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Howrey Trustee and Law Firms agree – D.C. Court of Appeals Should Settle Clawback Clash on Unfinished Business Rule

November 16, 2017, California – In a lawsuit wherein Howrey trustee is attempting to clawback $20 million in billings from the law firm’s former attorneys; the parties have finally agreed that the Ninth Circuit panel should certify a question for the D.C. Court of Appeals. The parties agreed that the D.C. Court would decide whether the bankrupt law firm could seek fees its ex-clients paid its former attorneys after they left the law firm.

Earlier in September 2014, the U.S. Bankruptcy Judge had refused to dismiss the Howrey trustee’s demands for roughly $20 million in billings on client work earned by former partners who decamped from the law firm. However, in June 2015, the district court reversed that decision, citing the New York court of appeals decisions in the cases of Thelen LLP and Coudert Brothers LLP, which effectively eliminated unfinished-business claims in the state by holding that law firms do not “own” clients and have no claim to future hourly billings.

However, the trustee objected to this, asserting that the district court’s ruling assumed that the D.C. law was unclear and instead a question should be put forth to a D.C. appellate court.

Judges Ronald Gould, Mary Murguia, and Nancy Freudenthal sat on the Ninth Circuit panel. The Howrey trustee is represented by Christopher Daniel Sullivan of Diamond McCarthy LLP. The law firms were represented by Shay Dvoretzky of Jones Day. The lead case is Allan Diamond v. Hogan Lovells, case number 15-16326, in the U.S. Court of Appeals for the Ninth Circuit.