Heller Ehrman LLP v. Arnold and Porter, LLP

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 08-32514DM
HELLER EHRMAN LLP, 	)
)
Debtor. 	) Chapter 11
___________________________________)
HELLER EHRMAN LLP, 	) Adversary Proceeding
) No. 10-3203DM
Plaintiff, )
)
v. 	)
)
ARNOLD & PORTER LLP, 	)
)
Defendant. )
___________________________________)
MEMORANDUM DECISION ON MOTION TO DISMISS
I. 	INTRODUCTION
Plaintiff (“Debtor”) filed a complaint 1 for avoidance of
fraudulent transfers, seeking to recover from Defendant law firm
the value of profits received by it with respect to unfinished
business that was being handled by the Debtor at the time of its
dissolution. 	Under documents that governed Debtor, its corporate
1 Debtor filed sixteen similar adversary proceedings against
sixteen law firms. 	The complaints are virtually identical as to
the allegations and the theories of recovery; they differ as to
each particular defendant’s “unfinished business” discussed in the
text, infra. 	The adversary proceedings are: 10-3203; 10-3210;
10-3213; 10-3216; 10-3219; 10-3221; 10-3234; 10-3235; 10-3238; 10-
3239; 10-3243; 10-3244; 10-3251; 10-3253; 10-3254; and 10-3263.
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Signed and Filed: April 22, 2011
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
April 22, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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partners and the attorney Shareholders of the corporate partners,
Debtor retained the right to all profits and fees (including
“unbilled fees, work in progress . . . or clientele”) derived from
legal services to its clients, even upon departure of the attorney
handling much matters. 	However, as part of its dissolution
process, Debtor agreed to waive its rights under Jewel v. Boxer,
156 Cal. App. 3d 171 (1984) (“Jewel”), 2 to recover fees associated
with such unfinished business and generated by its attorneys after
their departure. 	Debtor seeks to avoid this waiver as
constructive or actually fraudulent transfer.
In the First Claim For Relief, Debtor seeks to avoid and
recover intentional fraudulent transfers under the Bankruptcy
Code; in the Second Claim For Relief, Debtor seeks to avoid and
recover the same transfers as constructive fraudulent transfers
under the Bankruptcy Code; in the Third Claim For Relief, it seeks
to avoid and recover actual fraudulent transfers under the
California Uniform Fraudulent Transfer Act (“CUFTA”); in the
Fourth Claim For Relief, it seeks to avoid and recover
constructive fraudulent transfers under CUFTA.
Defendant filed a motion to dismiss (“Motion”). 	For the
reasons explained below, the Motion will be granted, in part,
although Debtor will be given leave to amend the Complaint as to
the First Claim For Relief and the Third Claim For Relief; in all
2 In Jewel, the court held that, in the absence of a
partnership agreement, the Uniform Partnership Act requires that
attorney fees received on cases in progress upon dissolution
belong to all partners of the dissolved partnership, even when a
former partner is substituted in as counsel for the dissolved
firm. 	Debtor had a partnership agreement, but as explained in the
text, it retained certain potentially valuable rights.
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other respects the Motion will be denied. 3
II. 	ISSUES
A. 	Did the doctrine of Jewel apply given the organizational
structure adopted by Debtor no later than January 1, 1994?
B. 	Assuming Jewel applies, did Debtor’s Basic Documents 4
operate to waive all or any of Debtor’s rights to demand an
accounting by, or recover unfinished business profits from,
attorneys who left the firm and retained unfinished business?
C. 	Assuming Jewel applies and Debtor did not waive its
rights under the Basic Documents, did paragraph VI(F) (the “Jewel
Waiver”) of Debtor’s dissolution plan effective September 26, 2008
(the “Plan of Dissolution”) constitute a transfer of Debtor’s
property that the Debtor may seek to avoid and recover, in whole
or in part, by the Complaint?
D. 	Would any recovery on the Complaint by Debtor constitute
an illegal sharing of fees under the California Rules of
Professional Conduct or violate any other applicable law?
