MEMORANDUM AND ORDER

Norma L. Shapiro, S.J.

In October, 1997, John Haymond ("Haymond"), Robert Hochberg ("Hochberg") and Marvin Lundy ("Lundy") formed the law firm of Haymond Lundy, LLP ("HL") to practice law in Philadelphia and the surrounding areas. Lundy had been practicing law in Philadelphia for some time, but his previous law firm had recently been dissolved. Haymond and Hochberg were partners in a Connecticut law firm and wished to expand geographically. Under the Haymond Lundy Partnership Agreement, Hochberg was made the Managing Partner of HL.

HL was dissolved in October, 1999, at which time Haymond and Lundy each filed an action against the other. The actions were consolidated, and the parties were eventually realigned with Haymond as plaintiff.

Lundy, answering Haymond's complaint, asserted a counterclaim against Hochberg for unauthorized practice of law. Lundy argued Hochberg, who has never been admitted to the bar of the Commonwealth of Pennsylvania: (1) failed to apply for readmittance in Pennsylvania after his disbarment in Massachusetts and consequent suspension in Connecticut; and (2) repeatedly misrepresented that he was licensed to practice law in Pennsylvania.

Lundy requested relief in the form of a permanent injunction against Hochberg. The court held a non-jury trial on Lundy's claim against Hochberg. In accordance with Federal Rule of Civil Procedure 52(a), the court enters the following findings of fact and conclusions of law:

I. Findings of Fact:

1. In 1996 Robert Hochberg was licensed to practice law in both Massachusetts and Connecticut. At that time, Hochberg was a partner in John Haymond, P.C. Tr. Jan. 17, 2001, at 64-65. The firm practiced in Massachusetts, Connecticut and New York. Id. Hochberg served as the Managing Partner of that firm. Tr. Jan. 17, 2001, at 66.

2. In 1996, Haymond, Hochberg and Lundy began discussing the formation of a partnership to practice law in the Philadelphia area. Tr. Jan. 17, 2001, at 66-70.

3. On May 7, 1996, Hochberg was indicted by a grand jury of the United States District Court for the District of Massachusetts on two counts of conspiracy to commit bank fraud. Tr. Jan. 17, 2001, at 15; L. Ex. 8.

4. Negotiations between Lundy, Hochberg and Haymond continued over the terms of a partnership to practice law in Philadelphia; at some point in these negotiations, Lundy was informed of Hochberg's indictment. Tr. Jan. 19, 2001, at 129-130.

5. On August 4, 1997, Hochberg pled guilty to one count of the Massachusetts indictment. L. Ex. 19.

6. Haymond, Hochberg and Lundy formed the law firm of Haymond Lundy, LLP in October, 1997. P. Ex. 1.

7. After the formation of Haymond Lundy, LLP, Haymond began using the name Haymond Lundy as a trade name for his Connecticut firm, John Haymond, P.C. The Connecticut firm remained a separate corporate entity. The Connecticut firm will be referred to as John Haymond, P.C. t/a Haymond Lundy, LLP.

8. The Haymond Lundy Partnership Agreement provided that Hochberg would hold a ten-percent interest in HL. P. Ex. 1., § 3.01. It also provided that Hochberg would serve as Managing Partner of HL. P. Ex. 1., § 5.02. He was to supervise the "day-to-day business and administration of the Partnership." Id. After HL's formation, Hochberg worked at the Philadelphia office of HL two or three days per week. Tr. Feb 21, 2001, at 130-31.

9. Robert Hochberg is not now, nor has he ever been, licensed to practice law in the Commonwealth of Pennsylvania. Tr. Jan. 17, 2001, at 15.

10. Hochberg's name was listed among the attorneys on the sign outside HL's office at 1600 Market Street, Philadelphia, PA. L. Ex. 25; Tr. Jan. 31, 2001, at 10-11 156. The sign did not specify the jurisdictions in which he was authorized to practice law, nor that he was not licensed to practice law in the Commonwealth of Pennsylvania. L. Ex. 25.

11. As the firm's Managing Partner, Hochberg directed the lawyers at HL. He assigned attorneys to cases and directed when certain actions should be taken with regard to cases. See, e.g., Tr. Jan. 31, 2001, at 154-56 (Hochberg directed an attorney not to pursue post-trial motions and instituted a policy that all attorneys should immediately file suit in client cases involving a specific insurance company.). He occasionally attended morning meetings at which the status of HL cases was discussed. When participating in these meetings, Hochberg gave his advice and opinion on case management and strategy. Tr. Jan. 31, 2001, at 11-14, 141-42.

12. Former associates at HL testified that they felt obligated to follow Hochberg's recommendations on litigation strategy because Hochberg was the Managing Partner. Tr. Jan. 31, 2001, at 45 142-43.

13. On November 17, 1997, Hochberg was sentenced in Massachusetts on his plea of guilty to a conspiracy count; he received three years probation, and was required to pay restitution of $71,500 and a fine of $50. Tr. Jan. 17, 2001, at 15.

14. On November 18, 1997, the Massachusetts Supreme Court issued an order disbarring Hochberg. Tr. Jan. 17, 2001, at 15.

15. After his disbarment in Massachusetts, Hochberg's name was removed from the Massachusetts office letterhead of John Haymond, P.C. t/a Haymond Lundy. Tr. Feb 22, 2001, at 23 25. The lawyers in that office were instructed that Hochberg was not to be involved in cases or talk to clients. Tr. Feb 22, 2001, at 23.

16. On November 26, 1997, the Statewide Grievance Committee for the State of Connecticut, initiated an action to discipline Hochberg for his Massachusetts conviction. L. Ex. 44, at 1-2.

17. On April 17, 1998, Hochberg's license to practice law in Connecticut was suspended on an interim basis. L. Ex. 44, at 4; Tr. Jan. 17, 2001, at 92.

18. In response to his suspension in Connecticut, a meeting was held at the Connecticut office of John Haymond, P.C. t/a Haymond Lundy, and steps were taken to ensure that Hochberg's name would not appear on the Connecticut office's letterhead and that he would not have contact with clients. Tr. Feb. 22, 2001, at 26. Haymond also notified the banks that handled the accounts for the Connecticut and Massachusetts offices and asked that Hochberg's name be removed from those accounts. Tr. Feb. 22, 2001, at 27.

