Heller Ehrman LLP v. Davis Wright Tremaine LLP , 830 F.3d 964 ( 2016 )


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  •                    FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    IN THE MATTER OF HELLER             No. 14-16314
    EHRMAN LLP,
    Debtor,            D.C. No.
    3:14-cv-01236-CRB
    HELLER EHRMAN LLP,
    Liquidating Debtor,
    Plaintiff-Appellant,
    v.
    DAVIS WRIGHT TREMAINE
    LLP,
    Defendant-Appellee.
    2       IN THE MATTER OF HELLER EHRMAN LLP
    IN THE MATTER OF HELLER             No. 14-16315
    EHRMAN LLP,
    Debtor,            D.C. No.
    3:14-cv-01237-CRB
    HELLER EHRMAN LLP,
    Liquidating Debtor,
    Plaintiff-Appellant,
    v.
    JONES DAY,
    Defendant-Appellee.
    IN THE MATTER OF HELLER             No. 14-16317
    EHRMAN LLP,
    Debtor,            D.C. No.
    3:14-cv-01238-CRB
    HELLER EHRMAN LLP,
    Liquidating Debtor,
    Plaintiff-Appellant,
    v.
    FOLEY & LARDNER LLP,
    Defendant-Appellee.
    IN THE MATTER OF HELLER EHRMAN LLP                       3
    IN THE MATTER OF HELLER                      No. 14-16318
    EHRMAN LLP,
    Debtor,                    D.C. No.
    3:14-cv-01239-CRB
    HELLER EHRMAN LLP,
    Liquidating Debtor,                    ORDER CERTIFYING
    Plaintiff-Appellant,          QUESTION TO THE
    CALIFORNIA
    v.                      SUPREME COURT
    ORRICK HERRINGTON &
    SUTCLIFFE LLP,
    Defendant-Appellee.
    Appeal from the United States District Court
    for the Northern District of California
    Charles R. Breyer, Senior District Judge, Presiding
    Argued and Submitted June 13, 2016
    San Francisco, California
    Filed July 27, 2016
    Before: Richard R. Clifton, and Sandra S. Ikuta, Circuit
    Judges, and Royce C. Lamberth,* District Judge.
    Order
    *
    The Honorable Royce C. Lamberth, United States District Judge for
    the District of Columbia, sitting by designation.
    4          IN THE MATTER OF HELLER EHRMAN LLP
    SUMMARY**
    Bankruptcy
    The panel certified the following question to the
    California Supreme Court:
    Under California law, does a dissolved law
    firm have a property interest in legal matters
    that are in progress but not completed at the
    time the law firm is dissolved, when the
    dissolved law firm had been retained to
    handle the matters on an hourly basis?
    ORDER
    We ask the California Supreme Court to resolve a
    question of state law: whether a dissolved law firm has a
    property interest in legal matters that are in progress but not
    completed at the time the law firm is dissolved, where the
    dissolved law firm had been retained to handle the matters on
    an hourly basis. This question resolves the bankruptcy appeal
    before us because if a dissolved law firm does not have a
    property interest in such matters, the transfer of those matters
    to a new law firm does not constitute a fraudulent transfer
    under the Bankruptcy Code. Although California courts of
    appeal have applied pre-1996 partnership law to address this
    issue, we have found no published California state court
    opinion addressing it after the California legislature revised
    **
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    IN THE MATTER OF HELLER EHRMAN LLP                  5
    the applicable state partnership law in 1996. Accordingly,
    pursuant to Rule 8.548 of the California Rules of Court, we
    certify the following question to the California Supreme
    Court:
    Under California law, does a dissolved law
    firm have a property interest in legal matters
    that are in progress but not completed at the
    time the law firm is dissolved, when the
    dissolved law firm had been retained to
    handle the matters on an hourly basis?
    Our phrasing of this question should not restrict the Court’s
    consideration of the issues involved. The Court may rephrase
    the question as it sees fit in order to address the contentions
    of the parties. If the Court agrees to decide this question, we
    agree to accept its decision. We recognize that the Court has
    a substantial caseload, and we submit this question only
    because of its significance to the bankruptcy administration
    of dissolved law firms in the state of California.
    I
    We start by providing a brief history of the development
    of the California doctrine of dissolved law firms’ rights to
    pending legal matters, and then provide the facts of the
    particular appeal before us.