E. 	May Debtor recover on the Complaint against Defendant,
3 All defendants in the adversary proceedings listed in
footnote 1 filed motions to dismiss that were fully briefed, then
argued and submitted on March 31, 2011. 	While some defendants
argued issues that others did not, the court deals with all issues
as though they had been raised by all defendants. 	The court
disposes of the sixteen motions by identical Memorandum Decisions
and Orders on Motion to Dismiss filed in those sixteen matters
this date.
4 For purposes of the Motion and this Memorandum Decision,
the Basic Documents are the Partnership Agreement (“PA”) (revised,
as amended, effective January 1, 1994); Shareholders Agreement
(“SHA”) (revised, as amended, effective September 28, 2005);
Employment Agreement (“EA”)(revised, as amended, effective
September 28, 2005); Glossary (as amended and restated as of June
1, 2006).
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rather than individuals who were Members of Debtor’s professional
corporate partners and later joined Defendant?
F. 	Do the First Claim For Relief and the Third Claim For
Relief adequately allege sufficient facts to establish essential
elements of actual fraudulent transfers?
III. 	DISCUSSION 5
A. Jewel applies despite Debtor’s organizational structure.
Defendant argues that Jewel cannot apply because of Debtor’s
organizational structure. 	Debtor is a California limited
liability partnership with a California professional corporation
as its managing general partner and several other professional
corporations (incorporated in California and other states) as its
remaining partners. 	The individual attorneys who practiced law
under the business of Debtor were Members (viz., Shareholders) of
those professional corporations pursuant to various versions of
the SHA. 	Those individuals also were employed by their respective
professional corporations pursuant to versions of the EA.
The parties do not disagree that Debtor was organized under
the California Revised Uniform Limited Partnership Act (Cal. Corp.
Code §§ 16100-16962)(“RUPA”), and that the corporate partners of
Debtor were not. 	Likewise, the Shareholder-employees of those
corporate partners are not governed by RUPA. 	Defendant therefore
argues that the duty of partners to account to one another under
RUPA does not govern the relationships here, and even of it did,
5 All facts referred to in this Memorandum Decision are
drawn from the Complaint or the Basic Documents, and assumed true
for purposes of the Motion. 	al-Kidd v. Ashcroft, 580 F.3d 949,
956 (9th Cir. 2009). 	The court rejects as unpersuasive arguments
as to any issue raised in the Motion and not specifically
addressed in this Memorandum Decision.
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the “reasonable compensation” rule of RUPA means that Debtor had
nothing to transfer via the Jewel Waiver. 	Defendant also contends
that Jewel has no applicability because it dealt with individuals
who practiced law as partners in a law partnership. 	Even though
the court agrees that RUPA is inapplicable, it disagrees with
Defendant’s contention that -- absent the Jewel waiver -- the
Shareholders had no duty to account for profits from unfinished
business.
Defendant relies on Debtor’s two-tier structure in an effort
to distinguish Fox v. Abrams, 163 Cal. App. 3d 610 (1985), in
which the California Court of Appeals rejected the argument that
Jewel does not apply to parties who practice law together in a law
corporation. 	The Fox court pointed out that Jewel was not based
solely on partnership law, but rather on a sound public policy
preventing lawyers who practice law together for competing for the
most remunerative cases in anticipation that they might retain
those cases should the law firm dissolve. 	The doctrine
discourages former members of the firm from scrambling to take
physical possession of files and seeking personal gain by
soliciting existing clients.
The policy announced by the Fox court was unequivocal:
There is no reason to hold that when lawyers decide to
practice together in corporate form rather than partnership,
they are relieved of fiduciary obligations toward each other
with respect to the corporation’s business.
* 	* 	*
What we do say, however, is that attorneys practicing
together in a law corporation owe each other fiduciary duties
very similar to those owed by law partners and therefore the
fact that a law corporation is involved is no reason to
disregard the fair and reasonable principles of Jewel v.
Boxer or to interpret the parties’ agreement in a manner
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favoring one group over another.
