## Facts

- John Haymond and Marvin Lundy, along with Robert Hochberg, formed a Philadelphia personal-injury partnership, Haymond & Lundy, LLP (H&L), in 1997.
- Lundy contributed his existing contingent-fee case inventory to the new firm; Haymond and Hochberg contributed cash to fund operations and expenses.
- Hochberg served as managing partner under the partnership agreement.
- In October 1999, Lundy declared the partnership dissolved and disputes arose over winding up, client communications, and fee allocation for matters pending at dissolution.
- The parties filed competing federal actions that were consolidated in the Eastern District of Pennsylvania and proceeded through pretrial rulings and bench trials.
- In a related proceeding, Lundy sought injunctive relief against Hochberg based on alleged unauthorized practice of law in Pennsylvania.

## Issues

1. Whether a partner breached the partnership agreement and fiduciary duties during dissolution by repudiating agreed dissolution procedures and by soliciting or communicating with firm clients in a misleading manner.
2. How contingent-fee matters pending at dissolution should be treated for purposes of post-dissolution fee allocation, given client autonomy and partnership accounting rules.
3. Whether post-dissolution communications and advertising about firm affiliation and continuity constituted false or misleading statements actionable under the Lanham Act and related unfair-competition theories.
4. Whether a non-Pennsylvania-admitted lawyer engaged in the unauthorized practice of law in Pennsylvania and, if so, whether injunctive relief was warranted.
5. Whether a referral-fee commitment in a contingent-fee case was a partnership liability incurred in the ordinary course of business or an extraordinary transaction requiring partner approval under the partnership agreement.

## Decision

- After a non-jury trial, the court entered fact-specific rulings allocating responsibility and revenues arising from the dissolution, finding limited breaches of the partnership agreement and fiduciary duties in connection with dissolution conduct and client solicitation/communications.
- The court found certain post-dissolution communications and advertising to be false or misleading as to firm continuity or affiliation and provided relief consistent with federal false-advertising and state unfair-competition principles.
- The court rejected broad fraud-based counterclaims to the extent they sought to unwind the entire relationship or obtain expansive damages based on the parties’ sophisticated bargaining and the case-specific proof at trial.
- In a separate Rule 52(a) bench decision, the court found Hochberg had engaged in unauthorized practice of law in Pennsylvania and entered a permanent injunction restricting him from practicing or holding himself out as authorized to practice in the Commonwealth.
- In subsequent accounting orders, the court treated a referral-fee obligation arising from client acquisition in the ordinary course as a partnership liability rather than a “material asset” transaction requiring advance majority approval, and allocated the expense to the partnership.

## Legal Principles

- Partners in a law partnership owe fiduciary duties of loyalty and care, including duties to account for partnership opportunities and to refrain from secretly appropriating partnership business during and after dissolution.
- Upon dissolution, contingent-fee matters are not treated as static partnership property; fee entitlement is commonly apportioned based on work performed before and after dissolution, consistent with ethical limits and the client’s right to choose counsel.
- Lawyer advertising and client communications may violate the Lanham Act, 15 U.S.C. § 1125(a), when they contain false or misleading statements likely to cause confusion about affiliation, origin, or sponsorship of legal services.
- Unauthorized practice of law may be enjoined where a lawyer not admitted in the jurisdiction performs legal services or represents eligibility to practice; equitable relief may be tailored to prevent continued violations rather than to impose punishment beyond what the findings support.
- Under partnership agreements governing internal approvals, obligations incurred in the ordinary course of business may be treated as partnership liabilities even if they involve substantial sums, depending on contract language and the parties’ course of dealing.

## Conclusion

The court resolved a law-firm dissolution dispute through detailed, case-by-case allocations of duties and contingent-fee revenues, granted limited relief for misleading post-dissolution communications, enjoined a partner’s unauthorized practice in Pennsylvania, and later treated a significant referral-fee commitment as an ordinary-course partnership liability for accounting purposes.


Haymond v. Lundy, 177 F. Supp. 2d 371 (E.D. Pa. 2001)