    A
    While it has long been established that partners have
    fiduciary duties towards each other, see Gorman v. Russell,
    
    14 Cal. 531
    , 539 (1860), the California Supreme Court has
    addressed the fiduciary duties of former partners of a
    6        IN THE MATTER OF HELLER EHRMAN LLP
    dissolved law firm with respect to the unfinished business
    pending at the time of dissolution in only two cases, both
    from the 1800s. The first case involved an agreement
    between former partners to share contingency fees and the
    second involved a surviving partner. In Osment v. McElrath,
    
    68 Cal. 466
     (1886), a two-partner law firm dissolved with
    several cases pending. The former partners agreed to share
    any contingency fees from the pending matters, but the
    lawyer who completed the legal work on the matters later
    refused to do so. 
    Id. at 467, 470
    . The California Supreme
    Court affirmed the trial court’s apportionment of the fees
    between the partners. 
    Id. at 472
    . Rejecting the argument that
    the working lawyer was entitled to a greater share of the fees,
    the Court pointed to the common law rule that partners are
    not entitled to compensation for services rendered to the
    partnership, even after dissolution. 
    Id. at 471
    . However, the
    Court left open the question whether a different rule might
    apply to winding up partnerships between lawyers “where the
    profits of the firm are the result solely of professional skill
    and labor.” 
    Id.
     Eight years later, the California Supreme
    Court held in Little v. Caldwell, 
    101 Cal. 553
     (1894), that
    after one law firm partner dies leaving a contingency fee
    contract not fully performed, the surviving partner has a duty
    to “complete the unfinished contract for the benefit of the
    partnership,” and the contract “is still to be viewed by a court
    of equity as an asset of the partnership.” 
    Id.
     at 560–61.
    The common law partnership rules enunciated in Osment
    and Little were superseded in 1929, when the California
    legislature adopted the Uniform Partnership Act (UPA), see
    Jacobson v. Wikholm, 
    29 Cal. 2d 24
    , 27–28 (1946), which it
    later codified as part of the state’s Corporations Code, see
    IN THE MATTER OF HELLER EHRMAN LLP                         7
    
    Cal. Corp. Code § 15001
     et. seq. (1998).1 Under UPA,
    partners had a fiduciary duty to each other to “account to the
    partnership for any benefit, and hold as trustee for it any
    profits derived by him without the consent of the other
    partners . . . .” 
    Cal. Corp. Code § 15021
    (1) (1998). Partners
    retained this duty even after the dissolution of the partnership,
    with only one exception: UPA provided that “[n]o partner is
    entitled to remuneration for acting in the partnership business,
    except that a surviving partner is entitled to reasonable
    compensation for his or her services in winding up the
    partnership affairs.” 
    Id.
     § 15018(f). The California Supreme
    Court interpreted this language to mean that, after the death
    of a partner, the surviving partner was entitled to reasonable
    compensation “based upon the time, labor, and skill
    expended” in winding up pending matters. Jacobson, 
    29 Cal. 2d at 32
    .
    The California Court of Appeal relied on § 15018(f) in
    holding that each former partner had a duty to the rest of their
    former partners to share in attorneys’ fees from a dissolved
    law firm’s unfinished business. In Jewel v. Boxer, a four-
    partner law firm dissolved, and the former partners
    1
    The National Conference of Commissioners on Uniform State Laws
    (the Uniform Law Commission, or ULC) publishes model codes, such as
    UPA, which are frequently adopted by state legislatures. The California
    legislature adopted the majority of UPA in 1929, effective August 14,
    1929. The ULC subsequently published a revision to UPA, the Uniform
    Partnership Act of 1994 (termed the Revised Uniform Partnership Act, or
    RUPA), which the California legislature also adopted in 1996, and which
    governed all partnerships as of January 1, 1999. See 
    Cal. Corp. Code § 16111
    . The ULC’s official comments to the model codes are considered
    by California courts for guidance. See, e.g., Rappaport v. Gelfand,
    
    197 Cal. App. 4th 1213
    , 1227 (2011); Rosenfeld, Meyer & Susman v.
    Cohen, 
    191 Cal. App. 3d 1035
    , 1059 (1987).
    8         IN THE MATTER OF HELLER EHRMAN LLP
    subsequently formed two new firms. 
