Diamond v. Hogan Lovells U.S. LLP, 022720 FED9, 15-16326

Docket Nº:15-16326, 15-16327 15-16328, 15-16329, 15-16330, 15-16331, 15-16332, 15-16333
Party Name:Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant, v. Hogan Lovells U.S. LLP, Defendant-Appellee. Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant, v. Pillsbury Winthrop Shaw Pittman LLP, Defendant-Appellee. Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, ...
Attorney:Christopher D. Sullivan (argued), Diamond McCarthy LLP, San Francisco, California; Christopher R. Murray and Michael Fishel, Diamond McCarthy LLP, Houston, Texas; for Plaintiff-Appellant. Shay Dvoretsky (argued) and Emily J. Kennedy, Jones Day, Washington, D.C.; Robert A. Mittelstaedt and Jason M...
Judge Panel:Before: Ronald M. Gould and Mary H. Murguia, Circuit Judges, and Nancy D. Freudenthal, District Judge. Blackburne-Rigsby, Chief Judge
Case Date:February 27, 2020
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Hogan Lovells U.S. LLP, Defendant-Appellee.

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Pillsbury Winthrop Shaw Pittman LLP, Defendant-Appellee.

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Seyfarth Shaw LLP, Defendant-Appellee.

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Perkins Coie LLP, Defendant-Appellee.

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Neal, Gerber & Eisenberg LLP, Defendant-Appellee.

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Kasowitz Benson Torres LLP, Defendant-Appellee.

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Sheppard Mullin Richter & Hampton LLP, Defendant-Appellee.

Allan B. Diamond, Chapter 7 Trustee of the Estate of Howrey LLP, Plaintiff-Appellant,

v.

Jones Day, Defendant-Appellee.

Nos. 15-16326, 15-16327 15-16328, 15-16329, 15-16330, 15-16331, 15-16332, 15-16333

United States Court of Appeals, Ninth Circuit

February 27, 2020

Argued and Submitted November 16, 2017

Submission Withdrawn February 27, 2018

Resubmitted February 20, 2020 San Francisco, California

Appeal from the United States District Court for the Northern District of California James Donato, District Judge, Presiding D.C. No. 3:14-cv-04882- JD, 3:14-cv-04883- JD, 3:14-cv-04884- JD, 3:14-cv-04885- JD, 3:14-cv-04886- JD, 3:14-cv-04887- JD, 3:14-cv-04888- JD, 3:14-cv-04889- JD

Christopher D. Sullivan (argued), Diamond McCarthy LLP, San Francisco, California; Christopher R. Murray and Michael Fishel, Diamond McCarthy LLP, Houston, Texas; for Plaintiff-Appellant.

Shay Dvoretsky (argued) and Emily J. Kennedy, Jones Day, Washington, D.C.; Robert A. Mittelstaedt and Jason McDonell, Jones Day, San Francisco, California; for Defendant-Appellee Jones Day.

Jonathan W. Hughes and Pamela Phillips, Arnold & Porter LLP, San Francisco, California; Robert Reeves Anderson, Arnold & Porter LLP, Denver, Colorado; for Defendant-Appellee Hogan Lovells U.S. LLP.

David G. Keyko, Pillsbury Winthrop Shaw Pittman LLP, New York, New York; John M. Grenfell and G. Allen Brandt, Pillsbury Winthrop Shaw Pittman LLP, San Francisco, California; for Defendant-Appellee Pillsbury Winthrop Shaw Pittman LLP.

Lori L. Roeser, Seyfarth Shaw LLP, Chicago, Illinois, for Defendant-Appellee Seyfarth Shaw LLP.

Ronald A. McIntire and Judith B. Gitterman, Perkins Coie LLP, Los Angeles, California, for Defendant-Appellee Perkins Coie LLP.

Nancy J. Newman, Hanson Bridgett LLP, San Francisco, California; Robert Radasevich, Neal Gerber & Eisenberg LLP, Chicago, Illinois; for Defendant-Appellee Neal Gerber & Eisenberg LLP.

Robert M. Novick, Kasowitz Benson Torres & Friedman LLP, New York, New York; Margaret A. Ziemianek, Kasowitz Benson Torres & Friedman LLP, San Francisco, California; for Defendant-Appellee Kasowitz Benson Torres LLP.

Richard W. Brunette and Michael M. Lauter, Sheppard Mullin Richter & Hampton LLP, Los Angeles, California, for Defendant-Appellee Sheppard Mullin Richter & Hampton LLP.

Paulette Brown, President; Eric A. Shumsky, Christopher J. Cariello, and Anjali S. Dalal, Of Counsel; American Bar Association, Chicago, Illinois; for Amicus Curiae American Bar Association.

David C. Tingstad, Beresford Booth PLLC, Edmonds, Washington, for Amici Curiae Various Practitioners and Academics.

Before: Ronald M. Gould and Mary H. Murguia, Circuit Judges, and Nancy D. Freudenthal, [*] District Judge.

