Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-04889/USCOURTS-cand-3_14-cv-04889-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

HOGAN LOVELLS US LLP,

Appellant,

v.

HOWREY LLP,

Appellee.

Case Nos. 14-cv-04882-JD

14-cv-04883-JD

14-cv-04884-JD

14-cv-04885-JD

14-cv-04886-JD

14-cv-04887-JD

14-cv-04888-JD

14-cv-04889-JD

PILLSBURY WINTHROP SHAW 

PITTMAN LLP,

Appellant,

v.

HOWREY LLP,

Appellee.

ORDER GRANTING LEAVE TO 

APPEAL

HOGAN LOVELLS US LLP, et al.,

Appellant,

v.

HOWREY LLP, et al.,

Appellee.

SEYFARTH SHAW LLP,

Appellant,

v.

HOWREY LLP,

Appellee.

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 1 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

PERKINS COIE LLP,

Appellant,

v.

HOWREY LLP,

Appellee.

NEAL, GERBER & EISENBERG LLP,

Appellant,

v.

HOWREY LLP,

Appellee.

KASOWITZ, BENSON, TORRES & 

FRIEDMAN LLP,

Appellant,

v.

HOWREY LLP,

Appellee.

SHEPPARD MULLIN RICHTER & 

HAMPTON LLP,

Appellant,

v.

HOWREY LLP,

Appellee.

JONES DAY,

Appellant,

v.

HOWREY LLP,

Appellee.

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 2 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

INTRODUCTION

This case arises out of the dissolution of Howrey LLP, a prominent law firm headquartered 

in Washington, D.C. In the wake of the dissolution, Howrey’s bankruptcy trustee brought suit in 

this district’s bankruptcy court against various law firms that had taken on former Howrey

partners -- some before Howrey’s dissolution and some afterwards. After the bankruptcy court 

denied the law firm defendants’ motion to dismiss the suit, the firms asked this Court to grant 

review of the bankruptcy court’s decision. Because the law firms have satisfied the standards for 

appealing non-final bankruptcy court decisions to the district court, the Court grants the request 

for an appeal.

BACKGROUND

The question that sparked this appeal is whether a partner who leaves a law firm must in 

certain circumstances account to the firm for unfinished client matters she took with her. 

Howrey’s bankruptcy trustee claimed she must, and sued a number of firms that took on Howrey 

partners to recover profits generated on “unfinished business” that originated at Howrey. The 

trustee has pursued firms irrespective of whether the ex-Howrey partners they hired left before or 

after dissolution.

The question for the partners who left Howrey upon dissolution has an added complexity. 

Howrey and these partners executed a “Jewel waiver” -- named after the California state court of 

appeal decision Jewel v. Boxer, 203 Cal. Rptr. 13 (Cal. Ct. App. 1984) -- whereby the firm waived 

any claims to profits that its ex-partners might earn in the future. The trustee challenged the Jewel

waiver as a fraud on Howrey’s creditors, and argued it should not preclude the trustee from 

pursuing the firms that took on Howrey partners who stayed until the firm’s end. After the law 

firm defendants moved to dismiss the trustee’s lawsuit, the bankruptcy court issued two opinions

agreeing with the trustee that certain pre- and post-dissolution unfinished business claims were 

viable under D.C. law and denied the motions to dismiss. See In re Howrey LLP (Howrey I), Ch. 

11 Case No. 11-31376-DM; Adv. No. 13-3095-DM, 2014 WL 507511, at *11-13 (Bankr. N.D. 

Cal. Feb. 7, 2014); In re Howrey (Howrey II), 515 B.R. 624, 628, 630-32 (Bankr. N.D. Cal. 2014).

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 3 of 8
2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

This is not the first case involving these issues. The bankruptcy court, interpreting 

California law, reached the same conclusion on post-dissolution unfinished business in a 2009 

case involving the now-defunct law firm Brobeck, Phleger & Harrison LLP. See In re Brobeck, 

Phleger & Harrison LLP, 408 B.R. 318, 336-40 (Bankr. N.D. Cal. 2009). The bankruptcy court 

also reached the same conclusion -- again interpreting California law -- in a case involving the 

dissolution of Heller Ehrman LLP. A district court in our district reversed the bankruptcy court on

appeal in that case, and found that “the California Supreme Court would likely hold that hourly fee 

matters are not partnership property and therefore are not ‘unfinished business’ subject to any duty 

to account.” Heller Ehrman LLP v. Davis, Wright, Tremaine, LLP, Nos. C 14-01236 CRB, C 14-

01237 CRB, C 14-01238 CRB, C 14-01239 CRB, 2014 WL 2609743, at *1 (N.D. Cal. Jun. 11, 

2014). Just a few weeks later, the New York Court of Appeals concluded that New York law 

required the same result. In re Thelen LLP, 24 N.Y.3d 16 (2014).

