On January 2, 2025, Justice Crane of the New York County Commercial Division issued a decision in White v. Vaccaro, 2025 NY Slip Op. 30013(U), distributing the value of a law firm’s contingency cases, explaining:
The court now moves on to the allocation issue which was the main purpose for the post hearing briefing. The Partnership Agreement provides that plaintiff and defendant each have a 50% stake in VW. However, the agreement does not provide for how to divide contingency fees that materialize post-termination.
Plaintiff contends that all future incoming contingency fees from any case that VW took up, during the time the parties were partners, should be divided 50/50 pursuant to each sides’ partnership interest. Defendant propounds a much more complicated solution. According to defendant, fees realized from pre-termination engagements, that he names “Legacy Cases,” must only reflect the value of the legal services VW performed pre-termination. In keeping with this analysis, defendant also argues that fees realized from post-termination engagements belong exclusively to whichever attorney the client actually retained.
Much to this court’s surprise (the court had assumed a pending case was an asset of the partnership and therefore any incoming fees had to be split 50/50 in accordance with the partnership agreement), it is defendant’s view that is in keeping with New York law. Under the seminal case of In re Thelen LLP, 24 N.Y.3d 16, 29 (2014), the Court of Appeals said, in the context of contingency fees, a dissolved law firm’s pending matters are not partnership property or unfinished business within the meaning of the Partnership Law, but rather belong to the client. The dissolved firm is only entitled to the value of the services it provided prior to dissolution. The court noted that statements that contingency fee cases are assets of the partnership subject to distribution simply means that, as between the departing partner and the partnership, the partnership is entitled to an accounting for the value of the case at the date of dissolution with interest. The value of the case to the Partnership is the equivalent of the value of the services provided. By this reasoning, a dissolved partnership has no claim for fees derived from cases that were opened after the partnership dissolved.
This rule is not without its critics. The reasons for a contrary rule make sense. Scrambling to take physical possession is precisely what occurred here and has contributed to the extreme acrimony between the parties.
In light of these concerns, this court does not understand why completing the executory contingency fee contract is not part of winding up the firm’s business, such that fees therefrom should be split according to the partnership agreement. This approach also encourages parties to abide by their fiduciary duties. However, the Thelan court has seen fit to approach this problem differently. Until it is overturned, this court is constrained to follow it.
Thus, VW is entitled to an accounting for the value of pending cases (in this context the value of the particular attorney’s services) at the date of dissolution. Under the circumstances here, although there are two partners each of whom hold a 50% share, the partnership is only entitled to the reasonable value of services rendered once the contingency fee comes in. That reasonable value, once assessed, will be then be split 50/50 according to the partnership agreement.
(Internal quotations and citations omitted).