In re: Coudert Brothers LLP, Debtor. -------------------------------- Development Specialists, Inc., Respondent-Appellant, -------------------------------- K&L Gates LLP et al., Appellants-Respondents, -------------------------------- Akin Gump Strauss Hauer & Feld LLP, et al., Appellants-Respondents.BriefN.Y.June 4, 2014COURT OF APPEALS STATE OF NEW YORK In the Matter of: Coudert Brothers LLP DEVELOPMENT SPECIALISTS, INC., Plaintiff-Respondent-Appellant, GEOFFROY DE FOESTRAETS, JINGZHOU TAO, Defendants, K&L GATES LLP, MORRISON & FOERSTER LLP, JONES DAY, ARENT FOX LLP, DLA PIPER LLP, DORSEY & WHITNEY LLP, DECHERT LLP, SHEPPARD MULLIN RICHTER & HAMPTON, LLP, SCOTT JONES, DUANE MORRIS LLP, AKIN GUMP STRAUSS HAUER & FELD, LLP, Defendants-Appellants-Respondents. YANN GERON, as Chapter 7 Trustee of the Estate of Thelen LLP, Plaintiff-Appellant, v. SEYFARTH SHAW LLP, Defendant-Respondent. Index No. CTQ- 2013-00010 Index No. CTQ- 2013-00009 AMICUS BRIEF OF ATTORNEYS' LIABILITY ASSURANCE SOCIETY, INC., A RISK RETENTION GROUP KEKER & VAN NEST LLP STEVEN A. HIRSCH JOHN C. BOSTIC 63 3 Battery Street San Francisco, CA 94111-1809 Telephone: 415 3915400 Facsimile: 415 397 7188 Completion Date: April25, 2014 LAWRENCE E. ZABINSKI Senior Vice President- Claims & Administration DANIEL J. DONNELLY Vice President and Senior Claims Counsel Attorneys' Liability Assurance Society, Inc., A Risk Retention Group 311 S. Wacker Drive, Suite 5700 Chicago, IL 60606 CORPORATE DISCLOSURE STATEMENT Pursuant to Court of Appeals Rule 500.l(f), Attorneys' Liability Assurance Society, Inc., A Risk Retention Group ("ALAS") hereby discloses that it is a wholly owned subsidiary of Attorneys' Liability Assurance Society Ltd., a Vermont captive insurance company. ALAS has one affiliate: ALAS Investment Services Limited, a wholly owned subsidiary of ALAS. Table of Contents PAGE STATEMENT OF INTEREST ................................................................................. 1 INTRODUCTION ............................. : ....................................................................... 3 ARGUMENT ............................................................................................................ 5 I. TREATING HOURLY WORK AS UNFINISHED BUSINESS VIOLATES BEST LAW-FIRM PRACTICES, HARMING CLIENTS AND ATTORNEYS ALIKE .......................................................................... 5 A. The need for stable transition of client matters .................................... 6 B. The need for stable transition of attorneys ........................................... 8 II. ATTEMPTS TO APPORTION PROFITS ON HOURLY UNFINISHED BUSINESS INEVITABLY LEAD TO ABSURD RESULTS ..................................................................................................... 11 III. HOURLY-BILLED CLIENT MATTERS ARE NOT LAW-FIRM "PROPERTY." .............................................................................................. 14 CONCLUSION ....................................................................................................... 17 1 Table of Authorities PAGE(S) Federal Cases In re Thelen LLP 736 F.3d 213 (2d Cir. 2013) ........... ; ................................................................. 3, 16 Kaiser Aetna v. US. 444 U.S. 164 (1979) ............................................................................................... 15 USAA Fed. Savings Bank v. Thack 599 F .3d 880 (9th Cir. 201 0) ............................................................................... 14 State Cases Cohen v. Lord, Day & Lord 75 N.Y.2d 95 (1989) ........................................................................................... 16 Demov, Morris, Levin & Shein v. Glantz 53 N.Y.2d 553 (1981) .......................................................................................... 15 Lemmer v. Charney 195 Cal. App. 4th 99 (2011) ............ ; ................................................................... 15 Shandell v. Katz 217 A.D.2d 472 (N.Y. App. Div. 1995) .............................................................. 16 Sheresky v. Sheresky Aronson Mayefsky & Sloan, LLP 35 Misc. 3d 120 1(A), 2011 N.Y. LEXIS 6588 .................................................... 17 Other Authorities Amanda A. Main, "Applying the Unfinished Business Rule to Dissolved Law Partnerships," 33 L.A. Law. 10 (Mar. 2010) ................................................. 9 Am. Bankr. Inst. 109 (Mar. 22, 2013), available on WESTLAW at 032213 ABI-CLE 109 ....................................................................................................... ~3 John C. Keeney, Jr. & Lynne M. Baum, "Beware of Unfinished Business," 19 Prof. Law. 24 (2009) ....................................................................................... 