    156 Cal. App. 3d 171
    ,
    175 (1984). Jewel reasoned that under § 15018(f), the former
    partners were not surviving partners, and therefore were not
    entitled “to extra compensation for services rendered in
    completing unfinished business.” Id. at 176. As a result, any
    attorneys’ fees generated from matters that had been pending
    when the law firm dissolved were “to be shared by the former
    partners according to their right to fees in the former
    partnership, regardless of which former partner provides legal
    services in the case after the dissolution.” Id. at 174. The
    former partners would be entitled only “to reimbursement for
    reasonable overhead expenses,” and not for their work on a
    quantum meruit basis. Id. at 180. The court rejected the
    argument that such a conclusion is contrary to the rule that
    “clients have an absolute right to the attorney of their choice,”
    because the client’s right is “irrelevant to the rights and duties
    between the former partners with regard to income from
    unfinished partnership business.” Id. at 177–78.
    Subsequent court of appeal decisions consistently applied
    Jewel’s interpretation of § 15018(f) to contingency fee matter
    cases. See, e.g., Fox v. Abrams, 
    163 Cal. App. 3d 610
    ,
    612–13 (1985) (applying rule that former partners had a right
    to share in attorneys’ fees from a dissolved law firm’s
    unfinished contingency fee cases); Rosenfeld, 191 Cal. App.
    3d at 1063 (same). In 1993, a California court for the first
    time expressly applied Jewel’s interpretation of § 15018(f) to
    matters that the dissolved law firm had been handling on an
    hourly basis. See Rothman v. Dolin, 
    20 Cal. App. 4th 755
    ,
    757–59 (1993). Rothman reasoned that “the policy reasons
    for the rule announced in Jewel, that is, that fees received in
    connection with the unfinished business of a partnership are
    to be allocated according to the former partners’ respective
    interests in the partnership rather than on a quantum meruit
    IN THE MATTER OF HELLER EHRMAN LLP                  9
    basis, apply with equal force to both contingency and hourly
    rate cases.” 
    Id. at 758
    . No other published case in California
    has expressly addressed this issue.
    Although the California Supreme Court has not directly
    addressed the question of dissolved law firms’ interest in
    legal matters pending at the time of dissolution, the Court
    acknowledged Jewel’s interpretation of § 15018(f) in one
    case, Howard v. Babcock, 
    6 Cal. 4th 409
    , 424 n.8 (1993). In
    Howard, the Court held that an “an agreement among law
    partners imposing a reasonable toll on departing partners who
    compete with the firm” was enforceable. 
    Id. at 412
    . The
    defendants argued that such an agreement would violate rule
    1-500 of the Rules of Professional Conduct because it
    discouraged withdrawing partners from continuing to
    represent clients who wished to employ them. In rejecting
    this contention, Howard noted that “in some respects, the ‘no-
    compensation rule’ of partnership law, whereby departing
    partners are compensated for winding up the unfinished
    business of the partnership according to their partnership
    interest, may be just as much a disincentive on the
    withdrawing partner to continue to represent clients of the
    firm as an anticompetitive penalty, and yet this is not
    considered to be a violation of rule 1-500.” 
    Id.
     at 424 n.8
    (citing Jewel, 
    156 Cal. App. 3d 171
    , among other cases).
    Howard did not otherwise address the Jewel issue.
    In 1996, the California legislature revised its partnership
    law by replacing UPA with RUPA. See 
    Cal. Corp. Code § 16100
     et. seq.; see also 9 Witkin, Summary Partnership
    § 15, 590 (10th ed. 2005). Among its other modifications,
    RUPA clarified the fiduciary duties of partners after the
    dissolution of the partnership. It replaced former section
    § 15021(1), which had provided that partners had a fiduciary
    10        IN THE MATTER OF HELLER EHRMAN LLP
    duty to account for benefits and profits to the other partners,
    with § 16404(b)(1), which sets forth a partner’s fiduciary duty
    “[t]o account to the partnership and hold as trustee for it any
    property, profit, or benefit derived by the partner in the
    conduct and winding up of the partnership business or
    derived from a use by the partner of partnership property or
    information, including the appropriation of a partnership
    opportunity.” 
    Cal. Corp. Code § 16404
    (b)(1). But at the
    same time, RUPA changed the rule regarding partners’ post-
    dissolution rights to reasonable compensation; it replaced
    § 15018(f), which had provided that only a “surviving partner
    is entitled to reasonable compensation for his or her services
    in winding up the partnership affairs,” with § 16401(h),
    which provides that all partners are entitled to “reasonable
    compensation for services rendered in winding up the
    business of the partnership.” 
    Cal. Corp. Code § 16401
    (h).2
    According to the official comment to RUPA § 401(h) (which
    is identical to § 16401(h) of the California Corporations
    Code), this revision was intended to provide that “any partner
    winding up the business is entitled to compensation, not just
    a surviving partner winding up after the death of another
    partner.” RUPA § 401 cmt. 9.
