United States: Decisions Do Not Apply "Jewel Doctrine" To Departed Partners' Fees

Last Updated: August 2 2014
Article by Allison Martin Rhodes and Barbra R. Parlin

Robyn Axberg is an Associate in the Chicago office, Allison Rhodes is a Partner in the Portland office, and Barbra Parlin is a Partner in the New York office.

Legal Fees Earned by Departed Partners in Now-Defunct Law Firms Determined Not to Be Property of the Bankrupt Firm


  • Two recent court decisions in California and New York call into question the continued viability of the unfinished business theory (the so-called "Jewel" doctrine) with respect to hourly matters earned by departed lawyers in firms that have dissolved.
  • With the escalation of the number of dissolved firms in recent years and the complexity of bankruptcies in the modern era of the mega-firm, the unfinished business doctrine has been invoked with greater frequency and with greater scholarly scrutiny. Other states will likely weigh in either favoring, distinguishing or eviscerating the unfinished business doctrine for their own states.

A California District Court recently held that a bankruptcy trustee could not claim a property interest in the hourly fee matters pending at the now-dissolved Heller Ehrman LLP law firm.1 This June California decision was followed by a similar holding less than a month later by the New York Court of Appeals (the highest court in New York), resolving a split among lower New York cases. The New York decision refused to apply the unfinished business doctrine in favor of the bankruptcy trustees for Thelen LLP and Coudert Brothers LLP.2 The two decisions call into question the continued viability of the unfinished business theory (the so-called "Jewel" doctrine) with respect to hourly matters. However, the issue is far from settled as other states will likely consider the issue.

Partner Migration Impacted by the Two Court Opinions

The three cases decided by the two opinions followed similar facts, now familiar in the wake of the demise of several venerable (and large) law firms. Heller and Thelen each dissolved in 2008, with ensuing bankruptcy protection cases. Coudert dissolved in 2005, subsequently seeking chapter 11 bankruptcy protection.

In each case, the bankruptcy trustee initiated adversarial proceedings against the law firms to which the former partners migrated. The suits asserted a property interest in the hourly fee matters pending at the time of dissolution. In Thelen and Coudert, the partners attempted to thwart the doctrine by entering into poorly timed waivers, sometimes referred to as a "Jewel waiver."3 An unfinished business or Jewel waiver is an agreement among the partners to disclaim any interest of the partnership in pending matters. Although an elegant and simple solution to all of the complexities that the unfinished business doctrine presents, timing is everything. The Jewel waivers in Thelen and Heller were thrown out because they were executed too close in time to insolvency and Coudert had no such waiver at all.

In the absence of enforceable Jewel waivers, the courts then turned to the question of whether the legal fees earned on matters opened at the pre-dissolution firm were property of the bankruptcy estate or the subsequent law practice of the departed partners that took the clients with them. In all three matters the answer is now "no." Referring in part to an earlier decision involving contingent fee matters, the courts ruled that a law firm is entitled only to the value of the services already performed – even while acknowledging that some prior case law has referred to contingency cases as an asset of the partnership. In other words, the court makes no distinction between hourly cases and contingency cases in finding that the prior law firm's rights are limited to work actually performed by that prior law firm.

Distinguishing from Jewel v. Boxer

These decisions do not overturn Jewel v. Boxer,4 rather they stand for the proposition that in the context of a law firm bankruptcy, post-dissolution legal fees are not property and are thus not subject to the unfinished business doctrine. In Jewel, the court determined that the partners of a voluntarily dissolved firm owed an accounting to the former partners for the unfinished business of the partnership. The case arose in 1984 under the Uniform Partnership Act, as adopted in California. In that case, a four-person law firm voluntarily dissolved and two new firms emerged, each with two of the former partners. The Jewel court found that the former dissolved firm had a property interest in its "unfinished business," or the matters pending at the time of dissolution. Ever since, the Jewel decision has stood for the proposition of the unfinished business doctrine, or that the pending matters were the unfinished business of a dissolved law firm at the time of dissolution and, as such, is an asset of the dissolved firm.