9, 12, 13 11 STATEMENT OF INTEREST Since 1979, Attorneys' Liability Assurance Society Ltd., a Vetmont captive insurance company, and its wholly-owned subsidiary, Attorneys' Liability Assurance Society, Inc., A Risk Retention Group ("ALAS") have provided professional liability insurance for large law firms in the United States. ALAS insures over 220 major law firms comprising almost 59,000 lawyers nationwide. In New York alone, ALAS insures 69 firms and over 4,500 lawyers. ALAS actively participates in the defense of professional liability claims asserted against its insured firms and lawyers, working with those lawyers to defend against such claims. It thus has unique insight into the potential pitfalls confronting law firms practicing nationally and in this state. ALAS is widely acknowledged as a pioneer in law firm loss prevention and claims handling. However, beyond working to prevent and defend malpractice claims, ALAS develops and promulgates detailed information regarding best practices for the legal profession. Lawyers from ALAS were actively involved in the American Law Institute's development of the Restatement (Third) of the Law Governing Lawyers as well as the American Bar Association's 2002 and 2012 revisions of the Model Rules of Professional Conduct. ALAS regularly works with other professional associations that have defined the ethical and professional duties of lawyers. 1 ALAS devotes considerable resources to providing its insured lawyers with loss prevention advice that encourages ethical conduct, promotes quality work product, and improves client service. This protects clients and reduces member firms' malpractice risks. One of ALAS's overarching goals is to contribute to a legal system that encourages trust and transparency in the attorney-client relationship, as well as zealous and competent advocacy before the courts. Maintaining such a system requires clear rules and incentives that align the interests of attorneys with those of their clients. But the so-called unfinished- business rule conflicts with client interests, prevents lawyers from receiving fair compensation for their work, and creates confusion for lawyers and courts. Accordingly, ALAS submits this amicus brief because misapplication of the unfinished-business rule would undermine loss prevention practices and compromise the quality of legal representation, exposing clients and lawyers to significant risk. 1 1 ALAS insures all of its member firms against professional liability claims through its Professional Indemnity Policy. In addition, member firms can obtain supplemental coverage for employment and management claims through the ALAS Management Liability Indemnity Policy ("MLI Policy"), Employment Practices Liability Indemnity Policy, or the combined Management Liabili!Y Indemnity/Employment Practices Liability Indemnity Policy ("Combined Policy"). Sugject to the terms, conditions, exclusions, and limitations of the Policies, unfinished business claims are covered under the MLI Policy and the Combined Policy. One such condition is the satisfaction of the firm's self-insured retention, which is no less than $250,000 and, depending on the firm, often reaches into seven figures. In the Coudert Brothers _Rroceedings, appellant Duane Monis LLP has coverage for unfinished business claims through ALAS. Several other appellants are ALAS 2 INTRODUCTION The last decade has seen a wave of law firm dissolutions, with some of the nation's oldest and best-known firms filing for bankruptcy. After a large firm dissolves, its creditors fight over the disposition of the firm's assets, and it is left to bankruptcy courts to craft a fair distribution. Ownership of physical property like real estate or valuable art may be easily established and valued with relative ease allowing fair apportioning among the creditors; but courts have struggled with how to categorize hourly-billed client matters that the dissolved firm can no longer complete.2 ALAS is baffled by this struggle because the answer is clear and member firms but do not have coverage for unfi,nished business claims through ALAS (and may not have coverage for such clmms ). · In the Thelen proceedings, appellant Seyfarth Shaw LLP is an ALAS member firm but does not have coverage for unfinished business claims through ALAS (and may not have coverage for such claims). The Thelen trustee has also asserted or threatened claims against other ALAS member firms, some of which have coverage for unfinished business claims through ALAS and others that do not have such coverage through ALAS (and may not have coverage for such claims). ALAS further notes that bankruptcy trustees (or similarly situated estate representatives) have asserted or threatened unfinished business claims against ALAS member firms in connection with the Heller Ehrman, Howrey, and Dewey & LeBoeuf bankruptcies. Once again, some of those ALAS member firms have coverage for unfimshed business claims through ALAS while others do not have such coverage through ALAS (and may not have coverage for such claims). 