Jewel v. Boxer
156 Cal.App.3d 171, 1984 Cal. App. LEXIS 2078, 203 Cal. Rptr. 13 (1984)
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Rule of Law:
In the absence of a partnership agreement, the Uniform Partnership Act requires that attorney's fees from cases in progress upon the dissolution of a law partnership are assets of the dissolved partnership and must be shared among the former partners according to their respective interests in the partnership, regardless of which partner completes the work.
Facts:
- Four partners—Howard H. Jewel, Stewart N. Boxer, Peter F. Elkind, and Brian O. Leary—were members of the law firm Jewel, Boxer and Elkind.
- The firm had no written partnership agreement and no agreement governing the allocation of fees from active cases upon dissolution.
- On December 2, 1977, the four partners mutually agreed to dissolve the partnership.
- The partners formed two new firms: Jewel and Leary, and Boxer and Elkind.
- At the time of dissolution, the firm had numerous active cases that were being handled by the individual partners.
- After the dissolution, the clients in these active cases executed substitution of attorney forms, formally retaining the new firm of the partner who had been handling their case.
- The new firms continued to represent these clients under the fee agreements originally entered into with the old firm and subsequently collected fees upon completion of the cases.
Procedural Posture:
- Jewel and Leary filed a complaint for an accounting of post-dissolution attorneys' fees against Boxer and Elkind in California Superior Court (trial court).
- Following a nonjury trial, the court allocated the fees on a quantum meruit basis, calculating amounts owed to the old firm based on factors including time spent and the result achieved.
- The trial court entered a judgment ordering Jewel and Leary to pay $115,041.16 to the old firm and Boxer and Elkind to pay $291,718.60 to the old firm.
- Jewel and Leary, the plaintiffs, appealed the trial court's judgment to the California Court of Appeal. Boxer and Elkind were the respondents.
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Issue:
In the absence of a contrary agreement, does the Uniform Partnership Act require attorney's fees from cases in progress at the time of a law partnership's dissolution to be allocated among the former partners according to their respective interests in the partnership, rather than on a quantum meruit basis for post-dissolution services?
Opinions:
Majority - King, J.
Yes. In the absence of a partnership agreement, fees earned on cases that were in progress at the time of a law partnership's dissolution are considered unfinished business of the dissolved partnership and must be allocated to the former partners according to their respective interests in the old firm. The court's reasoning is grounded in the Uniform Partnership Act (UPA), which states that a dissolved partnership continues until the 'winding up of unfinished business' is complete. The UPA expressly prohibits partners from receiving extra compensation for services rendered in winding up partnership business. Therefore, income generated from these cases is an asset of the dissolved partnership, to be divided according to the partners' pre-dissolution percentage interests. The fact that clients signed substitution of attorney forms does not convert unfinished partnership business into new business for the succeeding firms; this would allow partners to breach their fiduciary duty not to take partnership business for personal gain. A client's right to choose their attorney is distinct from, and does not alter, the duties former partners owe one another regarding the assets of their dissolved firm.
Analysis:
This case establishes a clear default rule for the dissolution of law partnerships in the absence of a partnership agreement. By classifying fees from pending cases as assets of the dissolved firm subject to the UPA's 'no extra compensation' rule, the decision prevents former partners from profiting individually from the firm's unfinished business. This precedent strongly incentivizes law partners to negotiate and execute detailed partnership agreements that explicitly govern the division of fees upon dissolution, allowing them to contract around this potentially harsh default rule. The ruling discourages partners from competing for lucrative cases in anticipation of a firm's breakup and promotes a more orderly winding-up process.