19. On the date of his suspension in Connecticut, Hochberg transferred his interest in HL to Haymond under a Conditional Agreement dated November 29, 1997. Tr. Jan. 17, 2001, at 91-92; Tr. Feb. 21, 2001, at 127; P. Ex. 49.

20. Hochberg knew that, after the suspension of his license to practice in Connecticut, he was no longer permitted to practice law in any jurisdiction. Tr. Feb 21, 2001, at 127. Hochberg was also aware that he was neither an owner, nor a partner of HL after his Connecticut license was suspended. Tr. Feb 21, 2001, at 127.

21. No meeting with HL's staff was ever held to discuss his disbarment in Massachusetts or suspension in Connecticut, nor was he removed as a signatory on the Philadelphia or New Jersey bank accounts. Tr. Feb. 22, 2001, at 27-28.

22. Hochberg continued to work at the Philadelphia office two or three days a week. Tr. Feb 21, 2001, at 130-31.

23. Throughout his suspension and disbarment, Hochberg's name continued to appear on the sign listing the lawyers of HL outside the entrance to its Philadelphia office. Tr. Jan. 31, 2001, at 12 156; Tr. Feb. 21, 2001, at 131.

24. Hochberg's name also continued to appear on HL letterhead with the designation "CT," as if he were licensed to practice law in the state of Connecticut. Tr. Jan. 31, 2001, at 77-78. He wrote to other attorneys on this letterhead during his suspension. See, e.g., L. Ex. 98.

25. Hochberg signed marketing agreements, leases and other business documents on behalf of HL as "Managing Partner" or as a "partner." Tr. Feb. 21, 2001, at 48, 131-37, 140-41.

26. Hochberg led the employees of HL to believe he remained Managing Partner. Tr. Feb. 21, 2001, at 163; Tr. Jan. 22, 2001, at 204.

27. HL moved to new offices in January, 1999, and Hochberg received new business cards reflecting the change of address. Tr. Jan. 31, 2001, at 59-65. These business cards listed his position as Managing Partner. L. Ex. 204. The cards did not list where, if anywhere, Hochberg was licensed to practice law. L. Ex. 204.

28. Hochberg had contact with at least a few clients while serving as Managing Partner of HL in Philadelphia:

A. In August, 1998, Michelle Dell'Orefice was assigned to review a distribution statement with a client named Peter Dugan. Tr. Feb. 21, 2001, at 79-80. The client was dissatisfied with the distribution statement and demanded to see an attorney; Dell'Orefice asked Hochberg to speak with Dugan. Tr. Feb. 21, 2001, at 81. Hochberg assured the client HL would attempt to renegotiate a medical bill with a doctor and, if successful, would send the client the balance of the money. Tr. Feb. 21, 2001, at 85.

B. In the Spring of 1999, Hochberg had telephone contact with a client, Jason Greer, who wanted to sell the rights to his portion of a judgment, then on appeal, in order to receive money immediately. Tr. Jan. 31, 2001, at 143-44. Greer needed information from HL in order to complete the sale. Tr. Jan. 31, 2001, at 144. Hochberg contacted both Greer and the attorney representing the judgment purchaser. Tr. Jan. 31, 2001, at 144; Dep. of Timothy Foley, at 16-18. This attorney believed Hochberg was an attorney representing Greer. Dep. of Timothy Foley, at 20-21.

29. Lundy produced evidence that Hochberg had contact with other attorneys on behalf of H L; Hochberg wrote to an attorney in Florida to finalize referral of an HL client to the Florida attorney for a referral fee of 25%. L. Ex. 98.

30. In July, 1999, a Connecticut court clarified the duration of Hochberg's suspension. The court ordered Hochberg suspended from the practicing law in Connecticut for three years, from November 18, 1997. L. Ex. 44. at 8.

31. Lundy dissolved HL in October, 1999.

32. Haymond formed a new firm, Haymond Napoli Diamond, P.C. ("HND-PA"). Hochberg initially became the "manager" of this new firm. P. Ex. 75. He never received business cards that listed his position as the "manager" of this law firm. Tr. Feb. 23, 2001, at 185.

33. Sometime after November 22, 2000, Hochberg was made a shareholder of HND-PA. Tr. Feb. 23, 2001, at 165-66. He reassumed the title Managing Partner in December, 2000. Tr. Feb. 23, 2001, at 166.

34. In December, 2000, Hochberg ordered new business cards. Tr. Feb. 23, 2001, at 162. Those cards listed his position as Managing Partner of HND-PA above the firm's Pennsylvania and Connecticut addresses. L. Ex. 208. The cards did not state where Hochberg is admitted to practice law. L. Ex. 208.

35. Hochberg now maintains a residence in Philadelphia. Tr. Feb. 23, 2001, at 149. His future plan is to work at the Philadelphia office of HND-PA a few days every other week. Tr. Feb 23, 2001, at 151.

36. In February, 2001, the Connecticut court issued an order of reinstatement, confirming Hochberg's status as a member of the bar of the state of Connecticut. C.D. Ex. 18; Tr. Feb. 23, 2001, at 163.

37. Robert Hochberg's testimony was only partially credible. His testimony that he repeatedly attempted to remove his name from the letterhead of the Philadelphia firm after his suspension, Tr. Feb. 21, 2001, at 162, Tr. Feb. 22, 2001, at 34-37, was not credible. This testimony was impeached by the credible testimony of Bernetta Henri and Dawn Kemp, former office assistants at HL. Tr. Jan. 31, 2001, at 77-78; Tr. Jan. 22, 2001, at 204-208. The documentary evidence introduced at trial supported the testimony of Bernetta Henri and Dawn Kemp. L. Ex. 84; L. Ex. 76.

38. Scott Diamond's testimony that he told either Dawn Kemp or Bernetta Henri, and Hochberg to remove Hochberg's name from HL stationery, Tr. Jan. 22, 2001, at 220, was not credible. It was contradicted by the testimony of Dawn Kemp and Bernetta Henri, as well as the testimony of Hochberg. Tr. Jan. 22, 2001, at 209; Tr. Jan. 31, 2001, at 77-78.