2 ALAS does not assume that this Court recognizes or should recognize the unfinished-business rule even with respect to contingency-fee matters. As the Second Circuit pointed out, "the New York Rules of Professional Conduct could be interpreted to forbid the unfinished business doctrine altogether"; and, "in the absence of a definitive ruling from the [New York] Court of Appeals, we cannot rule out the possibility that, confronted with a novel ~Jplication of the [unfinished- business l rul~ that court might conclude that the . . . doctrine l should not apply to any of a law nrm's cases. In re Thelen LLP, 736 F.3 213, 22:5 (2d Cir. 2013) (emphasis in original). 3 consistent with what ALAS teaches its firms: client matters belong to clients; they do not belong to law firms or lawyers. Unfortunately, some courts have determined that client matters belong to dissolved law firms and have applied the unfinished-business rule to client matters billed on an hourly basis. The penalty exacted by the rule in that context is unacceptably high for clients, lawyers, and law firms alike. Clients are bound to suffer as their cases continue to require work that no one is able to perfmm at the dissolving firm and that no one at the new firm wants to perform because all the profits will go back to the old, dissolving firm. And the transition of work between firms-always a risky venture, especially when the originating firm is defunct- becomes even more difficult when the new firm views that work as a financial burden. By forcing lawyers at new firms to finish a dissolved fitm's matters without retaining profits, the rule undercuts what is best for the client. Lawyers may feel pressure to devote less time and energy to these cases-the opposite of what should be encouraged when a client transfers its matters to a new law firm. And lawyers who might have been attractive to a new firm become unattractive because they are seen as bulls-eyes for lawsuits by bankruptcy trustees. Even if they are hired, they may become pariahs in their new firms because a substantial part of their work is done on a nonprofit basis. Indeed, the 4 unfinished-business rule works against the best practices of lateral integration espoused by ALAS. See Part I.B, below. Fortunately, nothing in state law compels these dire results. Fundamentally, legal matters billed on an hourly basis cannot be considered "property" of a law firm-regardless of whether that firm has dissolved or remains active. Lawyers possess no indicia of ownership over their cases, as their clients are always free to take their business elsewhere. A lawyer cannot force a client to remain with the firm, claw back a matter that the client takes to another firm, require a client to maintain a suit that the client wants to drop, or auction off client matters to the highest bidder. Treating hourly matters as the firm's property at dissolution is based on a nonsensical legal fiction that leads to unfair results and protects creditors' interests at the clients' expense. For these reasons and others set forth below, ALAS urges this Court to hold that a client matter that is billed on an hourly basis is not the "property" of a dissolved law firm. ARGUMENT I. Treating hourly work as unfinished business violates best law-firm practices, harming clients and attorneys alike. ALAS's role as an insurer of law firms and its extensive work developing and promoting best practices for client services give it a rare insight into the practical challenges and pitfalls that lawyers confront. In its years of working with 5 attorneys through all facets of loss prevention, ALAS has come to appreciate that the movement of lawyers and client matters from one firm to another can be a risky process, whether the client chooses to keep its matters at the original firm or to transfer them to a new firm. The dangers inherent in that process are greatly exacerbated when one firm is in dissolution. At those times, it is doubly impmiant for lawyers to maintain their commitment to high-quality client service and advocacy. In tum, fitms that take in lateral hires must be sure to give those new members the resources they need to maintain the appropriate level of service. To prevent harm to clients, lawyers need clear rules and fair incentives that encourage