Partners at struggling law firms may find it harder to jump ship in the future after a new ruling raised the risk of lawsuits against the firms that hire them, the Wall Street Journal reported today. Firms that hire lawyers from bankrupt law firms have long been subject to "unfinished business" claims, which seek to recover profits from ongoing legal work that partners take with them to their new homes. Such claims have typically been confined to firms that take on lawyers once a firm has shut down, under the theory that pending matters are assets that rightfully belong to the failed firm. But a ruling this month in the case of defunct Washington, D.C., law firm Howrey LLP has rattled some in the industry because it said that partners who leave a firm before it dissolves also have a duty to return any profits from unfinished legal work. The result could constrict a key escape hatch for law-firm partners at a time when many firms, caught between frugal clients and a dearth of business, are struggling to boost revenue. At least 10 major law firms have gone under in the past 15 years, scattering hundreds of partners who typically take ongoing legal work with them to their next job. On Feb. 7, Bankruptcy Judge Dennis Montali ruled that "there is no reason to limit the definition of Howrey unfinished business to matters pending as of dissolution." He gave bankruptcy trustee Allan B. Diamond the green light to try to recoup any profits from such work from firms that hired Howrey partners prior to the firm's demise. (Subscription required.)
