Unfinished Business Doctrine Plagues Law Firms Acquiring Partners from Collapsed Firms
Howrey bankruptcy trustee Allan Diamond is eying the law firms that acquired Howrey lawyers before its collapse as a potential source of revenue for creditors.
Diamond, who was appointed trustee last month, tells the Wall Street Journal (sub. req.) that he is just starting to investigate what kind of lawsuits he could file to collect money for creditors. But the law firms that hired Howrey lawyers likely have one of the biggest pools of cash available, he said.
According to the story, bankruptcy trustees seek to collect money from former partners at defunct firms and the new law firms that hire them under the unfinished-business doctrine. It allows trustees to seek profits from work the partners took from the old firm to the new one.
The doctrine has been a factor in the bankruptcy of Heller Ehrman. About 40 law firms that acquired Heller lawyers have reached settlements generating about $8 million for creditors, the story says.
Some law firms that acquired Heller lawyers are refusing to settle, however. They argue that a recent Supreme Court ruling involving the late Anna Nicole Smith requires unfinished business claims to be heard by U.S. district judges, rather than bankruptcy judges.