State High Court to Ponder Firms' 'Unfinished Business'

, New York Law Journal

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Two closely watched cases involving law firm billing and the "unfinished business" doctrine are headed to the state Court of Appeals. The court said Tuesday it has accepted two certified questions from the U.S. Court of Appeals for the Second Circuit in In re: Coudert Brothers, 62.

The case, the second taken by the state court, centers around the issue of whether the bankruptcy estate of New York law firms that dissolve retain an ownership right to fees earned from hourly matters taken by former partners to new firms.

In seeking guidance from state court, Circuit Judge Gerard Lynch (See Profile) wrote that, given the fact that the bankruptcy of major law firms "is, sadly, a phenomenon that has occurred with distressing frequency in recent years," the federal court would like a reading of New York law on the fee issue (NYLJ, Nov. 18).

The state Court of Appeals on Dec. 12 accepted two certified questions from another Second Circuit panel in a similar fee case, In re: Thelen, 261. In both Coudert and Thelen, the court said it would answer identical questions:

• "Under New York law, is a client matter that is billed on an hourly basis the property of a law firm, such that, upon dissolution and in related bankruptcy proceedings, the law firm is entitled to the profit earned on such matters as the 'unfinished business' of the firm?"

• "If so, how does New York law define a 'client matter' for purposes of the unfinished business doctrine and what proportion of the profit derived from an ongoing hourly matter may the new law firm retain?"

The court is likely to hear both cases sometime this fall.

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