The bankruptcy court’s second dismissal order in this action acknowledged the cases 

applying California and New York law to preclude unfinished business theories similar to those 

the trustee advances here, but concluded that a different result is compelled by the law of the 

District of Columbia, Howrey’s former home. Howrey II, 515 B.R. at 628. But recognizing that 

the question is “unsettled and serious,” the bankruptcy court recently certified the question for 

interlocutory appeal to the Ninth Circuit. Bankr. Ct. Mem. re Certification for Direct Appeal to 

Ct. App. at 8, Case No. 14-cv-04889-JD, Dkt. No. 7-2. The parties have fully briefed the law firm 

defendants’ motion for leave to appeal to this Court, and have also filed supplemental briefs on 

what role, if any, the certification for direct appeal to the Ninth Circuit should play in this Court’s 

decision to grant the motion for leave to appeal. Case No. 14-cv-04889-JD, Dkt. Nos. 1, 7, 8.

LEGAL STANDARD

District courts have discretionary jurisdiction over interlocutory bankruptcy appeals. 28 

U.S.C. § 158(a)(3). In deciding whether to grant leave to appeal an interlocutory order under 

section 158(a)(3), courts look to the analogous provisions of 28 U.S.C. § 1292(b), which governs 

review by courts of appeals of interlocutory district court orders. Belli v. Temkin (In re Belli), 268 

B.R. 851, 858 (B.A.P. 9th Cir. 2001); United States Fire Ins. Co. v. Official Comm. of Unsecured 

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 4 of 8
3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

Creditors (In re Plant Insulation Co.), No. C 09-4222 RS, 2010 WL 1526320 at *2 (N.D. Cal. 

April 14, 2010). Under that provision, an interlocutory appeal is appropriate if the order “[1] 

involves a controlling question of law [2] as to which there is substantial ground for difference of 

opinion and [3] an immediate appeal from the order may materially advance the ultimate 

termination of the litigation.” 28 U.S.C. § 1292(b).

DISCUSSION

A. The Case Presents a Controlling Question of Law

This proposed appeal turns purely on a question of District of Columbia law that, if 

resolved in the law firm defendants’ favor, will wholly dispose of the case. Because the 

bankruptcy trustee does not dispute that this prong is met, the Court need not address it further. 

Trustee Opp. to Mot. for Leave to Appeal at 6, Case No. 14-cv-04889-JD, Dkt. No. 1.

B. A Substantial Ground for Difference of Opinion Exists

“To determine if a ‘substantial ground for difference of opinion’ exists under § 1292(b), 

courts must examine to what extent the controlling law is unclear.” Couch v. Telescope, Inc., 611 

F.3d 629, 633 (9th Cir. 2010). “Courts traditionally will find that a substantial ground for 

difference of opinion exists where ‘the circuits are in dispute on the question and the court of 

appeals of the circuit has not spoken on the point, if complicated questions arise under foreign 

law, or if novel and difficult questions of first impression are presented.’” Id.

A substantial ground for difference of opinion clearly exists here. As discussed above, 

different courts have come to disparate conclusions about whether law firms that hire lateral 

partners are on the hook to prior firms for profits earned from client matters those partners bring 

with them. The bankruptcy trustee tries to downplay these differences by arguing that Heller and 

Thelen did not interpret D.C. law and therefore cannot be grounds for finding a difference of 

opinion about the District’s law. It points out that the law firm defendants do not contend that a 

split of authority exists among D.C. courts on this issue.

