November 7, 2011
Failed Law Firms and Unfinished Business Claims
The Wall Street Journal has an interesting article on efforts to collect the debts owed by failed law firms. According to the article, the bankrupt firm’s creditors are going after the new firms that the failing firm's attorneys join.
The basis of these claims is what’s known as the unfinished-business doctrine, the idea that the old firm’s creditors have an interest in profits generated by work that the attorneys began at the old firm and continue at their new firms. The unfinished-business doctrine is, in essence, an actual or constructive fraudulent conveyance claim. The trustee is arguing that the unfinished business, an asset of the bankrupt firm, was wrongfully conveyed to the new firm by the departing lawyer. Several law firms have apparently settled such claims.
I’m not a bankruptcy expert, so I wasn’t familiar with this idea, but it certainly puts a new spin on failing law firms. If you want to learn more, a short article from the New York Law Journal is available here.
November 7, 2011 | Permalink