best practices. Unfortunately, recognizing and applying the unfinished-business rule to hourly matters does the opposite. A. The need for stable transition of client matters Modem legal practice is fraught with potential hazards for the uninformed, the unwary, and the unlucky. Professional standards governing lawyers are demanding, and rightly so. When a client places his trust in a lawyer, he is entitled to that lawyer's best efforts. To avoid exposing herself and her firm to a malpractice suit, a lawyer must be attentive, responsive, thoughtful, and diligent as to each client matter in her care. Protecting a client's interests over the course of an entire engagement is challenging enough under normal circumstances, even for the best lawyers. But 6 when a client transfers a matter from one firm to another, the risk of something going wrong increases significantly. When a new firm's attorneys and staff take over key roles fi·om their counterparts at the former firm, details can fall through the cracks. Even if relationship partners remain constant as the client engages the new firm, there is a risk that key pieces of strategic information known only to former team members will be lost or misplaced. That loss of knowledge can result in missed deadlines, waived arguments, or similar mistakes. ALAS is aware of numerous malpractice claims that have arisen under these circumstances. To minimize these risks, attorneys from the former firm and the new firm need to devote significant energy to tracking the transfer of all information and responsibilities from one firm to the other. ALAS provides firms with step-by-step guidance for these processes. But when the original firm is in the midst of dissolution proceedings, a smooth transfer can be extremely difficult. At that point, the last thing a client needs is an obstacle to the transfer of its matters. But that is exactly what an unfinished-business rule would do: serve as an obstacle to what is best for the client. Though lawyers are bound by ethical rules, law firms are still businesses concerned with profitability. In all instances, ALAS would counsel a law firm to treat all client matters the same, regardless of profitability. But the reality is that a firm taking over a matter from a dissolved firm is more likely to invest the resources needed to manage that case effectively 7 and avoid mistakes if the case has the potential to be profitable. By depriving the new firm of its hourly fees for work on that matter, the unfinished-business rule incentivizes the firm to spend less time on it, staff fewer lawyers on it, and give it lower priority than profitable cases. To be sure, there are unavoidable risks when a client transfers its matters from one firm to another. But applying an unfinished-business rule to hourly matters dramatically increases those risks by establishing harmful incentives that can compromise the quality of legal representation. B. The need for stable transition of attorneys The unfinished-business rule, when applied to hourly matters, can also compromise the smooth transition of lawyers from firms in financial distress.3 A partner's ability to find a home at a new firm-and his treatment at that firm-may depend on his ability to convince clients to engage his new firm. But if that partner depmis his former firm as the result of a dissolution, the normally happy and productive outcome of convincing a client to transfer its matters to the lawyer's 3 The integration of lateral attorneys into a law firm is a complex process even when no dissolution is occurring. ALAS's Law Firm Management Guide on lawyer mobility advises firms to manage the integration of lateral attorneys through a standardized due-diligence procedure that includes, among other things: assigning dedicated teams or partners to oversee the process; developing a formal, written plan with concrete steps to guide the integratwn; arranging for mandatory orientatiOn and training; and consulting with the new attorney to review the status and staffing needs related to client matters. These steps require a substantial commitment of firm resources and partner time, but are necessary to achieve an orderly integration of a new la~er, maintain a high level of client service, and minimize the risk inherent in the lateral-hiring process. 