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September 25, 2008



The announcement that Heller will vote to dissolve on Friday brings the special problems of liquidating a law firm into a public forum. Though there is no regulatory oversight to ensure that the Rules of Professional Conduct are followed and the bar authorities do not oversee liquidations like the Fed or the Treasury, there are still rules and it is difficult to liquidate and ensure that they ar followed.

It sounds like Heller will not dissolve until after the 60 day wage and salary protections under the Warn Act are funded. So, its clients with active matters will be told that the law firm will not be providing legal services after sixty days.

No client with a need for serious and attentive representation can continue to engage a law firm that has announced that it will just stop in sixty days. The work and the professionals who are needed to get the work done must take care of and provide for the clients now and ensure that the clients are not put at risk as the firm's resources and ability to provide competent legal services evaporates.

Whether clients will assert claims for return of fees or compensation for the costs of transition and the firm's decision to dissolve will also become an issue as the firm tries to collect outstanding receivables. A client whose law firm sends it a pink slip saying that it should find a new law firm in sixty days may feel that any outstanding bills from the firm should be put on ice for a while.

If the firm really has the cash on hand to cover its liquidation costs may be a serious issue. Receivables are not dollars and they will degrade quickly. Lawyers taking clients to new firms rarely see collecting the old bills as an important goal. Indeed, being sympathetic with the client's desire to discount or disclaim the old bills in favor of paying for future work is more the norm.

With the liquidation vote and the inevitable reckoning on the real asset values, the real liabilities, and the likelihood that someone will have to come up with some money to get the firm put to rest. When that happens, someone will ask where all the money went from the high flying days and who should kick in what.

One place to put the spare cash that is usually high on the list for the lawyers is funding the tail on the malpractice policy and dealing with the deductibles. From their perspective, using a dollar to pay a copy service bill or giving it to the insurer is a no brainer.

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