39. John Haymond's testimony was only partially credible. His testimony on Hochberg's role in the Philadelphia law firm was inconsistent. At the jury trial, Haymond testified that Hochberg was to do the same thing at the Philadelphia firm as he had been doing in Connecticut. Tr. Jan. 17, 2001, at 78; see also Tr. Jan. 18, 2001, at 20-21. He then testified that in Connecticut, Hochberg had been responsible for, among other things, "dealing with the lawyers . . . and . . . the financial aspects of running the law firm." Tr. Jan. 17, 2001, at 66. Later in his testimony, he narrowed his description of Hochberg's duties and claimed he was only the "financial manager of the office and [that] his duties [bore] no relationship to him being a lawyer." Tr. Jan. 17, 2001, at 94. At the non-jury trial, Haymond testified that Hochberg's duties in Connecticut included assigning cases to attorneys, supervising the attorneys and discussing the progress of their cases with them. Tr. Feb 22, 2001, at 7. Finally, at his deposition, Haymond had testified that in Connecticut Hochberg also reviewed medical documents, gave attorneys advice on litigation strategy and valued cases. Tr. Jan. 18, 2001, at 20. Haymond's testimony that Hochberg merely dealt with financial matters is also contradicted by the credible testimony of Tom Masterson, which supports Haymond's deposition testimony that Hochberg directed the Philadelphia attorneys at HL on legal matters. Tr. Jan. 31, 2001, at 154.

40. Tom Masterson was an associate at HL. He testified to Hochberg's practices as Managing Partner. Although he now works for Marvin Lundy, his testimony was credible. His demeanor suggested credibility and his testimony was supported by the testimony of Donald Marino and, in part, by the testimony of Hochberg and Haymond.

41. Donald Marino's testimony regarding Hochberg's role in HL was credible, Tr. Jan. 31, 2001, at 11-14 44-45; it was supported by the testimony of Tom Masterson. Tr. Jan. 31, 2001, at 154 157. Marino's testimony that he did not know Hochberg was not licensed to practice in Pennsylvania, Tr. Jan. 31, 2001, at 16, was not credible. This testimony was impeached by the substantial amount of evidence documenting Hochberg being listed on HL's letterhead as licensed to practice only in Connecticut. See, e.g., L. Ex. 98; P. Ex. 25.

42. Linda Mirow's testimony was not credible. Mirow testified that Hochberg confided in her his plan to remove Lundy from the law firm, but that she never informed Lundy of Hochberg's plan. Tr. Feb. 21, 2001, at 52-58. This testimony was inconsistent with her deposition testimony, Tr. Feb. 21, 2001, at 61-64, and self-contradictory. She maintained that she felt extremely loyal to Mr. Lundy, Tr. Feb. 21, 2001, at 58-59, yet could not credibly explain why she did not tell Lundy of Hochberg's supposed plan to force him out of Haymond Lundy. See Tr. Feb 21, 2001, at 65-66 (Personal relationship with Hochberg played no role in her decision not to tell Lundy of Hochberg's alleged plan to replace him). No weight was given to this testimony.

43. Michelle Dell'Orefice's testimony regarding Hochberg's contact with Peter Dugan was credible; it was substantially corroborated by Hochberg and in accord with the credible testimony of Tom Masterson.

44. Steven Perna, an agent of HL's landlord at Seven Penn Center, testified credibly that Hochberg introduced himself as the Managing Partner of HL. Tr. Feb. 21, 2001, at 39-40. Hochberg never clarified that he was not an attorney. Tr. Feb. 21, 2001, at 43-44. His testimony was supported by Hochberg's trial testimony and the evidence that Hochberg signed the lease for HL's office space as Managing Partner. Tr. Feb. 21, 2001, at 43, 48.

45. Jeffrey Lundy, a Pennsylvania attorney, testified that he believed that Hochberg was a Pennsylvania attorney based on his demeanor and authority in the firm. Dep. at 18 22. This deposition testimony was credible under the circumstances.

46. David Easterly's testimony was contradicted by Hochberg's testimony and was not credible. It was not given weight.

47. The testimony of Frank Bass was not credible. Bass, who currently works for Marvin Lundy, is facing civil charges of unauthorized practice of law brought by John Haymond, Robert Hocheberg's best friend and partner. Tr. Feb. 21, 2001, at 98. His testimony was given no weight by the court.

48. Arlin Adams, Esq., testified to the customs and practices of the local legal community. See, e.g., Tr. Feb. 23, 2001, at 92 (It is the customary practice in Philadelphia for an attorney to resign his position once suspended from the practice of law). The court finds his testimony very credible. Some of his testimony focused on the applicable legal standards. See, e.g., Tr. Feb 23, 2001, at 66-69. Such testimony is not binding on the court.

II. Discussion

The court has supplemental jurisdiction over this matter under 28 U.S.C. § 1367; the court found this matter sufficiently related to the other claims of Haymond and counterclaims of Lundy that they formed part of the same case and controversy. See Haymond v. Lundy, No. 99-5048, 2000 WL 1824174, * 2 (E.D.Pa. Dec. 12, 2000).

Citing Colorado River Water Conservation Dist. v. Environmental Defense Fund, 424 U.S. 800 (1976), Hochberg argued, prior to trial, that this court should abstain from adjudicating this matter. The court declined to abstain. The question presented is not novel; the Supreme Court of Pennsylvania has addressed the issue at least twice. See Shortz v. Farrell, 193 A. 20 (1937); Dauphin County Bar Ass'n v. Mazzacaro, 351 A.2d 229 (1976). Other federal courts have addressed this issue in the past. See, e.g., In re Stone, 166 B.R. 269, 274 (W.D.Pa. Bankr. 1994).

B. Unauthorized Practice of Law

In Pennsylvania, an "attorney at law" is a person "admitted to the bar of the courts of this Commonwealth." 42 Pa. Cons. Stat. Ann. § 2521. The unauthorized practice of law is statutorily defined:

any person . . . who within this Commonwealth shall practice law, or who shall hold himself out to the public as being entitled to practice law, or use or advertise the title of lawyer, attorney at law, attorney and counselor at law, counselor, or the equivalent in any language, in such a manner as to convey the impression that he is a practitioner of the law of any jurisdiction, without being an attorney at law.

