Court of Appeals Opinion Reminds Lawyers of Importance of Operating Agreements for Their Own Practices

Ed Gaskins was one of appellants’ attorneys who successfully argued to the Court of Appeals for an order of judicial dissolution of a law firm in the absence of an operating agreement in the case of Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC v. Brewer. The matter presented a number of complex issues, including the valuation of pending contingency fee cases and the interplay between attorneys primarily working on contingency fee matters and others primarily working on hourly rates. One of the core disputes arose over whether the departing members of the firm, the plaintiff-appellants, had withdrawn or whether their departure initiated the dissolution of the firm with the remaining members “winding up” the business for the benefit of each member. This distinction was critical for the departing members to share in the results of the contingent fee cases they had supported with their hourly fees. In the absence of an operating agreement, the Court of Appeals found that the North Carolina Limited Liability Company Act, N.C. Gen. Stat. 57C-6-02, provided a legal remedy judicial dissolution reversed the Business Court’s ruling that the departing members were equitably estopped from denying that they had withdrawn from the firm. The matter is remanded to the Business Court to determine what each member should receive in the dissolution. The Court of Appeals’ February 1, 2011, opinion can be found here. For Lawyers Weekly’s coverage of the case, please click here.