June 18, 2019

Colorado Supreme Court: Profit from Contingency Fee Case Pending During Law Firm’s Dissolution Must Be Shared

The Colorado Supreme Court issued its opinion in LaFond v. Sweeney on Tuesday, January 20, 2015.

Colorado’s Limited Liability Company Act—CRS § 7-8-404(a)(1)—Contingent Fee—Unfinished Business Rule—No-Compensation Rule.

The Supreme Court held that under the plain language of Colorado’s Limited Liability Company Act (LLC Act), CRS §§ 7-80-101 to -1101, any profit derived from a contingency fee case that is pending upon dissolution of the LLC belongs to the LLC and must be divided between members and managers according to their profit sharing agreement. Members and managers are not entitled to additional compensation for their post-dissolution work winding up the LLC business. This holding derives from (1) the principle that law firms do not end upon dissolution, but extend through the winding-up period; (2) the fiduciary duties of members and managers of an LLC; and (3) the absence of language in the LLC Act granting members and managers the right to additional compensation for their post-dissolution services. Accordingly, the Court affirmed the judgment of the court of appeals.

Summary and full case available here, courtesy of The Colorado Lawyer.

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