## Facts

- Two lawyers formed a firm in 1991 without a written partnership or fee-allocation agreement.
- They split all firm proceeds equally and reported income as partnership income.
- In 1993, one lawyer filed articles organizing the firm as a limited liability company; the filing was not made with the professional responsibility board.
- In 1996, one lawyer gave notice that the professional relationship would end; all business issues were resolved except division of fees from several contingency-fee matters opened before dissolution.
- One lawyer brought a declaratory action seeking dissolution, equal division of contingency-fee recoveries, and injunctive relief; the other counterclaimed for an accounting and asserted a right to fees measured by quantum meruit for post-dissolution work.
- The district court ordered equal division of the contingency fees, referred accounting matters to a referee, and entered judgment for one lawyer in the amount of $101,750.

## Issues

1. Whether, absent a written agreement, fees generated after dissolution from contingency-fee files opened before dissolution must be allocated under partnership principles rather than quantum meruit.
2. Whether organizing the firm as an LLC precluded applying partnership dissolution principles to the allocation of pre-dissolution contingency-fee assets.
3. Whether professional conduct rules governing fee-splitting required a different allocation or barred equal division between former firm lawyers.

## Decision

- The court affirmed the district court’s judgment.
- In the absence of an agreement to the contrary, fees from pre-dissolution contingency-fee files were treated as firm assets to be allocated under partnership principles.
- The court rejected allocation based on quantum meruit for post-dissolution work on those files.
- The court held that professional conduct fee-splitting rules did not bar equal division in this internal allocation dispute between former firm lawyers.
- The judgment awarding $101,750 was upheld.

## Legal Principles

- Absent a contrary agreement, profits from firm matters existing at dissolution are distributed under default partnership dissolution rules, including equal sharing.
- Pre-dissolution contingency-fee files are firm assets; fees later realized from those files remain subject to allocation as part of winding up.
- A consistent course of dealing (equal division of proceeds) supports equal allocation when the parties did not agree otherwise.
- Quantum meruit is not the governing measure for dividing post-dissolution receipts derived from pre-dissolution firm contingency matters between former partners.
- Professional conduct restrictions aimed at fee-splitting between different firms do not control internal division of fees incident to dissolution where client interests are not shown to be harmed.

## Conclusion

The court held that, without an agreement reallocating fees, contingency-fee recoveries from matters opened before dissolution belong to the dissolved firm and must be divided equally under partnership principles, notwithstanding the firm’s LLC filing and notwithstanding quantum meruit claims for post-dissolution work.


Hurwitz v. Padden, 581 N.W.2d 359 (Minn. Ct. App. 1998)