Chip Bowles Explains Why Hourly Fee Representations of Former Clients Are New Matters and Not “Unfinished Business” of Bankrupt Law Firms
The issue of who is entitled to a client’s fees after an attorney leaves a law firm has been a contentious question since the California Court of Appeals decision in Jewel v. Boxer.
According to Bloomberg BNA, many attorneys agree with the recent ruling on attorney fees in Hogan Lovells US LLP vs. Howrey LLP which greatly limited the scope of Jewel. The Howrey case holds that hourly fee representations of former clients—when earned pursuant to new retention agreements with those clients and performed by pre-existing third-party law firms—are presumptively new matters, not the unfinished business of a bankrupt or dissolved law firm.
The suit in Hogan Lovells US LLP v. Howrey LLP was a demand by its Chapter 11 trustee for the profits that former partners earned by taking former Howrey clients to new firms. The case was dismissed due to the court refusing to follow the Jewel “unfinished-business doctrine.”
BGD partner Claude R. "Chip" Bowles Jr. and other attorneys’ support the ruling in countering the doctrine, originating with Jewel v. Boxer, as most feel this is an outdated rule.
Bowles said, “The fallacy of Jewel in the context of bankruptcy property recovery actions is that it creates a stream of income (on non-contingent fee matters) for law firms which are unable to do the work, merely because the matter or client was once at the bankrupt firm. It would in some respects reduce attorney client relationships to some form of vested property rights.”
Bowles concluded that “absent contingent fees issues, (which do involve property of the bankrupt firm) or cases where there are allegations of misconduct by the departing partner and the subsequent law firm, there is no good reason for such a policy or rule.”