Fox, 163 Cal. App. 3d at 617 (emphasis added). 	See also Rothman
v. Dolan, 20 Cal. App. 4th 755, 757 (1993); 	Grossman v. Davis, 28
Cal. App. 4th 1833, 1835 (1994). 6
The cornerstone of Defendant’s argument is that the
Shareholders had no fiduciary duty to Debtor. 	This ignores the
principles announced in Jewel and extended in Fox to attorneys
practicing within a professional corporation. 	This court will
apply those principles to a partnership consisting of corporations
that are owned by the attorney-employees who give them
professional life and meaning.
Defendant offers no authority suggesting that the
partnership-corporation-shareholder structure of Debtor immunizes
it from the Jewel analysis. 	While Debtor has not cited cases
applying Jewel to any law firm structured in a two-tier setting
such as Debtor, the principles are the same and this court will
not ignore the substance of Debtor’s existence in blind deference
to the form of it. 	Jewel and its progeny apply these sound
principles to attorneys who practice law together. 	The attorneys
who came together and created Debtor to be the institution that it
once was did so by the carefully drafted Basic Documents, and they
worked together as attorneys, representing clients, sharing the
6 The application of the Jewel principle to law firms formed
as corporations has been recognized in other jurisdictions as
well. 	Sullivan, Bodney & Hammond v. Bodney 16 Kan. App. 2d 208,
820 P.2d 1248 (1991); Sullivan, Bodney & Hammond v. Houston
General Insurance Co., 2 F.3d 824 (8th Cir. 1993) (“We do not
believe that the Supreme Court of Missouri would allow members of
the Missouri bar to expand their rights against litigation clients
and adversaries simply by conducting business in the corporate
form”).
-6-
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good with the bad, and quite importantly, trusting one another as
fellow members of the same law firm.
The rules of RUPA (governing the partnership structure of
Debtor) and the applicable governing professional corporate laws
(whether those of California or another state) 7 creating Debtor’s
corporate partners provide the structure and means of governance
of the entities and compensation of the Members. 	Those Members
are themselves attorneys practicing an honored and respected
profession, and they are governed by yet another set of rules that
bind those professionals together. 	Those are the rules of trust,
confidence and loyalty, rules that apply to attorneys representing
clients together, fiduciary ones to be sure. 	Jewel, 156 Cal. App.
3d at 179. 	The choice of California law by the partners is not
without consequences. 	Jewel applies, regardless whether RUPA
does. 	Under Jewel, attorneys practicing together need to
establish their respective rights and duties by their agreements.
More importantly, Defendant’s argument ignores the Basic
Documents themselves. 	Attached to this Memorandum Decision is an
appendix that sets forth the portions of the Basic Documents that
support the court’s conclusion that Debtor was a law firm
organized through an integrated set of interrelated documents. 	It
was a law firm of lawyers who chose the way they practiced law
together. 	That they chose to do it in the form they did, and
because they preserved to the Debtor the rights they did, they are
7 California partners were formed under the Moscone-Knox
Professional Corporation Act (Cal. Corp. Code § 13400, et seq.).
Corporate partners formed elsewhere would have been created under
comparable but different provisions of their respective state’s
laws.
-7-
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governed by California law and the principles of Jewel and Fox.
As illustrated in the appendix, Debtor retained to itself
several rights, including unbilled fees, work in process and
rights and access to clientele. 	The final sentence of Paragraph
9.5 of the Employment Agreement confirms forcefully the nature of
the relationship:
Employee [a practicing attorney with Debtor] understands
and agrees that, so long as Employee remains employed by
the Company [the Professional corporate partner of
Debtor], Employee’s solicitation of clients to terminate
their client relationship with the [Debtor] in whole or
in part involves fiduciary principles on the part of the
Employee and requires prior consent of the Company.
(Emphasis added.) 8
In sum, the court is satisfied that, just as the Fox court
extended Jewel to the professional corporation, the same rules and
consequences should follow and apply to Debtor’s two-tier
structure.
B. 	The Basic Documents did not waive Debtor’s rights under
Jewel.
