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Business and Corporate Law

Philip N. Krause, Esquire 

Clients have a fundamental right to freely choose their counsel.  Accordingly, a case is not a law firm asset, and a law firm is not entitled to retain a contingency fee contract if the client chooses to engage a departing partner (or another firm) instead of the law firm from which the partner is departing.  Welman, et al., v. Parker, No. 30016 (Mo. App. S.D., November 19, 2010), Lynch, J.
Attorney withdrew from a law firm, thereby dissolving the law firm's partnership.  The law firm had no written partnership agreement.  A personal injury client with a pending case determined to transfer his contingency fee case from the old firm to the departing attorney at a new firm.  When the case settled, the old firm claimed it was entitled to a share of the fee. The trial court ruled that the contingency fee case was an asset of the old firm and required the departed attorney to return a pro rata portion of the contingency fee to the old firm.
Held: Reversed.  Although this issue had not been previously determined by a Missouri appellate court, the court found that Missouri follows the "modern rule" in which a client may at any time release an attorney, with or without cause, and hire another.  The court therefore determined that whether the contingency fee contract remains an asset of the dissolved partnership is solely the decision of the informed client, who has the free choice to further engage the services of the former partners, the withdrawing partner - either individually or as a partner in a new partnership - or an entirely different attorney or law firm.  Clients are free to discharge the law firm or attorney who represents them at any time and hire new counsel. Clients have a fundamental right to freely choose their counsel.  The dissolved firm is only entitled to recover the reasonable value of the services it provided.

A partnership cannot be created by an oral agreement as to the sharing of ownership and profits but not the sharing of liabilities.  Winslow v. Nolan, No.93544 (Mo. App. E.D., August 24, 2010), Odenwald, J.
Winslow and Nolan discussed going into a plumbing business together.  According to Winslow, they agreed to have a partnership in which they each shared 50 percent of the profits and ownership.  Nolan proceeded to form a limited liability company without naming Winslow as an owner.  Instead of sharing profits, Nolan paid Winslow a salary.  Winslow sued to recover a share of the profits.  The trial court determined that a partnership had been formed by oral agreement, and awarded Winslow 50 percent of the profits.
Held: Reversed.  The court found that, according to Winslow's own testimony, the parties had not agreed to share any losses or liabilities of the plumbing business.  Without an agreement as to sharing losses or liabilities, a partnership cannot be formed.

The Missouri Bar Courts Bulletin, 11-Mar