8 new firm is shrouded in uncertainty. "Former partners of dissolved law firms in many instances carry, not only emotional baggage, but 'unfinished business' that can tie up their fees for years or result in costly litigation over rights to those fees." John C. Keeney, Jr. & Lynne M. Baum, "Beware ofUnfinished Business," 19 Prof. Law. 24, 24 (2009). With the law unclear as to whether the new firm can profit from client matters previously handled by another firm, lawyers from that firm become less attractive candidates, to their detriment and that of the profession.4 Once again, the client is the loser because the attorney-client relationship is destabilized, potentially depriving the client of the attorney most suitable to continue a given matter. Once associated with a new firm, lawyers working on matters that clients transferred from a dissolved firm might face additional pressure and scrutiny. Such lawyers might feel obligated to spend less time on their unprofitable pre- existing cases, or to overburden themselves with new cases to compensate. To 4 One commentator advises hiring firms to exercise caution in hiring former partners of dissolved firms: "Law firms who wish to hire former partners of aissolved and bankrupt firms should be cognizant of Jewel and Brobeck. The hiring firm, before taldng on qualified partners with lucrative practices, should determine whether the former partner's partnership agreement, or other agreement, contains a Jewel waiver. If so, the hiring firm should exercise due diligence and inquire about the circumstances surrounding the execution of the Jewel waiver to determine whether hiring a new partner who continues to work on matters from the partner's previous firm would expose the hiring firm to a fraudulent transfer claim. If a Jewel waiver is not included m the prospective partner's former partnershi:Q agreement, or other governing document, the hiring firm should think twice before making a hiring decision that mvites a lawsuit." Amanda A. Main, "Applying the Unfinished Business Rule to Dissolved Law Partnerships," 33 L.A. Law. 10, 12-13 (Mar. 2010). 9 avoid these challenges, partners at distressed firms may have an incentive to leave their firms prematurely to avoid application of an unfinished-business rule. These circumstances harm the relationship between lawyer and client, compromise the level of service that lawyers are able to provide, and could contribute to, if not cause, the failure of the law firm. ALAS offers its member firms advice regarding the migration of lawyers between firms, including a detailed management guide on the subject of lawyer mobility. In that guide and in numerous other communications, ALAS recommends that law firms exercise caution in recruiting and hiring attorneys from other firms-especially where those firms are in financial distress. 5 This is unfortunate, because clients would benefit from having the option to transfer their matters to well-qualified firms that are hiring the lawyers who were previously handling their matters. But the muddled state of the law relating to the unfinished business doctrine works against the smooth and effective transition of those lawyers to their new firms and, by extension, works against what would generally be most beneficial to the client. The unfinished-business rule increases the obstacles to smooth attmney transitions, creating conditions under which the quality of representation is likely 5 ALAS's advice on this topic has been informed and refined by recent firm failures and subsequent litigation. 10 to suffer. Holding that the unfinished-business rule excludes hourly matters would help promote quality legal service and strengthen the attorney-client relationship. II. Attempts to apportion profits on hourly unfinished business inevitably lead to absurd results. If an unfinished-business rule is established, courts will be forced to devise a method for determining what proportion of unfinished-business profits should be tmned over to" a dissolved firm. Initial attempts at damages calculations have only further confused an already muddled field of law. The difficulty of articulating a fair method for apportioning such profits confirms that it is unreasonable to apply the unfinished-business rule to hourly matters. Recently, a bankruptcy court tried to set forth a comprehensive framework for accounting for unfinished hourly work. The unsatisfactory result of that exercise illustrates the inherent difficulties of the task. As the Court knows, international law firm Heller Ehrman LLP filed for Chapter 11 dissolution in November of2008. After former Heller partners migrated to new firms, and clients transfened their open matters to those new firms, the bankruptcy estate filed adversary proceedings against the new firms to recover post-dissolution profits earned from those matters. See, e.g., Heller Ehrman LLP v. Jones Day, Adv. Proc. No. 10-3221DM (Bania. N.D. Cal.).6 In those proceedings, Bankruptcy Court 6 Two ALAS-insured firms-Davis Wright Tremaine LLP and Foley & Lardner LLP-are defendants in those adversary proceedings. 