SUMMARY

[**]

Bankruptcy

Following the District of Columbia Court of Appeals' answers to questions previously certified by the panel, the panel filed an order vacating the district court's decision and remanding for further proceedings in a bankruptcy case.

In the panel's prior order certifying questions to the District of Columbia Court of Appeals, the panel had stated that the claims of a trustee for the bankruptcy estate turned on the answers to unresolved questions of District of Columbia partnership law concerning the scope of the interest, if any, that a partnership has in client matters started at the partnership but completed at another firm. The District of Columbia Court of Appeals answered the certified questions, holding, among other things, that a dissociated partner has no duty to account for profits after the partner leaves the firm. The panel expressly adopted the District of Columbia Court of Appeals' answers, vacated the district court's decision, and remanded for further proceedings consistent with those answers.

ORDER

In our prior Order Certifying Questions to the District of Columbia Court, we certified the following questions to the District of Columbia Court of Appeals, by this language: Pursuant to D.C. Code § 11-723 we respectfully ask the District of Columbia Court of Appeals to resolve three questions of District of Columbia law that "may be determinative" of this bankruptcy appeal. D.C. Code § 11-723(a):

(1) Under District of Columbia law does a dissociated partner owe a duty to his or her former law firm to account for profits earned post-departure on legal matters that were in progress but not completed at the time of the partner's departure, where the partner's former law firm had been hired to handle those matters on an hourly basis and where those matters were completed at another firm that hired the partner?

(2) If the answer to question (1) is "yes," then does District of Columbia law allow a partner's former law firm to recover those profits from the partner's new law firm under an unjust enrichment theory?

(3) Under District of Columbia law what interest, if any, does a dissolved law firm have in profits earned on legal matters that were in progress but not completed at the time the law firm was dissolved, where the dissolved law firm had been retained to handle the matters on an hourly basis, and where those matters were completed at different pre-existing firms that hired partners of the dissolved firm post-dissolution?

The District of Columbia Court of Appeals accepted our certified questions and held oral argument on them. The District of Columbia Court of Appeals has now answered our certified questions. The court's short answers were: (1) We hold that hourly-billed client matters are not "property" of the law firm. A client has an almost "unfettered right" to choose or to discharge counsel. In re Mance, 980 A.2d 1196, 1203 (D.C. 2009). Therefore, a law firm has no more than a "unilateral expectation," rather than a "legitimate claim of entitlement," to future fees earned from continued work on hourly-billed client matters. Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972).

(2) After a partner leaves the law firm (disassociates), the partner owes no continued duty to the former law firm to account for new profits earned on hourly-billed client matters that started at the former firm. A dissociated partner has a limited duty of loyalty to the former firm only "with regard to matters arising and events occurring before the partner's dissociation." D.C. Code § 29-606.03(b)(3) (2013 Repl.). This limited duty requires a dissociated partner to remit profits earned on work performed prior to the partner's dissociation, but does not include profits earned from work performed subsequent to the partner's dissociation.

(3) Since a dissociated partner has no duty to account for profits earned after the partner leaves the firm, we need not address this question.

(4) A dissolved law firm has no interest in profits earned on hourly-billed client matters following dissolution. A dissolved law firm is only entitled to proceeds earned as part of the firm's "winding up" process, which include acts that preserve partnership rights and property, prosecute and defend actions, settle or transfer partnership business, or distribute assets. "Winding up" does not encompass new business or work done on former client matters after dissolution by former partners. The dissolved partnership can no longer undertake work on these matters after dissolution. See D.C. Code § 29-608.03(c) (2013 Repl.).

When we certified the specified questions to the District of Columbia Court of Appeals, we expressly said that "[i]f the District of Columbia Court of Appeals resolves these questions we will resolve the issue in our case in accordance with its answers." The answers to our certified questions appear in the decision dated February 13, 2020 from the District of Columbia Court of Appeals, which is attached to this Order as Appendix A. We therefore VACATE the district court's prior decision and REMAND to the district court for further proceedings consistent with the answers given by the District of Columbia Court of Appeals, which this Court expressly adopts.

IT IS SO ORDERED.

APPENDIX A

DISTRICT OF COLUMBIA COURT OF APPEALS

No. 18-SP-218

Allan B. Diamond, Chapter 7 Trustee of Howrey LLP, Appellant, v. HoganLovells U.S. LLP, et al., Appellees.

(Argued December 17, 2018 Decided February 13, 2020)

On Questions Certified by the United States Court of Appeals for the Ninth Circuit (15-16326, 15-16327, 15-16328, 15-16329, 15-16330, 15-16331, 15-16332, and 15-16333)

Christopher R. Murray, with whom Christopher D. Sullivan was on the brief, for appellant.

Jonathan W. Hughes, with whom Allon Kedem was on the statement in lieu of brief, for appellee Hogan Lovells US, LLP.

Shay Dvoretzky, with whom Parker A. Rider-Longmaid was on the brief, for appellee Jones Day.

...

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