Defendant seeks dismissal of the adversary proceeding because
Debtor had no right to bring claims against the Shareholders or
the corporate partners for unfinished business profits and thus
the Jewel Waiver transferred no property of Debtor in the first
instance. 	In other words, Debtor had no rights in unfinished
business to waive. 	The court is not persuaded; the Basic
Documents provided Debtor -- at least until the Jewel Waiver was
executed -- with the right to claim profits from such unfinished
business after the departure of Shareholder attorneys completing
8 If the drafters of “involves fiduciary principles” meant to
mean something less than the fiduciary relationships that the
Jewel and Fox courts recognized, they failed.
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such business. 	Debtor’s Members were quite experienced, and
plainly knew about Jewel and Brobeck 9 when they drafted the Plan
of Dissolution and the Jewel Waiver.
As shown specifically in the attached appendix, no corporate
partner or Shareholder had a right to Debtor’s unbilled time or
its work in process. 	Debtor did not waive (either explicitly or
inferentially by those documents) such rights or the right to
compel an accounting from departed Members, at least not until the
execution of the Jewel Waiver, when Debtor was insolvent and
bankruptcy was three months in the future.
The language of the Basic Documents, by reserving to Debtor
the unbilled fees, the work in process and the access to the
clientele, convinces the court that whatever vitality may have
once existed by virtue of Jacobson v. Wikholm, 29 Cal. 2d 24
(1946), suggesting that the surviving partner who completes the
work in progress keeps all of the profits, was abrogated by the
parties’ agreements.
When Debtor reconfigured itself under the Basic Documents or
at some other time before bankruptcy loomed and it was insolvent,
it could have surrendered those rights to its Partners or its
Members, but it did not. 	Had it done so, whether wise law firm
practice or not, the September 2008 Jewel Waiver would have been
unnecessary and Debtor now would likely have no theory of
fraudulent transfer to pursue.
C. 	The Jewel Waiver constitutes a transfer of Debtor’s
9 See discussion in III(C), infra.
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unfinished business.10
As noted above, the Jewel Waiver was part of Debtor’s Plan of
Dissolution. 	In the Jewel Waiver, Debtor, agreed to waive
. . . any rights and claims under the doctrine of [Jewel] to
seek payment of legal fees generated after the departure date
of any lawyer or group of lawyers with respect to non-
contingency/non-success fee matters only. . . .
While the Jewel Waiver did not refer to “unfinished
business,” specifically, the court construes the Jewel Waiver to
waive exactly that, namely Debtor’s right to profits from a
dissolved law firm’s unfinished business as defined in Jewel and
as reiterated by this court in Greenspan v. Orrick, Harrington &
Sutcliffe (In re Brobeck Phleger & Harrison LLP) 408 B.R. 318
(Bankr. N.D. Cal. 2009) (“Brobeck”). 11
For the reasons stated in Brobeck, the court treats Debtor’s
unfinished business as Debtor’s property that was transferred by
the Jewel Waiver, and that may be recovered under the Complaint.
Even those rights, however, are subject to the reasonable
compensation for completing the work in progress that RUPA (unlike
the former Uniform Partnership Act) recognizes, this court in
Brobeck recognized, and the Debtor in the Complaint recognizes. 12
10 Debtor does not challenge the efficacy of the Jewel Waiver
itself, but only the consequence as a fraudulent transfer.
11 As in Brobeck, the court does not construe the Complaint
to extend to new business handled by former members of Debtor at
new law firms.
12 To say that property that produced no profits was not
property is circular, conflating what was transferred with its
value. 	See Brobeck, 408 B.R. at 338.
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D. 	Recovery by Debtor on the Complaint will not violate
California Rules of Professional Conduct or other
applicable law.
One Defendant contended in its briefing that a recovery by
Debtor in these actions would violate the fee-sharing prohibitions
of the California Rules of Professional Conduct. 	The court
believes that a transfer of unbilled fees could be recovered
without doing violence to any applicable California Rule of
Professional Conduct or similar law.
