Law in the market: when law firms explode

New Hampshire’s major law firms are fairly stable, and many have been around for decades. This is not the case with the smaller ones – say, those with two to ten partners. There are many such companies, many of which were created in just the last few years, and in a few years many of them will dissolve. Why is that?

There are many reasons, but one of the main ones is that if the professional or life situation of a partner of one of these firms changes significantly after the partner becomes a partner, his affiliation with his firm may no longer make sense to the partner himself. , to the other partners, or to all together.

But law firm breakups can be messy. And not just messy: they can be downright ugly. The reasons:

Significant potential legal fees may be involved.

Breakups can be very complicated because according to the rules of ethics in force, the clients of a lawyer are completely free to change lawyers.

Incredibly, whether their law firms are LLCs, PLLCs, registered partnerships, or professional corporations, many attorneys do not comprehensively articulate their partnership terms in written partnership agreements.

Law firm attorneys can be even more contentious than owners of other types of businesses.

The best recent discussion I know of regarding law firm breakups is in the most recent post from the best law firm blawg I know. The blawg is “NY Business Divorce”, the link is nybusinessdivorce.com and the message is “Disputes abound when law firms dissolve”.

The post only discusses New York case law, but many of these cases will be persuasive in New Hampshire.

Here are some of the questions addressed in the message:

When should tax return data matter in litigation between law firms?

In law firm liquidations, how should lawyers assess the goodwill of law firms?

If the law firm is a registered partnership (rather than, say, an LLC) and a partner resigns, will his resignation cause the firm to wind up? Partnership law may allow remaining partners to vote to continue the business, but even if they do, there may be major valuation issues for the ex-partner and continuing partners.

Assessing potential contingent fees can be extremely complex.

The Bottom Line: Every attorney in a small New Hampshire firm should consider studying the above position; and their firms should have comprehensive written agreements with law firms.

John Cunningham is an attorney licensed to practice law in New Hampshire and Massachusetts. He is legal counsel for the law firm McLane Middleton, PA. Contact him at 856-7172 or lawjmc@comcast.net. His website is llc199a.com. To access all of his Law in the Marketplace columns, visit concordmonitor.com.

Law in the Marketplace is a legal advice section. It airs weekly in the Sunday Business section. The author is a lawyer at Concord and is not a staff member of the Monitor.