Jewel v. Boxer

Decision Date22 May 1984
CourtCalifornia Court of Appeals Court of Appeals
PartiesHoward H. JEWEL et al., Plaintiffs and Appellants, v. Stewart N. BOXER et al., Defendants and Respondents. A017873.

Socrates Mamakos, San Francisco, for plaintiffs and appellants.

Kathleen Courts, White, Courts & Mitchell, Oakland, for defendants and respondents.

KING, Associate Justice.

In this case we hold that in the absence of a partnership agreement, the Uniform Partnership Act requires that attorneys' fees received on cases in progress upon dissolution of a law partnership are to be shared by the former partners according to their right to fees in the former partnership, regardless of which former partner provides legal services in the case after the dissolution. The fact that the client substitutes one of the former partners as attorney of record in place of the former partnership does not affect this result.

Howard H. Jewel and Brian O. Leary appeal from a judgment, after dissolution of the former law partnership of Jewel, Boxer and Elkind, allocating post-dissolution fees on a quantum meruit basis. We reverse the judgment and remand the cause for allocation based upon the respective interests in the former partnership.

On December 2, 1977, the law firm of Jewel, Boxer and Elkind was dissolved by mutual agreement of its four partners--Howard H. Jewel, Stewart N. Boxer, Peter F. Elkind, and Brian O. Leary. The partners formed two new firms: Jewel and Leary, and Boxer and Elkind. Three associates employed by the old firm were employed by Boxer and Elkind. The partners in the old firm not only lacked an agreement about the allocation of fees from active cases upon a dissolution of the partnership but, contrary to the sound legal advice they undoubtedly always gave their partnership clients, they had no written partnership agreement. The absence of a written partnership agreement was an invitation to litigation upon a dissolution of the partnership.

On the date of dissolution the former partnership had numerous active cases. Boxer, Elkind, and the three associates had handled most of the active personal injury and workers' compensation cases; the rest, as well as other kinds of cases, had been handled by Jewel and Leary. Shortly after dissolution, each former partner sent a letter to each client whose case he had handled for the old firm, announcing the dissolution. Enclosed in the letter was a substitution of attorney form, which was executed and returned by each client retaining the attorney who had handled the case for the old firm. 1 The new firms represented the clients under fee agreements entered into between the client and the old firm.

At issue here is the proper allocation of attorneys' fees received from these cases, some of which were still active at trial. Jewel and Leary filed a complaint for an accounting of these fees, contending they were assets of the dissolved partnership.

In a nonjury trial the court first determined that the partnership interests in income of the old firm were 30% for Jewel, 27% each for Boxer and Elkind, and 16% for Leary. The court then allocated the disputed fees among the old and new firms by considering three factors: the time spent by each firm in the handling of each case, the source of each case (always the old firm), and, in the personal injury contingency fee cases, the result achieved by the new firm. The court assigned a value of 25% to the source factor, and thus allocated 25% of the total fees to the old firm for this factor. In the personal injury cases the court assigned values of 20%, 30%, and 40% for the result factor, depending on when the cases were settled or if they were tried. Remaining percentages (35% to 55% in the personal injury cases and 75% in the other cases) were allocated in accordance with the amount of attorney time expended upon the case before and after dissolution. Under this formula, Jewel and Leary was determined to owe $115,041.16 to the old firm, and Boxer and Elkind was determined to owe $291,718.60 to the old firm. The court rendered judgment in these amounts, plus interest at the legal rate from the date of receipt of each fee on the amount due the old firm. Although we reverse the judgment, we cannot do so without expressing admiration for the laudable efforts of the learned trial judge who masterfully developed a formula geared to achieving a just and equitable result for each party.

Under the Uniform Partnership Act (Corp.Code, § 15000 et seq.), a dissolved partnership continues until the winding up of unfinished partnership business. (Corp.Code, § 15030.) No partner (except a surviving partner) is entitled to extra compensation for services rendered in completing unfinished business. 2 (Corp.Code, § 15018, subd. (f).) Thus, absent a contrary agreement, any income generated through the winding up of unfinished business is allocated to the former partners according to their respective interests in the partnership.