First, no “sharing” of fees would occur. 	Rather, the
“profit” on the unfinished business would be recovered as a matter
of state or federal fraudulent transfer law. 	Second, to the
extent the Debtor is proceeding under the Bankruptcy Code, the
doctrine of federal preemption would overrule any apparently
contrary state law or rule. 	Finally, the court believes that
there is no prohibition on recovering assets transferred in actual
or constructive fraud of creditors. 	The client would have paid
the fees and the fees will have been reduced to cash or
equivalent.
Had Debtor made a transfer in fraud of creditors of an
account receivable due from a client for legal services rendered,
surely a recovery under the fraudulent transfer laws would not be
an impermissible sharing of fees. 	There is no difference with
unbilled fees.
A related argument is that a policy permitting the bankruptcy
estates of dissolved law firms to recover unfinished business
profits would render former lawyers of those firms “toxic”; no
firms would hire them given the potential loss of those profits.
The court is sympathetic to this policy concern, but the policy of
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the fraudulent transfer laws – recovery for creditors what value
is rightfully theirs - is far more compelling and is firmly
established in both state and federal law.
In sum, no defendant has set forth persuasive authority to
suggest a conflict sufficient to defeat the Debtor’s theories of
recovery.
E. 	Debtor may seek to recover fraudulent transfers from
Defendant.
Law firms that take on attorneys from an insolvent firm that
executed a Jewel Waiver in its dying days may be named as
fraudulent transfer defendants based on 11 U.S.C. § 550(b)(1).
See Brobeck, 408 B.R. 339, fn. 31 (“Therefore, if the Trustee can
recover profits from Brobeck’s Unfinished Business, he can recover
from not only the Partner Defendants but from the Firms as well,
subject to any defenses available to the Firms in [§]550(b)(1)”).
In Brobeck the plaintiff trustee named as defendants the
individual former Brobeck partners who joined the firms he sued.
Here Debtor has not done that. 	Nor does Debtor contend that the
defendant was an initial transferee from Debtor by virtue of the
Jewel Waiver. 	Instead, it contends in the alternative that 	the
defendant is a subsequent transferee or that it may be an entity
“. . . for whose benefit such transfer was made[.]” 	See 11 U.S.C.
§ 550(a)(1).
While Defendant seeks to dismiss or at least pin down Debtor
on which of these alternate theories it relies, the court is
satisfied that Debtor’s alternate pleading here may survive the
Motion. 	The development of the factual record will establish
which theory prevails, and thus what defenses are available to
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defendant. 13
F. 	The First Claim for Relief and the Third Claim for
Relief lack specificity and should be amended.
Defendant argues that Debtor’s four fraudulent transfer
claims lack the specificity and detail required by Fed. R. Civ. P.
9, incorporated by Fed. R. Bankr. P. 7009. 14 	It also argues that
under the general rules of pleadings of Fed. R. Civ. P. 8,
incorporated by Fed. R. Bankr. P. 7008, and recent Supreme Court
precedents, 15 that Debtor’s theories must have plausibility, not
merely possibility, and should fail because the circumstances of
the Jewel Waiver were completely explainable as part of Debtor’s
Plan of Dissolution.
The court disagrees with Defendant concerning Debtor’s Second
Claim for Relief and Fourth Claim for Relief (constructive
fraudulent transfers). 	Attacking a transfer as a constructively
fraudulent transfer is not the same as alleging fraud. 	A
constructively fraudulent transfer has nothing to do with the
conduct of the transferee. 	Stated otherwise, the transfer itself
is what is “fraudulent,” because of its impact on the creditors of
an insolvent transferor. 	Accordingly, the court will not dismiss
13 One Defendant has argued that Debtor cannot demonstrate
that the Jewel Waiver was given for less than a reasonably
equivalent value. 	This is a fact question not appropriate for
resolution in the context of a Rule 7012 motion to dismiss.
Further, the language of the Jewel Waiver is not clear as to what
consideration, if any, was exchanged.
14 Fed. R. Civ. P. 9(b) provides that:
In alleging fraud or mistakes, a party must state with
particularity the circumstances constituting fraud or
mistake.