42 Pa. Cons. Stat. Ann. § 2524(a). This statute governs the conduct of "any person" not licensed to practice law in the Commonwealth of Pennsylvania while in Pennsylvania.

Title 15 Pa. Cons. Stat. § 8105, provides, "all the partners in a partnership that renders one or more restricted professional services shall be licensed persons." 15 Pa. Cons. Stat. Ann. § 8105; see also 15 Pa. Cons. Stat. Ann. § 8903 (A law firm is a partnership to render a professional service). A licensed person is a "person who is duly licensed or admitted to practice his profession by a court, department, board, commission of this Commonwealth or another jurisdiction to render [the] professional service." 15 Pa. Cons. Stat. Ann. § 8903

Lundy asserts that § 8105 permits an attorney, not licensed in the Commonwealth, but licensed in another state, to practice law in Pennsylvania if he or she is a partner in a Pennsylvania law firm, and subjects the attorney to the Rules of Disciplinary Enforcement and Code of Professional Conduct (collectively "disciplinary rules") applicable to lawyers licensed in the Commonwealth. Lundy contends Hochberg was authorized to practice law in Pennsylvania up until the date of his suspension in Connecticut, and that, upon his suspension, he was required to abide by Pennsylvania's disciplinary rules applicable to an attorney suspended from the practice of law. Rule 217 of the Pennsylvania Rules of Disciplinary Enforcement requires an attorney suspended from the practice of law to notify: (1) all clients; (2) opposing counsel; (3) all persons to whom he or she owes a fiduciary duty; and (4) all professional contacts who might infer the attorney remains in good standing. At the conclusion of the suspension, the attorney must apply for reinstatement under Rule 218.

Lundy asserts that because Hochberg failed to abide by the Rules of Disciplinary Enforcement, he has been unauthorizedly practicing law in the Commonwealth since the date of his suspension. Lundy seeks an injunction: (1) requiring Hochberg to comply with the Pennsylvania disciplinary rules for suspended attorneys; and (2) forbidding him from practicing law in Pennsylvania until he is readmitted by the appropriate Pennsylvania disciplinary authority.

Lundy's reading of § 8105 is untenable. Section 8105 does not authorize an attorney licensed in another state to practice law in Pennsylvania simply because he or she is a partner in a Pennsylvania law firm. The statute does not address the practice of law; it merely permits a non-Pennsylvania lawyer to be a partner and share profits in a Pennsylvania law firm. See Washko v. Platz, 534 A.2d 522, 524 (Pa.Super.Ct. 1987) ("an attorney licensed to practice law only in a sister state is prohibited from practicing law in Pennsylvania unless a license to practice law in Pennsylvania is obtained); see also Pa. Bar Assoc. Op. 92-19("There is no indication and no requirement that all the attorneys sharing in the firm be licensed in Pennsylvania.").

Section 8105 does not subject an attorney who is a partner in a Pennsylvania law firm, but not licensed in Pennsylvania, to the disciplinary authority of the Pennsylvania Supreme Court. Nowhere does the statute mention the disciplinary rules, and Lundy's reading of the statute contradicts the jurisdictional provision of the rules themself. Rule 201 of the Pennsylvania Rules of Disciplinary Enforcement states that the rules govern:

(1) Any attorney admitted to practice in this Commonwealth.

(2) Any attorney of another jurisdiction specially admitted by a court of this Commonwealth for a particular proceeding.

Pa. R. Disciplinary Enforcement 201(a)(1)-(2).

There is some argument that Rule 201(a)(3) makes the disciplinary rules applicable to an attorney, like Hochberg, who was admitted only in another jurisdiction and then suspended from practice there. Rule 201(a)(3) states that the disciplinary rules govern "[a]ny formerly admitted attorney, with respect to acts prior to suspension, disbarment, or transfer to inactive status, or with respect to acts subsequent thereto which amount to the practice of law." Read in isolation, this subsection provides that the Pennsylvania Rules of Disciplinary Procedure govern attorneys admitted in other jurisdictions only if they have been disbarred or suspended in that jurisdiction, and then regardless of whether they had ever practiced in or even traveled to Pennsylvania, an unlikely result. It would require a disbarred or suspended attorney, never admitted in Pennsylvania to apply for "readmission," a contradiction in terms. Despite the plain reading of this clause when isolated, the court finds the term "formerly admitted attorney" refers only to attorneys previously admitted to practice in the Commonwealth. See Pa. R. Disciplinary Enforcement 201(a)(1).

Title 42 Pa. Cons. Stat. Ann. § 2524 governs Hochberg's situation. settlement negotiations has been held to require the application of abstract legal principles and constitute the practice of law. See Dauphin County, 351 A.2d at 233-34.

Hochberg maintains that his work in Pennsylvania as Managing Partner did not, and does not, involve the practice of law. The evidence shows that Hochberg, as Managing Partner, supervised and directed the attorneys in the Philadelphia office. He decided which cases should be assigned to which attorney and directed the litigation strategy of the attorneys in HL, including whether to file suit, when to file suit, and whether to appeal. See Tr. Jan. 31, 2001, at 154-56. He implemented a policy requiring all attorneys to file suit immediately in cases involving a particular insurance company. See Tr. Jan. 31, 2001, at 155-56. Such decisions require the decisionmaker to analyze the complexity of the client's case and determine the likelihood of success under applicable legal standards: making these decisions constitutes the practice of law. See Dauphin County, 351 A.2d at 234 ("Such an assessment . . . involves an understanding of the applicable tort principles . . ., a grasp of the rules of evidence, and an ability to evaluate the strengths and weaknesses of the client's case vis a vis that of the adversary."). Hochberg also acknowledges that he was the business manager of HL, in charge of "financial decisions." Making financial decisions on behalf of a law firm can require legal judgment when the decisions directly inform and influence how an attorney proceeds with litigation. For example, Masterson testified that Hochberg made decisions about which cases to "fund". Hochberg was involved in "[e]ssentially anything having to do with money for experts, anything having to do with a particular case that we would invest a lot of money in." Tr. Jan. 31, 2001, at 140; see also Tr. Jan. 31, 2001, at 154-55 (Hochberg directed Masterson not to pursue post-trial motions in a case because he did not wish HL to pay for the trial transcript).

