Colorado Supreme Court: Law firms in dissolution retain rights to contingency assets
- January 24th, 2015
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On Jan. 20, 2015, the Colorado Supreme Court issued an opinion on Lafond v. Sweeney stating that the unfinished business rule applies to contingency cases. The opinion held that when a law firm formed as a limited liability company (LLC) breaks up while one of its assets is interest in an unrealized contingency case that the client opts to continue with a member of the former firm, then the entire contingency remains the asset of the former firm and is to be distributed according the former firm’s operating agreement (notwithstanding any extra work the lawyer continuing with the case did on the case).
Of course, it’s possible to structure an operating agreement to reach a different result but, if the operating agreement is silent, this is the result that will obtain. The Court distinguished cases from other states dealing with how hourly matters are handled although it didn’t distinguish the case on those grounds. In other words, it’s an open question whether this holding also applies to hourly matters. The case also holds that, when the operating agreement is silent on the point, the departing lawyer taking the case is not entitled to extra compensation for work done on the case after the firm dissolves.
Ron Nemirow, Nemirow Perez P.C.