Judge Considers Whether Ex-Brobeck Partners Had Right to Clients

Lawyers involved in the bankruptcy of Heller Ehrman were in court Monday to watch arguments in a case involving the duties of 10 former partners at Brobeck, Phleger & Harrison.

At issue is whether the Brobeck partners and their new law firms must pay the firm’s creditors for taking Brobeck clients and their legal work, the Recorder reports. The partners claim their partnership agreement, enacted as Brobeck neared collapse, makes clear they were permitted to take clients to new firms and collect the legal fees. The bankruptcy trustee, on the other hand, claims the open cases and profits from them are assets that belong to the Brobeck partnership.

A final ruling in the case by U.S. Bankruptcy Judge Dennis Montali of the Northern District of California “will send a message on the potential risks to firms which hire partners of dissolved and dissolving firms,” according to the Recorder story. Most cases involving a trustee’s claims against former partners settle, making this litigated claim a rare precedent.

The trustee is relying on a 1984 California case, Jewel v. Boxer, involving two partners who left their four-partner firm, the story says. The decision said open cases belong to the partnership rather than individual partners or their new firms.

In a tentative decision Friday granting summary judgment for the defendants on five counts, Montali said Jewel seems to allow suits by law firm partners against departing partners, but not suits by trustees. However, Montali left undecided four counts claiming fraudulent conveyance.