The opening lines of the Heller decision state unequivocally, "A law firm – and its attorneys – do not own the matters on which they perform their legal services. Their clients do." The Heller court distinguished from Jewel by reason of the involuntary nature of its dissolution, the new fee agreements entered into with the new firms in Jewel, and the adoption of the Revised Uniform Partnership Act following the Jewel decision.

Equitable and Policy Considerations

The courts' holdings in these new decisions turned on equitable and policy considerations thus far rejected or ignored by the courts that have considered these issues. The Heller court emphasized that clients – not their lawyers – own client matters. Goodwill is not an asset that appears on a law firm's financial statements, and any expectation of continued business is personal to each particular lawyer. The court determined that the pending hourly matters could not be considered partnership property. Clients are free to take their business to any lawyer at any time. Therefore, when a client leaves a law firm (absent a dissolution), the only claim that a law firm may have is for work already completed.

The Thelen court was concerned that applying the unfinished business doctrine would create an unjust windfall to the dissolved partnership, allowing it to collect fees based on work conducted by another firm. Further, both courts were concerned that application of the unfinished business doctrine would create perverse incentives, encouraging partners to "jump ship" at the first sign of trouble to avoid a situation of being caught up in a dissolution or bankruptcy (and thereby susceptible to suits on the basis of the unfinished business doctrine), resulting in further destabilizing already floundering firms. Such a rule would also discourage firms from hiring attorneys or accepting client matters from dissolved firms and could cause clients to be concerned that their work was not receiving proper attention since its attorney is not being compensated. Both cases point to strong public policy favoring client choice in law firms, which is linked to lawyer mobility.

Law Firm Bankruptcies Occurring with Greater Frequency and Increased Scrutiny

With the escalation of the number of dissolved firms in recent years and the complexity of bankruptcies in the modern era of the mega-firm, the unfinished business doctrine has been invoked with greater frequency and with greater scholarly scrutiny. The Heller court and the Thelen court, applying laws of different states but with certain parallels in reasoning, have found no property interest in pending hourly matters and further, that the public policy considerations in such states favor the inapplicability of the unfinished business doctrine. Certainly, the law with respect to unfinished business doctrine is far from settled. Other states will likely weigh in either favoring, distinguishing or eviscerating the unfinished business doctrine for their own states.

Going Forward: What Law Firms and Displaced Attorneys Can Expect

For the Law Firm

This may not be the end of Jewel or the unfinished business doctrine. It is a reflection of how complicated the doctrine can be and underscores the importance of the partnership agreement that addresses these issues in the manner the partners wish rather than the state of the law at any one time or one place. A well-crafted partnership agreement is a must. The Jewel waiver can be dispositive in cases of simple dissolution (without the complexities of ensuing bankruptcies). Just like a will, a Jewel waiver is something to be considered in times of health. The waiver language should be considered during prosperous times – well before financial trouble is on the horizon – so that the language is not susceptible to attack as a fraudulent conveyance under the look-back periods afforded such theories.

For Law Firms Hiring Displaced Attorneys

Lateral hiring due diligence should include questions about Jewel waivers and the future of the old firm so that the acquiring firm does not open itself to complicated litigation or possible unfinished business claims. When partners of troubled or dissolving firms do move on to new firms, the new firms should carefully evaluate the risk of application of unfinished business doctrine by reviewing the cases pending (whether hourly or contingent) and determining the state of the firm from which the lawyer has departed – whether it is healthy, troubled, post-dissolution, or even if bankruptcy proceedings have already been filed. 


1 Heller Ehrman LLP v. Davis, Wright Tremaine, LLP,et al., 2014 WL 2609743 (N.D. Cal. 2014).

2 In re Thelen LLP, 2014 WL 2931526 (N.Y. 2014).

3 So named to avoid the application of the unfinished business doctrine applied in Jewel v. Boxer, 156 Cal. App. 3d 171 (Ca. App. 1 Dist. 1984).

4 Jewel v. Boxer, 156 Cal. App. 3d 171 (Ca. App. 1 Dist. 1984).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions