A Welcome Ruling for the New Law Firms of Refugees from Bankrupt Firms

A decision just handed down by a judge of the Southern District of New York has important implications for law firm dissolutions.

We’ve posted Judge Pauley’s memorandum opinion below. Here is one reader’s critical take:

I think he is way off on a number of points. Not the least of which is a summary dismissal of almost three decades of consistent interpretation of Jewel v. Boxer, and the “I don’t care what anybody else thinks, this is New York” approach to reconciliation of views. But that is what the system is built for, and we will trust to it working through the issues.

Well, in fairness to Judge Pauley, he has put this on the express train to 40 Foley Square. So if he’s wrong, he can get reversed in a New York minute.

Back to our critical tipster:

You will note that he invited the trustee, Mr. Geron, to amend his complaint so that he could better present the issues and address a couple of the infirmities as Judge Pauley observed them. So in effect… really nothing is decided.

It almost reads as though he wanted to be sure the appellate court would take the Honorable Judge Colleen McMahon’s decision [in DSI] and his decision and be forced to deal with the issue…. after all, you have two district court judges with offices on the same floor of the same building with almost diametrically opposed memorandum decisions on the issue! Will their clerks be eating lunch at the same table after this?

HA! But I think the clerks will be able to weather their bosses’ unfinished business over “unfinished business.” (Or, to put it another way: I clerked for Judge O’Scannlain, but some of my best friends are Reinhardt clerks.)

Here is a more serious concern about Judge Pauley’s decision:

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It won’t take long for folks to realize that if one follows the Honorable Judge Pauley’s path, that the “grab and go” with firm clients will hasten the demise of many firms, and encourage those who can to loot the firm and its junior partners, borrow bags of money from creditors, distribute the borrowings to themselves and run away with it… almost scot-free. The worst that happens would be like getting caught as a robber three blocks from the bank… and having to give 17 percent back and go free with the rest of the loot.

Then again, we are talking about New York and the home of investment and commercial banking — so perhaps that is the way it is supposed to work.

Biglaw partners acting greedy and selfish? Dewey have precedent for that? Methinks we do. And even the specter of Jewel v. Boxer claims won’t be able to deter such behavior.

Anyway, here’s Judge Pauley’s opinion for your perusal:

Geron v Robinson and Cole

Geron v. Robinson & Cole LLP [U.S. District Court for the Southern District of New York]
Jewel v. Boxer (1984) [Justia]
Judge weighs ‘unfinished business’ claims in Thelen case [Thomson Reuters News & Insight]
Judge certifies for appeal Coudert Brothers cases against law firms [Thomson Reuters News & Insight]

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