15 See Ashcroft v. Iqbal, ____ U.S. ____ 129 S.Ct. 1937
(2009) and Bell Atlantic Corp. v. Twombley, 550 U.S. 544 (2007).
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these claims for relief or even require that they be amended.
As to the First Claim for Relief and the Third Claim for
Relief (actual fraudulent transfers), the fraudulent conduct that
is necessary to state a claim on these theories requires actual
conduct by the transferor, and no particular involvement by the
transferee. 	That is not to say that in appropriate circumstances
a transferee may not be a participant to an actual fraudulent
transfer, but no such conduct is suggested in the Complaint.
The gravamen of these two counts is that somehow attorney
members of Debtor, in connection with the execution of the Jewel
Waiver, intended to hinder, delay or defraud Debtor’s creditors.
Not only are those serious allegations for Debtor to make, they
lack specificity under each of the two rules cited above.
Accordingly, the court will grant the Motion but will give Debtor
thirty days from the date the order is issued on this Memorandum
Decision to amend those claims for relief.
IV. 	CONCLUSION
Concurrently with the entry of this Memorandum Decision the
court is issuing an order denying the Motion as to the Second
Claim For Relief and the Fourth Claim For Relief, and granting the
Motion as to the First Claim For Relief and Third Claim For
Relief, with Debtor given thirty days to amend either or both of
those claims for relief.
Consistent with the court’s practice on adversary proceedings
related to Debtor, rather than set a continued status conference,
the court will simply leave this matter off calendar, subject to
being reset if and when any party wishes to be heard on any
motions or until either or both parties desire to bring the matter
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before the court for trial setting and other pretrial matters.
* * * END OF MEMORANDUM DECISION * * *
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Document 	Paragraph 	Language 	Court’s
Conclusions
PA 	Background 	“This Agreement
provides for the
continued practice
of law by the
Partners...’
Debtor is the
law firm; and
its
professional
corporations
its partners.
2.2 Business 	“The business of the
Partnership is to
engage in the
profession of
law...”
Same
3.2 Draws 	“...the Compensation
Committee shall
determine a draw
amount attributable
to each Member.”
“Member” [not a
party to the
Partnership
Agreement]
refers to
Shareholder of
Partner (See
Glossary). Not
unlike other
traditional law
firm
compensation
determinations.
3.3(a)
Percentages “the Compensation
Committee shall
determine a
percentage
amount...which is
attributable to each
Member...”
Same
3.4(b) Profits
and Losses “The Percentage
Interest of a
Partner for a Fiscal
Year shall be the
sum of the
Attributed
Percentages of its
Members.”
Same
Heller Memorandum Decision on Motions to Dismiss
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Conclusions
3.5(a)
Interest in
Partnership
“...no Partner and
no Member shall have
any interest in
...unbilled fees,
work in progress,
real or personal
property...”
Debtor retained
interests in
unfinished
business.
3.5(b) 	Describes
entitlements of
withdrawing Partner
or Member whose
employment by a
Partner is
terminated.
Debtor retains
unbilled fees,
work in
progress (i.e.,
unfinished
business), real
or personal
property.
4.5 Clients 	“All clients for
whom any Partner or
Member provides
legal services shall
be clients of the
Partnership...”
Clients are the
Debtor’s.
8.1 Entire
Agreement Integration
provision covers
“terms and
conditions agreed
upon by the Partners
relating to their
subject matters...”
See comments re
¶¶ 3.5 (a) &
(b).
8.4
Relinquishment Each Partner waives
“the right to demand
an accounting of any
Partnership business
or ... the right to
demand an interest
in or access
to...clientele...”
Debtor did not
waive or
relinquish
anything. It
retained right
to demand
accounting
and the
“clientele.”
8.7 Governing
Law; Consent
to
Jurisdiction
California law
applies. Jewel applies.
SHA 	Background 	Each Shareholder
[Member] licensed to
practice with the
professional
corporation.
Heller Memorandum Decision on Motions to Dismiss
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Document 	Paragraph 	Language 	Court’s
Conclusions
2.2 Common
Stock & 2.3
Preferred
Stock
Formulas for
determining number
of shares of common
stock in the
professional
corporation for each
attorney
Member/Shareholder
based on, inter
alia, determinations
of Adjusted
Attributed
Percentages by the
Compensation
Committee.