The decisions whether to provide the money to hire an expert, send the client for a medical consultation, take a certain number of depositions are not simply financial decisions; they are litigation decisions. Making these decisions on behalf of Pennsylvania clients requires an understanding of the Pennsylvania rules of evidence and Pennsylvania tort law. Such decisions must be made by attorney, or a client in consultation with an attorney. An attorney making such decisions is engaged in the practice of law. See Dauphin County, 351 A.2d at 233-34 (Where "an assessment of the likelihood that liability can be established in a court of law" is a crucial factor in making a decision, making the decision constitutes the practice of law.).

Hochberg engaged in the unauthorized practice of law in Pennsylvania before his suspension in Connecticut and during the period of that suspension. He has acted as an attorney in Pennsylvania regularly, but he is not and never has been licensed to practice law in Pennsylvania. B. Holding Oneself out as an Attorney:

Under § 2524, it is unlawful for someone not licensed in Pennsylvania to hold himself or herself out to the public of the Commonwealth as authorized to practice law. This statute safeguards members of the public from being deceived by assuring them that one who holds himself out as authorized to practice law in the Commonwealth has the expert knowledge required to attain and maintain membership in the bar here. See Dauphin County, 351 A.2d at 232 ("When a person holds himself out to the public as competent to exercise legal judgment [in this jurisdiction], he implicitly represents that he has the technical competence . . . and the requisite character qualifications to act in a representative capacity [here]. When such representations are made by persons not adequately trained or regulated, the dangers to the public are manifest.").

In Ginsburg v. Kovrak, 11 Pa. D. C. 2d 615, 617 (Phila. Cty. Ct. 1957), Judge Curtis Bok held that an attorney licensed to practice law in the District of Columbia and certain federal courts, including some in Pennsylvania, violated an earlier form of this statute by holding himself out to the public of the Commonwealth as an attorney. The attorney's stationery, office sign, and business cards stated only that he was an "Attorney at Law" and listed a Philadelphia address. See id. at 616.

Similarly, Hochberg's business cards from Haymond Lundy, LLP and the sign that hung outside HL's Philadelphia office failed to state the jurisdictional limitations of his practice. They announced only that he was Managing Partner of a Philadelphia law firm; they conveyed the impression that he was authorized to practice law in the Commonwealth.

To avoid such a misrepresentation, the Rules of Professional Conduct curtail the ability of firms to use letterhead stationery listing attorney names unless the stationery also lists the jurisdictional limits of the attorneys' practice. See, e.g., Pa. R. Prof. Conduct 7.5 ("A law firm with offices in more than one jurisdiction may use the same name in each jurisdiction, but identification of the lawyers in an office of the firm shall indicate the jurisdictional limitations on those not licensed to practice in the jurisdiction where the office is located). The same is logically required of business cards and signs. See Ginsburg, 11 Pa. D. C. 2d 615; cf. Pa. R. Prof. Conduct 7.1 (A Pennsylvania attorney is prohibited from making false or misleading communications about his or her services). If an attorney's name is presented along with an office address in Pennsylvania and he is not licensed to practice in the Commonwealth, the instrument should specify the jurisdictional limits of the attorney's practice. See id.

In addition, on at least two occasions, Hochberg interacted with Pennsylvania clients of HL in a manner that suggested he was authorized to practice in the Commonwealth. In August, 1998, Michelle Dell'Orefice was assigned to review a distribution statement with a client named Peter Dugan. Tr. Feb. 21, 2001, at 79-80. The client was unsatisfied with the distribution and demanded to see an attorney; Dell'Orefice asked Hochberg to speak with Dugan. Tr. Feb. 21, 2001, at 81. Hochberg assured the client the firm would attempt to renegotiate a medical bill with a doctor and, if successful, the client would receive the remainder of the money. Tr. Feb. 21, 2001, at 85. Given the circumstances, it was reasonable for Dugan to conclude that Hochberg was an attorney in Pennsylvania. Hochberg never clarified his role or the jurisdictional limits of his practice with Dugan.

Hochberg also had contact with a firm client named Jason Greer. Greer wanted to sell his portion of his judgment, then pending on appeal in the Commonwealth Court, in order to receive cash immediately. Tr. Jan. 31, 2001, at 146-47. In the spring of 1999, Hochberg had telephone contact with Greer and the attorney representing the purchaser of Greer's judgment. Tr. Jan. 31, 2001, at 143-44. Greer needed information in order to arrange for the sale. Tr. Jan. 31, 2001, at 144. Based on his interactions with Hochberg, the purchaser's attorney believed Hochberg was representing Greer. Dep. of Timothy Foley, at 20-21. It can be inferred that the HL client, Jason Greer, similarly concluded that Hochberg was authorized to act as an attorney in the Commonwealth. Hochberg held himself out as authorized to practice law in the Commonwealth.

The question of the rights and responsibilities of an attorney operating in a jurisdiction in which he or she is not licensed to practice is the subject of national debate. The heightened attention stems from the perception that it is now increasingly common for an attorney to practice law in jurisdictions in which he or she is not a member of the bar, despite rules prohibiting such practice. See Diane L. Babb, Take Caution When Representing Clients Across State Lines: The Services Provided May Constitute Unauthorized Practice of Law, 50 Ala. L. Rev. 535, 535 (1999) ("Attorneys engage in the unauthorized practice of law on a daily basis."). Proponents of reform of the rules prohibiting such practice claim that adequately representing clients in the modern, business economy requires an attorney to practice nationally. See id.

The American Bar Association ("ABA") is currently undertaking a comprehensive review of law governing multi-jurisdictional practice. The President of the ABA has appointed a Commission to study the issue and its ethical implications and develop a report and recommendation addressing how to regulate multi-jurisdictional practice. See ABA Commission on Multijurisdictional Practice, available at_www.abanet.org/cpr/mjp-home.html. The Commission is considering safe harbor provisions for: (1) persons admitted pro hac vice; (2) work prior to expected pro hac vice admission; (3) in-house counsel; (4) work performed in connection with local counsel; and (5) work performed in connection with the representation of a client from the state in which the attorney is licensed. See id. The Commission is also attempting to outline what actions should be forbidden, it has suggested that establishing an office in a state in which the attorney is not admitted to the bar may be proscribed.