But the trustee defines the driving legal question too narrowly. Although Heller, Thelen, 

and the bankruptcy court decision here interpreted the laws of different jurisdictions, they 

necessarily addressed -- and came to contrary conclusions about -- common issues of law. For 

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 5 of 8
4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

example, Heller distinguished the Jewel decision from the California Court of Appeals, which 

held that a law firm had rights to unfinished business its partners took with them, in part because 

Jewel applied the Uniform Partnership Act (“UPA”), which has since been superseded by the 

Revised Uniform Partnership Act (“RUPA”). See Heller, 2014 WL 2609743, at *4. The Heller 

court called this change in the law “significant.” Id. The bankruptcy court here based its 

conclusions on UPA-era cases, and must have concluded -- in contrast to Heller -- that D.C.’s 

replacement of UPA with RUPA did not affect the validity of those precedents. And the 

bankruptcy trustee claims its position is supported by a recent Eleventh Circuit case applying 

RUPA, which if true -- a question on which the Court expresses no opinion at this time -- is 

further evidence that courts have split on this issue. Trustee Opp. at 16 (discussing Buckley 

Towers Condominium, Inc. v. Katzman Garfinkel Rosenbaum, LLP, 519 F. App’x 657, 662 n.6 

(11th Cir. 2013) (unpublished)).

The bankruptcy court itself acknowledged that decisions applying the law of other 

jurisdictions may nevertheless involve common issues of law, writing that “[t]he analytic steps 

taken by [the Southern District of New York interpreting New York law] are a perfect proxy for 

analyzing D.C. law here.” Howrey I, 2014 WL 507511, at *6 (citing Development Specialists, 

Inc. v. Akin Gump Strauss Hauer & Feld LLP (In re Coudert Brothers LLP), 480 B.R. 145 

(S.D.N.Y. 2012), rev’d, 574 Fed. App’x 15 (2d Cir. 2014)). Ultimately, though, the New York 

Court of Appeals -- answering questions certified to it by the Second Circuit during the appeal of 

the Southern District of New York decision -- concluded that “pending hourly-fee matters are not 

partnership ‘property’ or ‘unfinished business’” under New York law. Thelen, 24 N.Y.3d at 22. If 

a decision applying another state’s law is persuasive when its conclusion matches the bankruptcy 

court’s, a decision applying that same state’s law surely creates a “substantial ground for 

difference of opinion” when its conclusion differs from the bankruptcy court’s.

In addition, a substantial ground for difference of opinion would exist even in the absence 

of directly contradictory cases. “A substantial ground for difference of opinion exists where 

reasonable jurists might disagree on an issue’s resolution, not merely where they have already 

disagreed.” Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 688 (9th Cir. 2011). “Stated 

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 6 of 8
5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

another way, when novel legal issues are presented, on which fair-minded jurists might reach 

contradictory conclusions, a novel issue may be certified for interlocutory appeal without first 

awaiting development of contradictory precedent.” Id. In the certification for direct appeal to the 

Ninth Circuit, the bankruptcy court pointed out that there is no controlling authority from the 

Ninth Circuit or Supreme Court on the issues at play in this appeal, despite the fact that “the 

matter is of significant public importance to the legal community.” Bankr. Ct. Mem. at 7-8 

(listing law review articles). The Court concludes that both the fact that courts have come to 

different conclusions on the issues presented and the novelty of the issues themselves militate in 

favor of finding this prong satisfied.

C. Granting the Interlocutory Appeal will Materially Advance the Ultimate Termination 

of the Litigation

Granting the appeal will also increase the chances of a quick end to this litigation. If the 

law firm defendants prevail on the question of whether Howrey is entitled to profits on unfinished 

business its ex-partners took with them, these suits will be over. The trustee rightly cautions 

against assuming the law firms will win. But if the appeal is granted, they will have some chance 

of prevailing at an early stage; as it stands now, they have none.

The bankruptcy court, in certifying the matter for direct appeal to the Ninth Circuit, 

summarized the situation by stating that “an immediate disposition of this question will clearly 

‘advance the progress of the case or proceeding in which the appeal is taken’” because “[i]f the 

direct appeal is taken and decided favorably for the appellants, the litigation will come to an end 

without the parties having to engage in what no doubt will be very expensive and time consuming 

discovery and other pre-trial activity and the subsequent trials, judgments and appeals.” Bankr. 

Ct. Mem. at 9. On the other hand, “[i]f the matters are resolved favorably to the Trustee, that quite 

likely will facilitate prompt consensual resolution of these disputes.” Id. The Court agrees. This 

factor weighs in favor of an interlocutory appeal as well.

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 7 of 8
6

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

CONCLUSION

Consequently, the Court grants the law firm defendants’ motion for an interlocutory appeal 

of the bankruptcy court’s order denying the motion to dismiss the operative complaint. The Court 

sets a case management conference for December 3, 2014, at 1:30 p.m.

IT IS SO ORDERED.

Dated: November 20, 2014

______________________________________

JAMES DONATO

United States District Judge

Case 3:14-cv-04889-JD Document 9 Filed 11/20/14 Page 8 of 8