California Supreme Court Amicus Brief of Professor John Morley in Heller Ehrman LLP v. Davis Wright Tremaine LLP

Abstract

This brief, written on behalf of and in consultation with Prof. John Morley, supports the law firms that hired former partners of Heller Ehrman LLP in their litigation against Heller over the unfinished business doctrine. Roughly stated, the unfinished business doctrine says that when a partner leaves a dissolved law firm (such as Heller), the partner’s new firm must pay to the dissolved firm any billings the partner subsequently generates for work on matters that were open at the time the partner left. This obligation extends not only to work the partner did before leaving the firm, but also to work that the partner does after leaving the firm, so long as the matter was already open at the time the partner left.

This brief argues that the basic problem with the unfinished business doctrine is that it unduly discriminates between partners who leave a firm before and after the firm dissolves. Today, law firm partnership agreements commonly allow a firm to continue operating after a partner’s withdrawal, so that large law firms only tend to dissolve after many partners have already left and the remaining partners are forced to dissolve the firm by a formal vote. The unfinished business doctrine unfortunately draws a sharp distinction at the moment of such a vote by demanding that partners who stayed until after the dissolution share their billings with the firm, while allowing partners who left before the dissolution to walk away with no obligations.

The fixation on dissolution as a trigger for liability creates three problems: First, it creates a self-propelling race for the exits as partners scramble to get out before the firm formally dissolves, thus making dissolution ever more likely. Second, the fixation on dissolution treats partners unfairly by arbitrarily discriminating between otherwise similar partners who merely happen to leave a firm at slightly different times. And third, the focus on dissolution undermines the effectiveness of the unfinished business doctrine by allowing partners who depart before dissolution to completely escape liability.

This fixation on dissolution was not a problem when the unfinished business doctrine first appeared, because the doctrine initially applied only to law firms that dissolved automatically upon the withdrawal of every partner, which effectively eliminated the distinction between withdrawal and dissolution that makes the doctrine so problematic today. Prof. Morley therefore supports the respondent by arguing that the unfinished business doctrine should be greatly limited. In this case, that means applying the doctrine only to contingent-fee matters, and not to matters billed on an hourly basis.