Additionally, the ABA's comprehensive reevaluation of its Model Code of Professional Responsibility, the Ethics 2000 project, has recommended changes to address multi-jurisdictional practice. The amendments would permit an attorney licensed in one state to practice in another if the attorney is: (1) preparing for a proceeding in which he or she expects to be admitted pro hac vice; (2) acting on behalf of a client of whom he is an employee; (3) handling a matter "reasonably related" to his practice on behalf of a client in a jurisdiction where the lawyer is licensed; and (4) acting in conjunction with an attorney licensed in the jurisdiction with whom he is associated, so long as the local attorney is not merely serving as a conduit. See Model Rule 5.5, American Bar Association, Report of the Commission on Evaluation of the Rules of Professional Conduct, available at www.abanet.org/cpr/ethics2k.html.

This court must decide this action on present Pennsylvania law, and take custom and practice into account only to the extent it does not conflict with the decisional law. But the growing conflict itself supports this court's adherence to the standard articulated in Ginsburg and its finding that Hochberg unlawfully held himself out as licensed to practice in the Commonwealth. At a minimum, protection of the public requires that the members of the public be made aware of the credentials of any attorney in order to make an informed choice about his or her representation. Cf. Ohio Bd. of Grievances Discipline, Op. 90-12 (attorney must make full disclosure of jurisdictional limitations of practice). An attorney has a duty to make all members of the public with whom he or she interacts professionally aware of his or her credentials. Any misleading, or even ambiguous, presentation of the attorney's name should be clarified by an unambiguous statement of the attorney's qualifications in order to prevent this allegedly "common practice" from becoming routinely deceptive.

C. The Propriety of an Injunction:

Lundy seeks a permanent injunction precluding Hochberg from practicing law in Pennsylvania or holding himself out as authorized to practice law in the Pennsylvania unless and until he acquires a license to practice law in the Commonwealth. Hochberg contends that even if found to have violated § 2524 in the past, there is no evidence that violations will continue in the future, so issuance of an injunction is unnecessary and improper.

An injunction may only be issued if the unlawful actions are likely to recur; an injunction is inappropriate if the possibility of future harm is purely speculative. See City of Los Angeles v. Lyons, 461 U.S. 95, 101-02 (1983) (citations omitted). The decision whether injunctive relief is appropriate is analogous to Securities Exchange Commission actions seeking injunctive relief for violations of SEC rules. In such cases, the court must assess the likelihood of future violations, and the propriety of issuing an injunction, by evaluating the totality of the circumstances surrounding the violations, including: (1) the degree of scienter involved; (2) the isolated or recurrent nature of the violation; (3) the defendant's recognition of the wrongfulness of the conduct; (4) the likelihood, given the defendant's professional occupation, of future violations; and (5) the sincerity of his assurances against future violations. See SEC v. Bonastia, 614 F.2d 908, 912 (3d Cir. 1980) (citations omitted).

Hochberg knew that aspects of his behavior were inappropriate; he acknowledged that he should not have been signing documents as Managing Partner when he was not licensed to practice law. Tr. Feb. 21, 2001, at 127. He was aware, as a general matter, that an attorney may not routinely involve himself in Pennsylvania litigation if he is not licensed to practice in the Commonwealth. Yet the evidence shows recurrent violations of § 2524.

Hochberg testified that, since the filing of this lawsuit, he has not engaged in any unlawful conduct. He stated he has not met with clients, participated in decisions concerning settlement or intake, or advised the HND attorneys on case strategy. Tr. Feb. 23, 2001, at 152-53.

Hochberg's denials seem credible in light of his testimony that he has spent very little time in Pennsylvania since the initiation of the lawsuit. However, his future plan is to come more frequently to the Pennsylvania office of Haymond Napoli Diamond, P.C. He testified that he intends to work in the firm's Philadelphia office approximately three days every two weeks. Tr. Feb. 23, 2001, at 151. Hochberg did not specifically testify that he intended to continue to limit the scope of his work at the Philadelphia firm in the future. Indeed it will be difficult for Hochberg to do so.

A number of the former associates of HL now work at HND-PA. These attorneys are accustomed to requesting advice from Hochberg on litigation strategy and may look to him to supervise their work. Under these circumstances, a reasonable likelihood exists that Hochberg will unauthorizedly practice law or hold himself out as able to practice law in the Commonwealth unless enjoined. Injunctive relief is appropriate.

A permanent injunction will prohibit Robert Hochberg from: (1) practicing law in Pennsylvania; or (2) holding himself out as licensed to practice law in Pennsylvania by listing himself as an attorney or noting his association with HND, or any other Pennsylvania law firm, on any instrument in Pennsylvania or subject to distribution in Pennsylvania, including, but not limited to, business cards, signs, or stationery, without clearly stating that he is "not licensed to practice in Pennsylvania," unless and until he either obtains the permission of a court to serve as an attorney in particular matter pending before it or gains admission to the bar of this Commonwealth.

III. Conclusions of Law:

1. This matter is governed solely by the 42 Pa. Cons. Stat. Ann. § 2524.

2. Hochberg unauthorizedly practiced law in Pennsylvania, both before and after the Connecticut court suspended his license to practice law in that state.

3. Hochberg unauthorizedly held himself out as an attorney licensed to practice law in the Commonwealth of Pennsylvania both before and after the Connecticut court suspended his license to practice law in that state.

4. Issuance of an injunction is appropriate.

5. The court will issue a permanent injunction prohibiting Robert Hochberg from: (1) practicing law in Pennsylvania; or (2) holding himself out as licensed to practice law in Pennsylvania by listing himself as an attorney or noting his association with HND, or any other Pennsylvania law firm, on any instrument in Pennsylvania or subject to distribution in Pennsylvania, including, but not limited to, business cards, signs, or stationery, without clearly stating that he is "not licensed to practice in Pennsylvania," unless and until he either obtains the permission of a court to serve as an attorney in particular matter pending before it or gains admission to the bar of this Commonwealth.