    California’s adoption of RUPA is material to the question
    raised in this case. Jewel had primarily based its conclusion
    that lawyers had to account to their former partners for all
    income generated from a dissolved law firm’s unfinished
    business on the language in § 15018(f) that precluded former
    partners from earning extra compensation for winding up
    2
    Section 16401(h) provides in full: “A partner is not entitled to
    remuneration for services performed for the partnership, except for
    reasonable compensation for services rendered in winding up the business
    of the partnership.”
    IN THE MATTER OF HELLER EHRMAN LLP                           11
    partnership business. Jewel, 156 Cal. App. 3d at 176. But
    under RUPA, partners are entitled to “reasonable
    compensation” for such work. 
    Cal. Corp. Code § 16401
    (h).
    Because “reasonable compensation” means fees “attributable
    to the services and skill” of the partner performing the work,
    Jacobson, 
    29 Cal. 2d at 30
    , the language in § 16401(h)
    suggests that former partners now have a claim to some or all
    of their hourly rate for working on unfinished business.
    Despite the significance of this legislative change, no
    California court has considered (in a published opinion3)
    whether there remains a basis for holding that a partnership
    has a property interest in legal matters pending at the time the
    firm is dissolved, when the firm was retained on an hourly
    basis, now that the California legislature has repealed
    § 15108(f) and replaced it with § 16401(h).
    B
    We now explain Jewel’s continuing impact on bankruptcy
    law. In 2009, a bankruptcy court determined that the rule
    enunciated in Jewel, that former partners of a dissolved law
    firm had a right to share in attorneys’ fees received on cases
    that had been pending when the law firm dissolved, had
    significance in a bankruptcy context. See In re Brobeck,
    Phleger & Harrison LLP, 
    408 B.R. 318
     (N.D. Cal. 2009).
    3
    Appellant points out that two unpublished California opinions have
    applied Jewel after the enactment of RUPA. See Marquart v. Smith, 
    2014 WL 1990286
     (Cal. Ct. App. May 16, 2014); Kuist v. Hodge, 
    2008 WL 510075
     (Cal. Ct. App. Feb. 27, 2008). Under the Supreme Court’s rules,
    these unpublished cases may not be cited or relied on by a court or a party.
    See California Rules of Court 8.1115.
    12       IN THE MATTER OF HELLER EHRMAN LLP
    The reasoning in Brobeck relies on underlying principles
    of bankruptcy law. Under 
    11 U.S.C. § 548
    , a bankruptcy
    trustee has the power to set aside the debtor’s transfer of “an
    interest of the debtor in property” to a third party when the
    transfer was made within a specified period before the date of
    filing a petition in bankruptcy, and the transfer was made
    either with intent to “hinder, delay or defraud” creditors, 
    id.
    § 548(a)(1)(A), or was constructively fraudulent because it
    met certain criteria, id. § 548(a)(1)(B). For purposes of
    § 548, the debtor has an interest in any property “that would
    have been part of the estate had it not been transferred before
    the commencement of bankruptcy proceedings.” Begier v.
    IRS, 
    496 U.S. 53
    , 58 (1990); see also 
    11 U.S.C. § 541
    (a)(1)
    (defining the debtor’s property interests as including “all
    legal or equitable interests of the debtor in property as of the
    commencement of the case”). Since “[p]roperty interests are
    created and defined by state law,” Butner v. United States,
    
    440 U.S. 48
    , 55 (1979), we “look to state law to determine
    property interests” of the debtor, In re Perl, 
    811 F.3d 1120
    ,
    1127 (9th Cir. 2016).
    Brobeck involved a national law firm partnership that
    experienced serious financial difficulties. 408 B.R. at 326.
    The partners entered into a dissolution agreement stating that
    neither the partners nor the partnership would have any claim
    to legal matters that were ongoing at the time of the
    dissolution of the partnership. Id. at 327. Specifically, the
    provision stated it was “intended to expressly waive, opt out
    of and be in lieu of any right any Partner or the Partnership
    may have to ‘unfinished business’ of the Partnership, as that
    term is defined in Jewel v. Boxer, or as otherwise might be
    provided in the absence of this provision through
    interpretation or application of the California Revised
    Uniform Partnership Act.” Id. After the law firm’s
    IN THE MATTER OF HELLER EHRMAN LLP                 13
    dissolution, its partners moved to other firms, taking pending
    legal matters along with them. Id. at 328. The law firm was
    subsequently put into involuntary bankruptcy, and the trustee
    in bankruptcy commenced two adversary proceedings seeking
    a declaration that the profits from the legal matters that were
    pending when the law firm dissolved were property of the
    dissolved law firm. Id. at 330.
