Lawyers Who Fled An Imploding Law Firm Might Get Sued

Steven Davis Dewey And LeBoeufReuters/Lucas JacksonArtist Geoffrey Raymond talks to pedestrians walking past in an attempt to get them to write on a painting he made of its former Chairman Steven Davis, outside of the building housing the law firm Dewey & LeBoeuf LLP in New York, May 8, 2012.

The saga of
Dewey & LeBoeuf— a gigantic law firm that
collapsed spectacularly— is continuing to haunt partners who fled the firm after it became clear it was going under.

A judge overseeing Dewey’s bankruptcy has ruled the firms that hired Dewey partners just before its collapse must cough up information about the clients they “inherited” from the now-defunct firm, the AM Law Daily’s Sara Randazzo reports.

It’s not unusual for partners to take their clients with them when they move to a new firm.

This practice can be problematic, however, when their old firms go bankrupt. Trustees for the bankrupt law firms — which are trying to get money for the firm’s creditors — can file so-called “unfinished business claims” against the former partners and their new firms.

So, let’s say a partner is in the middle of a big case and takes her client and her case to a new firm. Then her old firm goes bankrupt. The bankruptcy trustee can sue her and her new firm to recover the money she earned from that case to pay back the defunct firm’s creditors.

In an apparent effort to avoid such lawsuits, more than two dozen firms that hired Dewey partners during its rapid decline objected to the subpoenas that would seek information on unfinished business. They said the subpoenas would be “tremendously burdensome,” AM Law Daily reported.

Judge Martin Glenn balked at their objections, though. “Don’t give me ‘tremendously burdensome,'” Judge Glenn reportedly said, noting that somebody in accounting could get the info by pushing some buttons.

Once those firms provide the Dewey trustee with that information, it will be easier for the bankruptcy estate to go after them in court.

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