Is the Unfinished Business Doctrine Finished?

Many professionals do not end their careers where they started. Professionals are on the move. The vast majority of professionals are impacted by the transition of a colleague from one firm to another. In fact, with the increase in online media covering the legal industry in particular, news of partner transitions is readily available. In a recent California case, a trustee of a bankrupt law firm has taken the position that the dissolved firm should retain all ongoing legal fees from cases started at the firm. This could have significant impact on how professionals transition their practice.

Under current California law, the “Unfinished Business Doctrine” holds that any work begun at a firm that later dissolves is a partnership asset that must be completed for the benefit of the dissolved firm. The trustee in this particular case has pointed to policy-based justifications for keeping the doctrine, while also arguing that it is the dissolved firm who expended considerable marketing and business development costs to obtain the work. It is therefore only equitable, the trustee argues, that it is the dissolved firm who reaps the benefits as opposed to the new/acquiring firm.

The defense has countered that to the extent any dissolved firm can lay claim to start-up costs in acquiring a client, these interests are overridden by the need for clients and attorneys to freely move at their own desire.  By restricting the fees of the case to the firm where the work originated, the Unfinished Business Doctrine essentially prevents a partner working on a large case to move firms unless he wishes to work for free for an extensive period of time.  Furthermore, should he opt to do so and relinquish the case to his former firm, the client is forced to either keep a firm he no longer wishes to retain or find a new attorney.  While courts are already reluctant to restrict attorneys, they are even more so with regards to clients, according to the defense.

It is likely that California will join New York in disposing of the Unfinished Business Doctrine to the benefit of mobile attorneys. In rejecting this doctrine in New York, the court found that a firm does not have any interest in ongoing work once the attorney has left the firm, and may only recover what was completed while at the firm. This concept also falls into line with the principle that a firm lacks an interest in the future work of a client, as clients are free to change attorneys at any time.

A ruling to dispel with the Unfinished Business Doctrine would continue along the current trend.  Especially in litigation, attorneys will often take a case that is expected to last for several years before even reaching trial. Some believe that it is unreasonable that the case be fossilized in the firm in which it began, regardless of where the originating attorney works or what the client prefers to do. Partners, trustees and law firms across the country will likely keep a close eye on this decision, as a California ruling in line with New York places two large legal markets in sync and could significantly erode any future arguments in favor of the Unfinished Business Doctrine in other jurisdictions.