Trends and Analysis for Successfully Transitioning Lateral Partners
into New Partnerships While Minimizing Risk and Reducing Potential Liabilities

Claims Relating to Partner Departures.

Notice to Clients of Attorney Departure Not Likely Protected Speech in California

Earlier this month, California’s Fourth District Court of Appeal agreed with an Orange County trial court that several emails sent by a departing partner to clients and former clients announcing his departure to a new firm did not qualify as protected speech under anti-SLAPP laws.  Although the Court of Appeal’s opinion was unpublished, the Court provided a detailed analysis of what constitutes protected speech in the context of attorney departures.  The opinion also underscores that the anti-SLAPP statute has very limited utility in attacking claims related to partner departures. More

Court Found No Conflict of Interest with Dual Representation of Law Firm and Partner Against Claims from Departing Partner Shareholder

Earlier this year, California’s Fourth District Court of Appeal found that a partner’s status as 50% shareholder of a law firm did not give rise to a conflict of interest which would preclude the firm’s counsel from defending the firm and another partner against the departing partner’s lawsuit.  (See Coldren v. Hart, King & Coldren (2015) 239 Cal.App.4th 237.)  The Court also found that under the facts specific to that case, the departing partner did not have standing to bring a motion to disqualify the firm’s counsel based on an alleged conflict of interest. The Court’s analysis in this matter is helpful in guiding not only attorneys who are considering whether there is a conflict with such dual representations, but for law firm’s handling the transition of departing partners and who want to avoid potential conflicts in representing the firm’s interests in such disputes. More

Nelson Levine v. Lewis Brisbois Just Settled: Firm Laptops and the Computer Fraud and Abuse Act – Lessons from A Recently Resolved Attorney Departure Case

As many attorneys who follow partner departures and lateral moves know, in 2014 a group of attorneys at Nelson Levine De Luca & Hamilton, LLC (“Nelson Levine”) in Montgomery County, Pennsylvania, left the firm to join Lewis Brisbois Bisgaard & Smith LLP (“Lewis Brisbois”), a California limited liability partnership. This departure resulted in litigation that serves as a primer on the Computer Fraud and Abuse Act, underscoring the importance of adding firm-issued laptops and the handling of other technology (often accessing confidential information) that attorneys regularly use, to the growing list of topics that firms and departing attorneys should address as part of the firm’s policies and procedures and in advance of any separation.
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Significant Victory in Challenge Against Unfinished Business Rule’s Application to Hourly Fee Matters in California

On June 11, 2014, U.S. District Judge Charles Breyer issued a significant ruling in favor of several large law firms in the ongoing fight regarding whether and if a dissolved law firm has the right to profits from unfinished legal work its former partners brought to their new firms.  In his Order granting summary judgment in favor of the law firms and against the Trustee for the defunct Heller Ehrman LLP, Judge Breyer was reviewing de novo an earlier Bankruptcy Court order that went against the law firms and in favor of the Heller Ehrman Trustee.  In a case of first impression, Judge Breyer concluded that under the facts presented in this case, “neither law, equity, nor policy recognizes a law firm’s property interest in hourly fee matters.” More

Bankruptcy Court finds that Unfinished Business Rule is Valid in California and May Apply to Hourly Rate Matters

There has been a lot of recent press about the validity of Unfinished Business Claims in California (also known as Clawback claims) following a ruling earlier this year by U.S. Bankruptcy Judge Dennis Montali in San Francisco related to the Howrey, Simon, Arnold & White LLP (“Howrey”) bankruptcy.  At issue, was whether the trustee of a bankrupt firm had any basis to proceed against the firm’s former partners to recover profits from unfinished legal business matters that followed former partners to their new firms, even if those profits apply to hourly rate matters.  Although other jurisdictions have litigated this issue (both D.C. and New York), no California court has expressly interpreted the Unfinished Business Rule, as set forth in Jewel v. Boxer (1994) 156 Cal. App. 3d 171 (“Jewel”), as applying to hourly rate matters upon partnership dissolution. More

Departing Partners Must Properly Navigate California’s Uniform Trade Secrets Act When Making a Lateral Move to a New Firm

A departing partner must be familiar with and properly navigate California’s Uniform Trade Secrets Act (Civil Code Section 3246 et seq.)(“UTSA”), which governs misappropriation of trade secrets, when informing clients of a move to a new firm.  In the seminal 2004 case Reeves v. Hanlon (2004) 33 Cal.4th 1140, the California Supreme Court defined the scope of the UTSA in the context of a law firm partner departure and use of the firm’s client list. More

According to the California Supreme Court in Edwards v. Arthur Andersen, There is No “Narrow Restraint” Exception to General Rule Voiding Noncompetition Agreements

As a general rule under California law, contracts that restrict or penalize competition among former employees and employers are void and unenforceable under Business & Professions Code Section 16600.  In Edwards v. Arthur Andersen, the California Supreme Court examined the issue of whether or not there was a “narrow restraint” exception to this general rule, which would allow a contractual provision to be valid and enforceable when a party is “barred from pursuing only a small or limited part of the business, trade or profession.”  The California Supreme Court held that there was no such exception to the unambiguous and undiluted language of Section 16600 and that any such restraints on an employee’s right to pursue his/her trade or business are invalid and unenforceable.  (See Edwards v. Arthur Andersen (2008) 44 Cal.4th 937.) More