ORDER OF PERMANENT INJUNCTION

MEMORANDUM AND ORDER

Procedural History

In his complaint, Haymond asserted claims on behalf of himself and his new law firm, Haymond Napoli Diamond, P.C.-CT ("HND-CT"), against Lundy for anticipatory breach of the Haymond Lundy Partnership Agreement ("Partnership Agreement" or the "Agreement"), Lanham Act violations, unfair competition, tortious interference and breach of fiduciary duty. Haymond alleged that Lundy repudiated the dissolution provision of the Partnership Agreement and then, in contravention of that provision, solicited former clients of HL. Haymond also alleged that Lundy used false and misleading information in those solicitations and tortiously interfered with Haymond's prospective contractual relationships with the former clients. Finally, Haymond alleged that Lundy delayed the distribution of certain funds until after he had dissolved HL because if received during the term of the partnership the funds would have been paid to the partnership, but if received after dissolution they were payable to Lundy alone.

Lundy asserted claims against Hochberg for unauthorized practice of law, against Haymond and Hochberg for negligent misrepresentation, breach of fiduciary duty, fraud, fraud in the inducement, aiding and abetting fraud, conspiracy to commit fraud, and breach of the Partnership Agreement, and against Haymond, Hochberg, and John Haymond, P.C. t/a Haymond Lundy, LLP for civil RICO and RICO conspiracy. Lundy, amending his complaint, added Scott Diamond and Haymond's new law firm, HND-CT, as defendants and asserted an additional claim against Haymond and Diamond for aiding and abetting and conspiracy to commit Hochberg's unauthorized practice of law. Lundy alleged that Haymond and Hochberg: (1) induced him to enter the Partnership Agreement by concealing Hochberg's pending conviction for bank fraud; (2) failed to inform him of Hochberg's disbarment in Massachusetts, consequent suspension in Connecticut, and the transfer of his partnership interest to Haymond; (3) permitted Hochberg to continue practicing law and serving as managing partner of HL despite disbarment in Massachusetts and suspension in Connecticut; and (4) conspired to steal his practice, property and reputation, with the aid of Diamond, a HL associate in whom Lundy had placed great trust.

Cross-motions for temporary restraining orders and preliminary injunctions were denied on October 15, 1999. The actions were consolidated under Civil Action Number 99-5048, in which Lundy was plaintiff. With the consent of the parties, Martin Heller, Esq. was appointed special master to facilitate the division of the cases and distribution of files post-dissolution, and participate in negotiations concerning the lease of the space formerly occupied by HL. See Orders, Oct. 25, 1999 Nov. 9, 1999.

Each party filed a motion to dismiss. The cross-claims for breach of fiduciary duty were dismissed because the action sounded in contract, not tort. See Haymond v. Lundy, No. 99-5015 99-5048, 2000 U.S. Dist. LEXIS 8585, * 22-25 42-44 (E.D.Pa. June 22, 2000). Lundy's RICO, fraud and negligent misrepresentation claims were dismissed because Lundy admitted that during the partnership negotiations with Haymond and Hochberg his attorney learned of Hochberg's pending indictment for bank fraud. See id. at 11-22. His attorney's knowledge was imputed to Lundy. See id. at 14-15. Once he knew of the indictment, Lundy could not have reasonably relied on any misrepresentation made by Hochberg and Haymond about the indictment's insignificance or its probable lack of effect on Hochberg's licenses to practice law. See id. at 15-16, 18-19, 22.

After the court ruled on the cross-motions to dismiss, Lundy voluntarily dismissed the two remaining counts of his first amended complaint and filed a notice of appeal. Because the cases had been consolidated, the court found that Lundy had prematurely appealed from a non-final order and held it retained jurisdiction to proceed on Haymond's counterclaims. The parties were realigned with Haymond as plaintiff.

In his answer to Haymond's complaint, Lundy asserted three counterclaims: (1) unauthorized practice of law against Haymond, Hochberg, Diamond, and HND-CT; (2) breach of contract against Haymond and Hochberg; and (3) civil conspiracy against Haymond, Hochberg, Diamond, and HND-CT. The claim against Haymond and Diamond for aiding and abetting and conspiracy to commit the unauthorized practice of law was dismissed. See Haymond v. Lundy, No. 99-5048, 2000 U.S. Dist. LEXIS 17879, *6 (E.D.Pa. Dec. 12, 2000).

At the close of discovery, the parties filed cross-motions for summary judgment. The court found that certain Lundy statements alleged to have misled former HL clients were not deceptive as a matter of law and granted Lundy summary judgment on all but one of Haymond's Lanham Act and unfair competition claims. See Haymond v. Lundy, No. 99-5048, 2001 U.S. Dist. LEXIS 54 (E.D.Pa. Jan. 5, 2001). The court, finding that Lundy did not allege an underlying tort, proof of which is required to uphold a finding of civil conspiracy, granted Haymond summary judgment on Lundy's civil conspiracy counterclaim. See Haymond v. Lundy, No. 99-5048, 2001 U.S. Dist. LEXIS 630 (E.D.Pa. Jan. 29, 2001).

Each party's breach of contract claim remained, as did Haymond's claims for violation of the Lanham Act and tortious interference and Lundy's counterclaim against Hochberg for unauthorized practice of law. The court determined the tort claims should be severed and stayed pending the outcome of a trial on the cross-claims for breach of contract, and that the trial of the contract claims should be bifurcated.

A trial by jury on contractual liability commenced on January 16, 2001. At trial, Haymond alleged that Lundy breached Partnership Agreement § 3.02 requiring Lundy to use his best efforts to obtain as large a percentage of the MLL fees as possible for the benefit of the partnership. The MLL fees were portions of the fees obtained by Lundy or his former partner, Donald Manchel ("Manchel"), for successfully litigating or settling cases of their former firm, Manchel, Lessin Lundy ("MLL"), after the dissolution of that firm. The MLL fees had been placed in an escrow account by an arbitrator pending his decision on the respective percentage entitlements of Lundy and Manchel to those funds. Under § 3.02(b) of the Haymond Lundy Partnership Agreement, MLL fees received by Lundy during the term of the HL partnership would be contributed to the partnership, but any distributions made after the dissolution of Haymond Lundy would be paid to Lundy alone. Haymond claimed Lundy delayed the distribution of the MLL fees until after he dissolved the partnership so that he, not the partnership, would receive his share of those fees, and in so doing failed to act in the best interest of the partnership.

