US federal court rules that failed law firms can't pursue former partners for profits

September 12, 2012 A new federal court ruling in New York has challenged the orthodoxy that failed law firms can pursue former partners to recoup profits from unfinished legal work that was taken to their new firms.

The decision provided that the defunct firm Thelen LLP did not have a right to claim the profits for unfinished work that was taken to two law firms that hired Thelen ex-partners. Those profits are not, according to the judgment, the property of the defunct firm.

A separate decision of the same court, made in May, provided just the opposite result, ruling that the profits from unfinished legal work in that case were indeed assets of the failed law firm (Coudert Brothers LLP, in that case). The Wall Street Journal Blog suggests that the matter might soon be resolved by the New York state Court of Appeals.


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