Malpractice and Partner Liability at Issue in Heller Bankruptcy
A bankruptcy judge sorting out the issues surrounding the dissolution of Heller Ehrman is refusing to allow a malpractice suit by an identity theft company to proceed against the former law firm.
The identity theft company Lifelock Inc. accuses Heller and former partner Mary Azcuenaga of overbilling, the Recorder reports. Judge Dennis Montali of the Northern District of California refused to lift an automatic stay that prevented the case from going forward because of the risk of draining assets from the estate so early in the bankruptcy, the Daily Journal reports.
Heller’s bankruptcy trustee has estimated that only $8.25 million will be available by the end of May to pay the law firm’s debts.
Another issue likely to arise in the bankruptcy is whether Heller partners are liable for work they took to new firms and for partner draws they received when the firm was insolvent, according to the Daily Journal story. Montali is considering the partner liability issue in another case involving former partners at the dissolved law firm Brobeck, Phleger & Harrison.
A 1984 California case, Jewel v. Boxer, held that a dissolved law firm is entitled to fees from cases that originated at the firm, unless the partnership agreement provides otherwise. The Heller partnership agreement doesn’t specify that partners can take fees with them to new firms, but the dissolution agreement attempted to allow it, the Daily Journal story says.
At issue is whether fraudulent transfer laws were violated when the partnership transferred assets without receiving something of value in return.