    The bankruptcy court agreed. It first held that under
    Jewel, the dissolved law firm had a property interest in the
    profits from the legal matters that were pending at the time of
    the dissolution, whether those cases were billed on an hourly
    or contingent fee basis. Id. at 338–39. It did not address the
    question whether RUPA affected the applicability of Jewel to
    such profits. Id. at 337–38. It then held that the law firm
    waived its interests in these profits when its partners entered
    into the dissolution agreement. Id. at 338. This waiver “gave
    what was otherwise property of [the law firm] to the [former
    law firm] partners.” Id. The bankruptcy court then
    concluded that the trustee had established that the law firm
    had transferred the profits in the pending legal matters to the
    former partners, and this transfer could be challenged as a
    fraudulent transfer under § 548(a). Id. at 339–40.
    After Brobeck was decided, the Second Circuit addressed
    a similar issue arising under New York law. See In re Thelen
    LLP, 
    736 F.3d 213
     (2d Cir. 2013). Thelen considered
    “whether, for purposes of administering the firm’s related
    bankruptcy, New York law treats a dissolved law firm’s
    pending hourly fee matters as its property.” 
    Id. at 216
    . The
    court certified the question to the New York Court of
    Appeals. 
    Id. at 225
    .
    14       IN THE MATTER OF HELLER EHRMAN LLP
    The New York Court of Appeals held that a dissolved law
    firm does not have a property interest in income generated
    from unfinished hourly legal matters. In re Thelen LLP,
    
    24 N.Y.3d 16
    , 28 (2014). The court rejected the concept that
    a law firm has a property right in unfinished law firm
    business. 
    Id.
     Although acknowledging that courts in other
    jurisdictions had interpreted UPA (which was also the basis
    for New York’s Partnership Law) to the contrary, Thelen
    stated that the Partnership Law “does not define property;
    rather, it supplies default rules for how a partnership upon
    dissolution divides property as elsewhere defined in state
    law.” 
    Id.
     Accordingly, the law “has nothing to say about
    whether a law firm’s ‘client matters’ are partnership
    property.” 
    Id.
     Further, because “clients have always enjoyed
    the ‘unqualified right to terminate the attorney-client
    relationship at any time’ without any obligation other than to
    compensate the attorney for ‘the fair and reasonable value of
    the completed services,’” 
    id.
     (citing Matter of Cooperman,
    
    83 N.Y.2d 465
    , 473 (1994)), the “expectation of any
    continued or future business is too contingent in nature and
    speculative to create a present or future property interest,” 
    id.
    (quoting Verizon New England Inc. v. Transcom Enhanced
    Servs., Inc., 
    21 N.Y.3d 66
    , 72 (2013)). Accordingly, Thelen
    held that “no law firm has a property interest in future hourly
    legal fees because they are ‘too contingent in nature and
    speculative to create a present or future property interest.’”
    
    Id.
     (quoting Verizon New England Inc., 
    21 N.Y.3d at 72
    ).
    II
    This is an appropriate case in which to seek the California
    Supreme Court’s guidance because, as in Brobeck and
    Thelen, it raises the question whether hourly fee matters
    pending at the time of the law firm’s dissolution are property
    IN THE MATTER OF HELLER EHRMAN LLP                 15
    of the dissolved law firm in the context of an adversary action
    in bankruptcy.
    Heller was a global law firm with more than 700
    attorneys. The partnership was comprised of professional
    corporations, each of which employed attorneys as
    shareholders. The shareholders controlled Heller through
    shareholder votes and management committees. By August
    31, 2008, Heller experienced financial distress. Its balance
    sheet reflected around $5 million in cash and nearly $55
    million in bank debt. On September 19, 2008, Bank of
    America, acting as an agent for itself and Citibank, declared
    Heller in default. Soon after, Heller’s shareholders voted to
    approve a dissolution plan.