11 Judge Dennis Montali has ruled that the Heller estate had a property interest in the post-dissolution profits from former Heller matters and that Heller's pre-petition waiver of that interest constituted a voidable fraudulent transfer. Earlier this year, Judge Montali issued an order on the parties' motions for summary judgment regarding the value of unfinished business to be recovered. Heller Ehrman LLP v. Jones Day, Adv. Proc. No. 10-3221DM, 2014 WL 323068 (Bania. N.D. Cal. Jan. 28, 2014). In that order, Judge Montali ruled that damages could not be determined as a matter of law; but he set forth a framework for calculating those damages. Specifically, the banlauptcy court explained that Heller was not entitled to "the full amount of profits ... received by Defendants," as Defendants were entitled to recover "all direct costs and certain indirect costs of completing the Unfinished Business" along with "reasonable compensation." Id. at *2 & *4. But the court also rejected the defendants' argument that "reasonable compensation" be defined as the hourly rates charged for completing the work. Id. at *6. Instead, the court suggested that damages should be analyzed from the perspective of a hypothetical firm having Heller's profit margins and other characteristics. I d. at * 8. Specifically, the court directed that: [T]he ultimate determination will be a fact based analysis, perhaps assisted by expert testimony, as to the objective projected net present value of the pending unfinished matter on the firm's dissolution date, 12 based on the hypothetical continuation of the matter to its reasonably anticipated completion by an ongoingfirm with [HellerJs} characteristics. I d. (emphasis added) (quotation omitted). The court added that any damages awarded to Heller "should not exceed the amount it would have recovered if it had completed the Unfinished Business." Id. at *3 This method of damages calculation is based on an incoherent hypothetical. It is difficult, if not impossible, to determine how much profit a dissolved firm would have made on unfinished business, because the fi1m's financial condition is what kept it from completing that work in the first place. Thus, this damages theory requires the parties to take into account certain characteristics of a dissolved firm, but disregard its most salient characteristics-the ones that caused the firm to become insolvent and dissolve.7 By forcing the parties to calculate damages based on what a failing fitm might have earned from continuing work that it could no longer do, the bankruptcy court invited speculation. 8 7 As one article put it: "Here's a riddle. A law firm has no practicing lavyyers, does no legal work and pays no expenses for legal work, yet may be entitled to all of the t?rofits on legal work performed by other attorneys at other law firms. What kind of firm is it? The answer: an unfortunate dissolved law firm that has not done advance_p_lanning about its dissolution." Jonathan Hughes & Diana DiGennaro, "Without an agreement, a former partner will likely have a duty to account to the dissolved firm," in Concurrent Session: Law Firm Insolvencies: What Have We Learned? Am. Bankr. Inst. 109 (Mar. 22, 2013), available on WESTLA W at 032213 ABI-CLE 109. 8 Ironically, the bankruptcy court's damages framework might be even worse 13 These confusing pronouncements resulted from the bankruptcy court's best efforts to reconcile the unfinished-business rule for hourly matters with the general principle that damages should "restore the estate to the financial condition it would have enjoyed if the transfer had not occmTed." USAA Fed. Savings Bank v. Thack, 599 F.3d 880, 890 (9th Cir. 2010) (citation omitted). Those guidelines might lend themselves to analyses concerning the value of material assets or even intellectual property, but their logic breaks down when applied to profits from client matters that the dissolved firm could not have performed. This confusion about the appropriate measure of damages stems directly from applying an unfinished-business rule to hourly matters. A ruling by this Court that the rule does not apply to hourly matters will help resolve such confusion nationwide. III. Hourly-billed client matters are not law-firm "property." Treating hourly client matters as law-firm property following dissolution is not only harmful to clients, lawyers, and law firms-it also has no basis in property law. Indeed, treating client matters as property in the context of a firm dissolution is irrational, as client matters do not qualify as property in any other context. As discussed more fully in the parties' briefs, New York recognizes the importance of without the "failing firm cap," as there would then