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Duty to Client Extended Beyond Firm’s Closing
By Anthony Lin
As reported in the New York Law Journal, March 6, 2006, and Law.com

A New York federal judge has ordered the former equity partners of a now-defunct law firm to step in as counsel for a client they last directly represented before their firm’s dissolution in 2003.

Though he noted that neither the code of professional responsibility nor New York partnership law directly addressed the issue, Southern District of New York Judge Charles S. Haight said the partners retained “the professional and ethical responsibility” for the representation despite the closing of their firm.

“[O]ne feels intuitively that the obligation of a partner of a law firm to an existing client should not lapse with the subsequent dissolution of the firm,” the judge wrote in RLS Associates, LLC v. United Bank of Kuwait PLC, 01 Civ. 1290

The client, consulting firm RLS Associates, said it retained the law firm of Spitzer & Feldman on a contingent-fee basis to bring a 2001 suit against the United Bank of Kuwait over unpaid fees the bank allegedly owed. The law firm dissolved in late 2003 after partner M. James Spitzer left to join the New York office of Tampa’s Holland & Knight, but the partners paid a former associate, Michael Smith, to continue handling the case.

The two other former equity partners of Spitzer & Feldman are Thomas Westle, who joined the New York office of Philadelphia’s Blank Rome, and Ronald J. Offenkrantz, who joined Lichter Gliedman Offenkrantz.

Smith represented RLS and its president, Richard Swomley, until last month, when a partner at the associate’s present firm, Rosenberg Feldman Smith, wrote to Haight stating that the Rosenberg firm had been retained to assist the Spitzer firm in the case and had never itself entered into an engagement agreement with RLS. In a subsequent conference call, Smith told the judge he had been hired by the former Spitzer & Feldman partners “to undertake specific, discrete tasks” on behalf of RLS.

In returning responsibility to the Spitzer & Feldman partners, Haight noted that they had not applied for leave to withdraw from the case prior to the dissolution of their firm. He said any retainer agreement with RLS therefore remained in effect and “the former partners of the firm are obligated to continue protecting RLS’s legal interests in accordance with its terms.”

Even in the absence of a written agreement, the judge said, the attorney-client relationship meant the partners had fiduciary duties to RLS.

The judge ordered the partners to file papers by March 24 responding to a motion by the bank to dismiss the case with prejudice. The bank had moved to dismiss on the grounds that RLS had failed to post a $465,900 bond to cover attorney fees in the case.

Haight had ordered the bond last December on the grounds that the contract between RLS and the bank was governed by British law and British custom was to award attorney fees to the prevailing party.

The judge also said the former Spitzer & Feldman partners would be responsible for an appeal, if RLS so chose, in the event the Kuwaiti bank’s motion was granted.

Offenkrantz said Thursday he and his partners had expected Smith to eventually execute his own contingent-fee arrangement with RLS. He said he and his partners were now discussing how to proceed, but he said they would find a way to comply with the judge’s order.

“No one’s saying we’re not going to pay for the representation,” he said. “What nobody knows how to do is how to effectively become counsel at a point when everyone’s at different places.”

He said an additional consideration was the fact that Spitzer & Feldman had completely wound up and carried no malpractice insurance. He said the policies of the partners’ present firms would probably not apply in this instance either.

The most likely solution, he said, would be to find another lawyer to represent RLS. This would probably be an out-of-pocket expense for the partners, he said, noting that the case had never promised a large payday. He said the amount in dispute was now probably lower than the attorney fees paid by the bank, which is represented by Loren Selznick of Dailey & Selznick.

“This is like something out of Kafka,” said Offenkrantz, 69. “I’m here wending my way towards retirement and then this case comes back from the past.”