Ex-Dreier Partners Could Be Liable Despite Nonequity Status
Indicted lawyer Marc Dreier may have been the only equity partner at his law firm, but that doesn’t necessarily mean departing nonequity partners are free of liability.
Dreier was indicted last month on charges that he cheated investors and hedge funds out of $400 million by misappropriating trust money and selling fictitious promissory notes. Nearly all the partners at the law firm have moved on to new law firms or created their own, the New York Law Journal reports.
But the departing nonequity partners may not be able to leave behind responsibility for the law firm’s woes, ethics experts told the New York Law Journal. The partners could be liable for the firm’s debts, could be forced to return fees from clients for work on unfinished matters and could face disciplinary action for any missing escrow funds, according to the story.
Law professor Robert Hillman of the University of California Davis told the legal publication that liability could turn on the issue of “apparent authority.” Contract partners who are held out as partners may “assume liabilities they don’t know they have,” he said.
Also key to liability is the agreement between the contract partners and Dreier, said Leslie Corwin, a Greenberg Traurig partner, the story says.
Ex-partners are likely to argue they were employees rather than partners, and that they were shielded from liability because the law firm was organized as a limited liability corporation. But Hillman told the publication that an LLP structure “doesn’t relieve partners of responsibility to ensure that assets are controlled and escrow accounts are properly monitored.”
Related Coverage:
New York Personal Injury Law Blog: “Will Dreier Partners Be Liable for Stolen Money?”