be no hard limit on the windfall available to the bankruptcy estate. · 14 a client's right to counsel of choice. See Demov, Morris, Levin & Shein v. Glantz, 53 N.Y.2d 553, 556 (1981). Because clients always have the right to take their business where they wish, client matters cannot meet the basic definition of property under any reasonable legal theory. For instance, it is a basic tenet of property law that the owner of property may exclude others from using it. This right to exclude is "one of the most essential sticks in the bundle of rights that are commonly characterized as property." Kaiser Aetna v. US., 444 U.S. 164, 176 (1979). In contrast, a law fitm has no right to exclude other attorneys from taking over its client's matters. A client is free to terminate a lawyer at any time, take its case to new counsel, hire co-counsel, or end the case altogether. Courts uniformly recognize that a lawsuit belongs to the client, not the attorney. See Lemmer v. Charney, 195 Cal. App. 4th 99, 105 (20 11) ("just as the law will not enforce an agreement between the parties constraining a client to pursue an unwanted lawsuit, the law does not recognize a tort cause of action for damages for the client's decision to abandon it"). A client's right to move, share, or terminate its business defeats any characterization of that business as the lawyer's property. Simply put, something that you have no right whatsoever to keep or dispose of can't be your property. Treating hourly matters as property in the dissolution context is thus a legal fiction whose main effect is to place creditors' interests ahead of clients' interests. In certifying this issue to this 15 Court, the Second Circuit acknowledged that client matters may not be considered law fi1m property under New York law, reasoning that "[b ]ecause the client has an unassailable right to discharge an attorney at any time, with or without cause, it is clear that 'clients are not merchandise."' In re Thelen LLP, 736 F.3d 213, 222-23 (2d Cir. 2013) (quoting Cohen v. Lord, Day & Lord, 75 N.Y.2d 95, 98 (1989)). As the Second Circuit noted, "[r]ecognizing a law firm's property interest in pending client matters might unde1mine that relationship, and be 'inconsistent with the best concepts of [lawyers'] professional status."' I d. Finally, from the standpoint of fundamental fairness, it is unreasonable to treat hourly matters pending at dissolution as property of the dissolved firm. Such treatment denies the lawyers who continue to handle those matters fair compensation for their time and work. For this reason, several New York courts have recognized that a dissolved firm does not have the right to collect profits derived from the "efforts, skill and diligence" of the attorneys who handled the matter post-dissolution. Shandell v. Katz, 217 A.D.2d 472, 473 (N.Y. App. Div. 1995). And in the only New York case to address directly the proper status of hourly-billed cases after firm dissolution, the court reasoned that "New York decisions dealing with a cause of action for unfinished business have uniformly involved contingent fee cases," but that it was "logical to distinguish between contingency fee arrangements and cases which are billed on the basis of hourly 16 work." Sheresky v. Sheresky Aronson Mayefsky & Sloan, LLP, 35 Misc. 3d 1201(A), 2011 N.Y. LEXIS 6588, at** 12-15 (N.Y. Sup. Ct., N.Y. Cnty. 2011). The unfairness of the unfinished-business rule is highlighted by the different results that it produces, depending on which firm the client selects to work on its matters. If the client selects a firm that none of the dissolved firm's partners joined, that firm is entitled to reap the profits from that work and the estate of the dissolved firm is entitled to nothing. But if the client makes the logical choice of selecting a firm that hired a partner from the dissolved firm, that firm must essentially work for free for the benefit of the estate. The law should not be that mercurial or arbitrary. CONCLUSION When faced with questions like those at issue here, our highest courts should be guided not only by past case law, but also by the likely consequences of their rulings. ALAS strongly believes that adoption of an unfinished-business rule would have dire consequences for those lawyers and clients affected by law firm Ill Ill Ill Ill 17 dissolutions. For the foregoing reasons, this Court should hold that a client matter billed on-an hourly basis is not the property of a law firm, and that, upon dissolution and in related bankruptcy proceedings, the dissolved law firm is not entitled to the profits earned on such matters as the "unfinished business" of the firm. Dated: May 14, 2014 By: Respectfully submitted, KEI