The trial court in the present case recognized these principles, but followed a Texas decision which cited no supporting authority but held that the rule precluding extra compensation for post-dissolution services should not apply to a law partnership, because fees are generated by a former partner's post-dissolution time, skill, and labor. (Cofer v. Hearne (Tex.Civ.App.1970) 459 S.W.2d 877, 879.) The trial court also cited Fracasse v. Brent (1972) 6 Cal.3d 784, 100 Cal.Rptr. 385, 494 P.2d 9, which held that a client has an absolute right to discharge an attorney employed under a contingent fee contract and the attorney is entitled only to the reasonable value of the services rendered before discharge.

Jewel and Leary contend that the court erred in failing to adhere to the rule precluding extra compensation, and should have allocated all post-dissolution fees from the old firm's unfinished cases to the four former partners according to their respective percentage interests in the old firm. Boxer and Elkind argue that the substitutions of attorneys transformed the old firm's unfinished business into new firm business and removed that business from the purview of the Uniform Partnership Act, with the old firm thereafter, under Fracasse v. Brent, supra, limited to a quantum meruit recovery for services rendered before discharge.

The decision in Cofer v. Hearne, supra, was plainly wrong. 3 The Uniform Partnership Act unequivocally prohibits extra compensation for post-dissolution services, with a single exception for surviving partners. (Corp.Code, § 15018, subd. (f).) The definition of "business" in the Uniform Partnership Act as including "every trade, occupation, or profession" (Corp.Code, § 15002) precludes an exception for law partnerships. (Resnick v. Kaplan (1981) 49 Md.App. 499, 434 A.2d 582, 588.)

Accordingly, several courts in other states have held that after dissolution of a law partnership, income received by the former partners from cases unfinished at the time of dissolution is to be allocated on the basis of the partners' respective interests in the dissolved partnership, not on a quantum meruit basis. (Resnick v. Kaplan, supra, 434 A.2d at p. 587; Frates v. Nichols (Fla.App.1964) 167 So.2d 77, 81; see also Kreutzer v. Wallace (Fla.App.1977) 342 So.2d 981, 982-983.)

The decision in Resnick v. Kaplan, supra, is closely analogous to the present case. Resnick, a former partner in a dissolved law partnership, opened his own office and continued to represent clients of the former firm in cases for which he had been responsible before dissolution. The other partners continued to represent other clients of the old firm. (Id., 434 A.2d at pp. 584-585.) In an ensuing action for an accounting, the trial court allocated all fees collected in these cases among the former partners according to their percentage interests in the former partnership. The appellate court affirmed, stating that the Uniform Partnership Act "conferred no right upon either side to compensation for services rendered in this winding up process, [citation] and, in the absence of any provision in the partnership document, it was correctly held that the aggregate of the fees collected should be allocated according to the percentages specified in the agreement for the distribution of profits and losses." (Id., at p. 587.) The court rejected the argument that different rules should apply to professional partnerships, citing the Uniform Partnership Act's express applicability to the professions. (Id., at p. 588; see Corp.Code, § 15002.)

The court in Resnick also rejected an argument made by Boxer and Elkind in the present case (and asserted by the court below in citing Fracasse v. Brent ), that clients have an absolute right to the attorney of their choice. The Resnick court recognized this right of clients, but said "it does not mean, as appellant contends, that the fees thereafter earned by the partner chosen by the client are not subject to division in accordance with the partnership agreement." (Id., at p. 588.) A similar conclusion was reached recently in Rosenfeld, Meyer & Susman v. Cohen (1983) 146 Cal.App.3d 200, 219, 194 Cal.Rptr. 180, in which two partners handling a large antitrust suit for a law partnership left the firm and contracted with the client to take the case with them. The court held that even though the client had the right to the attorneys of its choice, that right was irrelevant to the rights and duties between the former partners with regard to income from unfinished partnership business. The reasoning in Resnick and Rosenfeld on this point is sound: the right of a client to the attorney of one's choice and the rights and duties as between partners with respect to income from unfinished business are distinct and do not offend one another. Once the client's fee is paid to an attorney, it is of no concern to the client how that fee is allocated among...

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