Common stock
calculations
not unlike
other
traditional
lawfirm
compensation
determinations.
Preferred stock
is a form of
capital
contribution.
3.4(b)
Mechanics and
Payment [on
Termination of
Employment]
Shareholder/Member
who leaves other
than through death,
disability or
retirement paid for
Common and Preferred
Stock.
Deferred
payment scheme
for departing
Member under
other
circumstances.
3.9(a)
Alternative
Medium of
Payment; Set-
Off
Deals with payout of
Member who provides
legal services,
directly or though a
new firm
affiliation, to a
client of the
Debtor. 	Debtor may
make payout, in lieu
of cash, through
assignment of
accounts receivable
or unbilled fees
owed by prior
client.
Departing
attorney taking
client not paid
out as well as
those who died,
retired or were
disabled.
3.9(b)& (e) 	Debtor may recover
excess cash paid on
stock repurchase.
Debtor may also set-
off any amount owing
to it or
professional
corporation against
amounts owing to
departed Member.
Set-off
available, but
not described
as the sole
remedy of
recovery from
Member.
Heller Memorandum Decision on Motions to Dismiss
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Conclusions
5.1 Entire
Agreement Integration
provision covers
“terms and
conditions agreed
upon by the
Shareholder, the
Company, the other
Partners and the
Partnership relating
to their subject
matters...”
No waiver of
Debtor’s or
Company’s
rights to
unfinished
business.
5.4 No
Entitlements “No Shareholder
shall have any
interest, other than
as a shareholder,
in...
unbilled fees, work
in progress, real or
personal
property....” “Each
Shareholder
relinquishes and
waives...the right
to demand an
accounting of any
Partnership
business...or the
right to demand an
interest in or
access
to...clientele...”
No waiver of
right to
accounting by
Debtor or
Company.
Debtor retains
right to
unfinished
business.
5.7 Governing
Law; Consent
to
Jurisdiction
California law
applies. Jewel applies.
EA 	Background 	Debtor and employee
[attorney] engaged
in the practice of
law.
Consistent with
recitals in
other
agreements.
3.1 Full Time
Employment Employee to devote
substantially all
time to practice of
law.
Same
Heller Memorandum Decision on Motions to Dismiss
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Document 	Paragraph 	Language 	Court’s
Conclusions
4 Compensation 	Base salary and
annual bonus
provisions
Consistent with
recitals and
authorizations
for fixing
compensation in
other
agreements.
9.4
Compensation
upon
Termination
Provisions deal with
entitlement to
unpaid Base Salary
and Annual and other
bonuses, subject to
payback of any
excess.
Same
9.5 Post-
Termination
Obligations
“...Employee shall
not be entitled to
any share of future
income from client
work existing at the
effective date of
termination.....”
“Employee
understands and
agrees that, so long
as Employee remains
employed by the
Company, Employee’s
solicitation of
clients to terminate
their client
relationship with
the [Debtor] in
whole or in part
involves fiduciary
principles on the
part of the Employee
and requires prior
consent of the
Company.
Debtor retains
right to
unfinished
business.
Recognition of
fiduciary
relationships.
Heller Memorandum Decision on Motions to Dismiss
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Document 	Paragraph 	Language 	Court’s
Conclusions
10.1 Entire
Agreement Integration
provision covers
“terms and
conditions agreed
upon by Employee,
the Company, the
other Partners and
the Partnership
relating to their
subject matters...”
Nothing about
different
rights upon
dissolution.
10.4 No
Entitlement “Employee...
relinquishes and
waives...the right
to demand an
accounting of any
Partnership
business...or the
right to demand an
interest in or
access
to...clientele...”
No waiver of
right to
accounting by
Debtor or
Company.
10.7 Governing
Law; Consent
to
Jurisdiction
California law
applies. Jewel applies.
Heller Memorandum Decision on Motions to Dismiss
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