    The dissolution plan included a waiver by the law firm of
    any rights and claims “under the doctrine of Jewel v. Boxer,
    
    156 Cal. App. 3d 171
     (1984) to seek payment of legal fees
    generated after the departure date of any lawyer or group of
    lawyers with respect to non-contingency/non-success fee
    matters only.” The waiver provision stated that it was “an
    inducement to encourage Shareholders to move their clients
    to other law firms and to move Associates and Staff with
    them, the effect of which will be to reduce expenses to the
    Firm-in-Dissolution.”
    In the following months, Heller’s former shareholders
    joined at least sixteen other law firms, and many of Heller’s
    former clients signed new fee agreements with those law
    firms to continue to receive representation.
    In December 2008, Heller filed a petition under Chapter
    11 of the Bankruptcy Code. In August 2010, Heller’s joint
    plan of liquidation was approved, and the plan became
    16       IN THE MATTER OF HELLER EHRMAN LLP
    effective in September 2010. A plan administrator was
    appointed and became responsible for pursuing claims to
    recover assets for the benefit of Heller’s creditors.
    In December 2010, the plan administrator filed adversary
    proceedings in bankruptcy court on behalf of Heller against
    the sixteen law firms, seeking to avoid the dissolution
    agreement’s waiver of Heller’s rights to post-dissolution legal
    fees as a fraudulent transfer under 
    11 U.S.C. § 548
    (a)(1)(B)
    or under California Civil Code § 3439.05 (which has
    essentially the same elements as § 548(a)(1)(B)). Basing its
    action on Brobeck (which had been decided by the same
    bankruptcy judge hearing Heller’s case), Heller alleged that
    it had a property right in legal fees generated by work on
    hourly matters after its dissolution, that the waiver of this
    right in the dissolution agreement constituted a transfer of
    Heller’s interest in property (presumably to the shareholders),
    and that the new law firms were the subsequent transferees of
    such transfers. Heller further alleged that such transfers met
    the additional statutory criteria in § 548(a)(1)(B) to be
    avoidable as fraudulent transfers.
    After the bankruptcy court denied the new law firms’
    motions to dismiss, all but four of the sixteen firms settled
    with Heller. In June 2012, Heller and the four non-settling
    law firms (Davis Wright Tremaine LLP; Jones Day; Orrick,
    Herrington & Sutcliffe LLP; and Foley & Lardner LLP) filed
    cross motions for summary judgment on whether the waiver
    in the dissolution agreement constituted a transfer of Heller’s
    property to the defendants and whether any such transfer was
    a fraudulent transfer under 
    11 U.S.C. § 548
    . Relying on its
    earlier decision in Brobeck, the bankruptcy court granted
    Heller’s motion.
    IN THE MATTER OF HELLER EHRMAN LLP                      17
    After further proceedings in bankruptcy court, the
    bankruptcy court certified to the district court that the case
    could proceed to bench and jury trials for factual
    determination of the amount of damages in the four cases.
    The district court entered an order withdrawing the reference
    from the bankruptcy court, but instead of proceeding to trial,
    the court asked for briefing on the waiver issue. Reviewing
    the bankruptcy court’s rulings de novo, the district court
    granted summary judgment in favor of the four defendants.
    Among other things, the district court reasoned that RUPA
    undermined the legal foundation on which Jewel rests
    because RUPA contains no provision giving dissolved law
    firms the right to demand an accounting for profits earned by
    its former partners under a new retainer agreement, but allows
    partners to obtain “reasonable compensation” for helping to
    wind up partnership businesses. Because Jewel did not apply,
    the court held that Heller did not have a property interest in
    its pending hourly matters at dissolution. Therefore, it did
    not reach the issue whether the Jewel waiver constituted a
    fraudulent transfer.
    On appeal, Heller argues that RUPA did not abrogate the
    rule in Jewel, and under California law, a dissolved law firm
    has a property interest in the profits from the firm’s
    unfinished business. Heller notes that two unpublished
    California cases4 and two legal commentaries5 have reached
    4
    See supra note 3.
    5
    The legal commentaries cited by Heller indicate that RUPA did not
    alter the fiduciary duties of partners. See 9 Witkin, Summary Partnership
    § 30, 604 (10th ed. 2005) (“Although [RUPA] treats the topic of fiduciary
    duties extensively, the Partnerships Committee of the State Bar, in
    reviewing California cases dealing with the fiduciary duties of partners,
    concluded that none would have been decided differently under
    18        IN THE MATTER OF HELLER EHRMAN LLP
    the same conclusion. According to Heller, § 16401(h) does
    not undermine Jewel because it merely allows former partners
    to receive some compensation for completing the dissolved
    law firm’s unfinished business. To the extent that completion
    of the work generated profits beyond such “reasonable
    compensation,” the former partners would continue to have
    a fiduciary duty to account for such profits to the former
    partnership. Accordingly, Heller argues, the former partners
    continue to have a fiduciary duty to account for the legal fees
    generated from the hourly matters that were pending when
    Heller dissolved, and Heller continues to have a property
    interest in such fees.
