution partners earned by the new firms, and that profits associated with pre-dissolution partners were not recoverable either.
The opinion explained that the District of Columbia Court of Appeals later answered certified questions on these issues and reached the same conclusion for similar reasons. The Ninth Circuit adopted that District of Columbia opinion in full and remanded the matter for further consistent proceedings.
Disposition
The court adopted the District of Columbia opinion. It reversed the bankruptcy court’s order denying dismissal and ordered that an amended judgment be entered in favor of the appellants and against the appellees. The opinion’s summary states that the cases were dismissed with prejudice. Judge James Donato also noted that the matter had already been closed for some time and that no party had expressed interest in further proceedings.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.