A Dissolving Law
Firm’s Duty to its Clients: Breaking up is Hard to Do
By Jeffrey P. Lewis
As a
general rule, malpractice committed by a former partner of a dissolved
partnership will not be imputed upon the other former partners so long as the
clients were notified of the dissolution. Following dissolution, however,
former partners remain bound by any fee agreement made with partnership clients.
Moreover, a pair of recent federal district court decisions out of
In RLS Associates, L.L.C. v. United Bank of Kuwait PLC, 417 F. Supp. 2d 417 (S.D.N.Y., decided Feb. 27, 2006) and RLS Associates, L.L.C. v. United Bank of Kuwait PLC, 2006 U.S. Dist. LEXIS 22975 (S.D.N.Y., decided April 19, 2006), the court considered the obligations of the partners of a dissolved law firm to protect the interests of the former partnership’s clients in litigation.
In RLS, plaintiff had retained the partnership law firm to represent it in litigation, whereupon the law firm entered its appearance on plaintiff’s behalf. The partnership then assigned a partner and an associate at the firm to perform most the work. Later, in the midst of this litigation, the law firm dissolved and the client was notified. The partners went their separate ways, as did the associate. The client wanted one or more of the former partners to continue their representation. The former partners demurred.
Senior Judge Charles S. Haight
Jr. concluded that the former equity partners, but not the former associate,
owed both a professional and ethical responsibility to continue in the
representation. Part of the difficulty in considering this issue, as Judge
Haight notes, lies in the fact that
The court found two distinct and
separate bases to support its conclusion. First, it assumed that the parties
had entered into an engagement letter. Because under
As a consequence, the court ordered that the former partners either continue to represent plaintiff or hire competent counsel of their choosing and expense for plaintiff. The former partners sought reconsideration. They argued that the law firm and the client had entered into an oral contingent fee agreement, never reduced to writing, and that the attorneys and client had never expressly discussed the extent of the representation. They also argued that the court should force the former associate to handle the case because the former partners had not handled the case since the firm’s dissolution. The court refused to alter its decision, finding that the former associate had been engaged as an associate in his current firm to perform only discrete services for the plaintiff, some paid for by the former partners and some performed pro bono, and that he had never entered his appearance in the litigation.
As a practical matter, generally, the dilemma involving the duty to provide continued representation following dissolution can only occur in matters involving contingent or flat fees. Liability for post-dissolution negligence of a former partner, however, can occur in any case based upon a breach of duty created by the attorney/client relationship while a partner. The engagement letter provides the opportunity to define that relationship. Provide language that allows the partnership, and each of its members, to formally withdraw from the case in the event of dissolution. In the event of dissolution, file a petition to withdraw if the departing partner taking responsibility for the case refuses to enter his appearance in his own name or on behalf of another firm so that the partnership can simply file its withdrawal. Obviously, ensure that all clients are notified of the dissolution and the withdrawal.
Jeffrey P. Lewis is a
shareholder in the West Chester office of the Philadelphia-based law
firm of McKissock & Hoffman P.C., with offices also in