    In response, the four defendant law firms argue, among
    other things, that partners completing the firm’s unfinished
    hourly fee matters are entitled under § 16401(h) to their
    hourly rate for such work, so Heller has no ongoing property
    interest in the matters that have been transferred to other
    firms. As a policy matter, they argue that giving dissolved
    law firms a property interest in hourly fee matters that have
    been transferred to third party law firms would discourage
    such firms from representing clients of a dissolved firm
    because they would have no ability to profit from that
    representation.
    III
    We are bound by decisions of the state’s highest court in
    analyzing questions of that state’s law, Glendale Assocs., Ltd.
    [RUPA].”); see also Donald J. Weidner, Cadwalader, RUPA and
    Fiduciary Duty, 
    54 Wash. & Lee L. Rev. 877
    , 913 (1997) (discussing
    fiduciary duties under RUPA and noting that no change in current law was
    intended).
    IN THE MATTER OF HELLER EHRMAN LLP                   19
    v. N.L.R.B., 
    347 F.3d 1145
    , 1154 (9th Cir. 2003), but the
    California Supreme Court has not addressed the question
    (either before or after RUPA was enacted) whether a
    dissolved law firm has a property interest in unfinished
    business where the law firm had been retained on an hourly
    basis. Indeed, the Court expressly held this issue open some
    130 years ago, and has not revisited it since. See Osment,
    
    68 Cal. at 470
    . “When the state’s highest court has not
    squarely addressed an issue,” we predict “how the highest
    state court would decide the issue using intermediate
    appellate court decisions, decisions from other jurisdictions,
    statutes, treaties and restatements for guidance.” Glendale
    Assocs., 
    347 F.3d at 1154
     (quoting N.L.R.B. v. Calkins,
    
    187 F.3d 1080
    , 1089 (9th Cir. 1999)). But the California
    Legislature’s replacement of § 15018(f) with 16401(h) has
    substantially affected the basis for the court’s conclusion in
    Jewel, and none of the California Courts of Appeal have
    applied Jewel in a published opinion after the enactment of
    RUPA.
    For the reasons stated above, we need guidance from the
    California Supreme Court to determine whether Heller has a
    property interest in its unfinished hourly fee matters upon
    dissolution. The Court’s decision determines the outcome of
    this appeal. If Heller has no such property interest then
    Heller cannot claim that the dissolution agreement constituted
    a transfer of the property interest. If Heller did have a
    property interest in its unfinished hourly fee matters, then we
    will remand to the district court to determine the remaining
    issues, namely whether the transfer met the criteria in
    § 548(a)(1) to constitute a fraudulent transfer that is avoidable
    by the plan administrator.
    20       IN THE MATTER OF HELLER EHRMAN LLP
    This issue is significant for California lawyers and law
    firms, as well as for their clients. Partners in California law
    firms need clarity regarding their obligations after a law firm
    dissolves. Absent guidance from the California Supreme
    Court, law firms will have difficulty predicting their
    entitlement to revenue from completing the unfinished
    business of dissolving law firms. Clients may also be
    disadvantaged by this ambiguity, as it may be unclear how
    their matters will be handled at a new law firm, if the hourly
    fees from their matters must be shared with a dissolved law
    firm. Moreover, lawyers in dissolving law firms may have
    difficulty providing accurate guidance to clients regarding the
    effect of a law firm dissolution on their matters. This may
    make compliance with Rule 3-700(A)(2) of the California
    Rules of Professional Conduct more difficult. See Cal. R.
    Prof. Conduct 3-700(A)(2) (requiring a withdrawing attorney,
    including an attorney withdrawing as a result of the
    dissolution of the attorney’s law firm, to take “reasonable
    steps to avoid reasonably foreseeable prejudice to the rights
    of the client, including giving due notice to the client,
    allowing time for employment of other counsel, complying
    with rule 3-700(D) [by returning the client’s papers and
    property], and complying with applicable laws and rules.”).
    The importance of this issue is underscored by the numerous
    amicus briefs this court received from bar associations and
    law firms in California.
    We therefore respectfully ask that the California Supreme
    Court decide the certified question.
