In an amicus brief filed with the New York Court of Appeals, the American Bar Association asserts that because clients, not their lawyers, own their legal matters, dissolved law firms in bankruptcy proceedings should have no property interest in unfinished hourly rate client matters.
The brief, filed in In the Matter of: Coudert Brothers LLP, responds to questions that the U.S. Court of Appeals for the 2nd Circuit certified to New York’s highest court.
The brief addresses whether, under New York law, a dissolved law firm can claim in bankruptcy proceedings that an hourly rate client matter is its property and that, therefore, it is entitled to profits earned by another firm on the client matter as its “unfinished business.”
The ABA document requests that the court first consider whether a client’s matter is at any time the property of a law firm. According to the ABA, which produces the ABA Model Rules of Professional Conduct, the answer is no.
“The answer to this precursor question requires consideration of both the fundamental principle that the client has the absolute right to choose, retain and discharge its counsel, and the strong New York policy against restrictions on client choice,” the brief stated.
“The contention that an unfinished hourly rate client matter of a dissolved law firm is the property of the dissolved firm conflicts directly with the long-standing principle that the client has the right to control its relationship with its attorney,” the ABA said.
When focused on the client’s rights in the matter, according to the ABA, “a firm should have no property interest — whether the firm is dissolved or ongoing — in the profits resulting from an hourly fee matter after the client has moved that matter to a newly retained law firm or lawyer.”
“Once the attorney-client relationship has ended on an hourly fee matter,” the ABA stated, “the dissolved firm’s interest should be limited to the work it has already performed.”
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