    IV
    The Clerk of Court is hereby directed to transmit
    forthwith to the California Supreme Court, under official seal
    IN THE MATTER OF HELLER EHRMAN LLP                      21
    of the Ninth Circuit, a copy of this order and request for
    certification and all relevant briefs and excerpts of record
    pursuant to California Rule of Court 8.548. Submission of
    this case is withdrawn, and the case will be resubmitted
    following receipt of the California Supreme Court’s opinion
    on the certified question or notification that it declines to
    answer the certified question. The panel shall retain
    jurisdiction over further proceedings in this court. The
    parties shall notify the Clerk of this court within one week
    after the California Supreme Court accepts or rejects
    certification. In the event the California Supreme Court
    grants certification, the parties shall notify the Clerk within
    one week after the court renders its opinion.
    The captions of these cases are:
    14-16314
    IN THE MATTER OF HELLER EHRMAN LLP,
    Debtor
    -------------------------------------------------------
    HELLER EHRMAN LLP, Liquidating Debtor,
    Plaintiff-Appellant
    v.
    DAVIS WRIGHT TREMAINE LLP
    Defendant-Appellee
    and
    14-16315
    22      IN THE MATTER OF HELLER EHRMAN LLP
    IN THE MATTER OF HELLER EHRMAN LLP,
    Debtor
    -------------------------------------------------------
    HELLER EHRMAN LLP, Liquidating Debtor,
    Plaintiff-Appellant
    v.
    JONES DAY,
    Defendant-Appellee
    and
    14-16317
    IN THE MATTER OF HELLER EHRMAN LLP,
    Debtor
    -------------------------------------------------------
    HELLER EHRMAN LLP, Liquidating Debtor
    Plaintiff-Appellant
    v.
    FOLEY & LARDNER LLP,
    Defendant-Appellee
    and
    14-16318
    IN THE MATTER OF HELLER EHRMAN LLP                      23
    IN THE MATTER OF HELLER EHRMAN LLP,
    Debtor
    -------------------------------------------------------
    HELLER EHRMAN LLP, Liquidating Debtor
    Plaintiff-Appellant
    v.
    ORRICK HERRINGTON & SUTCLIFFE LLP,
    Defendant-Appellee
    Counsel for the parties are as follows:
    For Plaintiff-Appellant Heller Erhman LLP:
    Christopher D. Sullivan
    Diamond McCarthy LLP
    150 California Street, Suite 2200
    San Francisco, California 94111
    Telephone (415) 692-5200
    Jeffrey T. Makoff
    Valle Makoff LLP
    Two Embarcadero Center, Suite 2370
    San Francisco, California 94111
    Telephone (415) 986-8001
    Kevin W. Coleman
    Schnader Harrison Segal & Lewis LLP
    650 California Street, 19th Floor
    San Francisco, California 94108
    Telephone (415) 364-6700
    24        IN THE MATTER OF HELLER EHRMAN LLP
    For Defendant-Appellee Davis Wright Tremaine LLP:
    Steven A. Hirsch
    Keker & Van Nest LLP
    633 Battery Street
    San Francisco, California 94111-1809
    Telephone (415) 391-5400
    For Defendants-Appellees Davis Wright Tremaine LLP and
    Foley & Lardner LLP:
    Peter P. Meringolo
    Luther Orton
    PMRK Law, LLP
    One Sansome Street, Suite 3500
    San Francisco, California 94104
    Telephone (415) 964-4445
    For Defendant-Appellee Jones Day:
    Shay Dvoretzky
    Jones Day
    51 Louisiana Ave., N.W.
    Washington, D.C. 20001
    Telephone (202) 879-3939
    For Defendant-Appellee Orrick, Herrington & Sutcliffe LLP:
    Eric A. Shumsky
    Orrick, Herrington & Sutcliffe LLP
    Columbia Center
    1152 15th Street, N.W.
    Washington, D.C. 20005
    Telephone (202) 339-8400
    IN THE MATTER OF HELLER EHRMAN LLP   25
    Rachel Wainer Apter
    Christopher J. Cariello
    Orrick, Herrington & Sutcliffe LLP
    51 West 52nd Street
    New York, New York 10019
    Telephone (212) 506-5000
    Pamela Phillips
    Jonathan W. Hughes
    Arnold & Porter LLP
    Three Embarcadero Center, 10th Floor
    San Francisco, California 94111
    Telephone (415) 471-3100
    CERTIFICATION REQUESTED; SUBMISSION
    VACATED.