Haymond also claimed that Lundy breached Partnership Agreement § 9.02(e) requiring the partners to allocate the HL cases according to certain percentages based on approximate value. The HL cases were the cases that originated at Haymond Lundy, LLP, i.e. the client came to HL during the term of the partnership. The allocation of these cases upon dissolution of the firm was to be agreed upon by the partners in good faith. See Partnership Agreement, § 9.02(e). Haymond claimed that Lundy violated this term of the Partnership Agreement by soliciting the clients of HL by letter and telephone post-dissolution to obtain a greater portion of the cases.

Lundy alleged that Haymond and Hochberg breached the Partnership Agreement by failing to notify Lundy of their entry into a Conditional Agreement. The Conditional Agreement transferred Hochberg's ownership interest in Haymond Lundy to Haymond. See P. Ex. 49. Although signed in November, 1998, Haymond and Hochberg agreed that the transfer of interest would not occur unless and until Hochberg's license to practice law in the state of Connecticut was suspended. Connecticut suspended Hochberg's license on an interim basis on April 17, 1998, but neither Hochberg nor Haymond informed Lundy of the transfer of partnership interests.

Lundy also alleged that Haymond breached Partnership Agreement § 9.02(e). Under that provision, Lundy was to receive "all right, title and interest in and to" the MLL cases upon dissolution. Lundy claimed that Haymond solicited MLL clients post-dissolution.

On January 26, 2001, the jury returned a liability verdict in favor of Haymond. The jury found that Lundy had materially breached the Partnership Agreement by failing to: (1) use his best efforts to obtain the MLL fees on behalf of the partnership; and (2) abide by the Partnership Agreement terms regarding dissolution. The jury found that Haymond had not breached the Partnership Agreement.

Discussion

In his amended complaint, Haymond requested injunctive relief as a remedy were Lundy found to have breached the contract. At the close of the liability phase, the parties agreed the jury should be dismissed and the court should determine appropriate injunctive relief. The parties filed written submissions and the court heard oral argument on this issue. The question presented is: in light of the jury's findings, should dissolution proceed under the Partnership Agreement or the Uniform Partnership Act?

The dissolution provision of the Partnership Agreement would require that the partners: (1) return to Lundy the open MLL cases and the furniture he contributed to the partnership; (2) divide the HL cases among themselves according to a certain formula and then, on the close of each case, redistribute the fees received from the case according to a different formula; (3) liquidate all non-distributed partnership assets; and (4) distribute the partnership funds in the order provided. In contrast, the Uniform Partnership Act requires that all partnership assets be liquidated. The partnership funds are then: (1) used to pay all debts of the partnership; and (2) divided among the partners in accordance with their respective partnership interests. See 15 Pa. Cons. Stat. Ann. §§ 8362 8360.

I. The Applicable Dissolution Provision

Although Haymond's amended complaint requested that the dissolution provision of the Partnership Agreement be enforced, he now argues that Lundy's material breach cancelled the Partnership Agreement and, in the absence of a contract, the provisions of the Uniform Partnership Act should govern dissolution. Lundy contends the Partnership Agreement's dissolution provision still governs.

O'Donnell v. McLoughlin, 125 A.2d 370 (Pa. 1956), addressed the power of a court to disregard the dissolution provisions of a Partnership Agreement. In O'Donnell the chancellor found that each of the partners had breached the Partnership Agreement and ordered the partnership dissolved. Id. at 371-72. The Partnership Agreement contained a dissolution provision stating:The good will of the business shall not be considered a part of the capital effects of the partnership and shall not be sold, but each partner shall be at liberty to commence and carry on similar business in his own or other name not similar or identical with the name of the firm.

Id. at 372. The chancellor found the agreement's dissolution provision inapplicable because of the partners' breaches and ordered the partnership sold to the partner bidding highest for it. See id.

On appeal, the Pennsylvania Supreme Court held the chancellor had no authority to disregard the Partnership Agreement's dissolution provision. The court found that "[t]he articles did not forthwith become a nullity merely because both partners were guilty of violations of them." Id. at 373. Unless extraordinary circumstances justify the avoidance of the dissolution provision, its terms govern the partnership's dissolution. "In the absence of [fraud,] a countervailing prohibition of law or the intervening rights of third persons, . . . the terms are reasonable and just in themselves and continue to be the law of the partnership." O'Donnell, 125 A.2d at 373.

Here, there are no extraordinary circumstances justifying the avoidance of the dissolution provision of the Partnership Agreement. There was no fraud in the formation of the Haymond Lundy partnership. This court dismissed Lundy's fraud claims because Lundy knew of Hochberg's indictment for bank fraud and could not have reasonably relied on assertions that the indictment would not affect the partnership, see Haymond v. Lundy, No. 99-5015 99-5048, 2000 U.S. Dist. LEXIS 8585 (E.D.Pa. June 22, 2000), and Haymond has never alleged fraud. There is no assertion that a third party has intervening rights, and neither party has alleged that the dissolution provision violates law or public policy. Under O'Donnell, this court has no authority to disregard the dissolution provisions of the Haymond Lundy Partnership Agreement.

Haymond argues O'Donnell is distinguishable because it did not address a finding of material breach and it is the materiality of the breach that mandates cancellation of the contract. Finding a breach material is the equivalent of finding the breaching party did not substantially perform his or her duties under the contract. This failure to perform justifies the non-breaching party's subsequent decision not to perform, i.e., where one party has previously materially breached the contract, the second party cannot be held liable for a later breach of the agreement.

While the O'Donnell court did not invoke the term "material," it accepted the chancellor's finding that the breaches were persistent and severe, and justified the termination of the partnership. The termination of the partnership cancels the partnership agreement; the purpose of the agreement is the formation and governance of the partnership. The O'Donnell court held that this cancellation of the partnership contract did not affect the applicability of its dissolution provision.

Haymond also argues that O'Donnell is distinguishable because it addressed a situation in which both partners had breached the Partnership Agreement, so equity did not favor either partner. Here, Lundy is the only partner found to have breached the Partnership Agreement. According to Haymond, dissolving the partnership under the terms of the Partnership Agreement is inequitable because it fails to punish, and, in fact, rewards Lundy for having breached the agreement.

Dissolving the partnership according to the Partnership Agreement terms will not punish Lundy, but punishment is not the appropriate remedy for a contract violation. Contract damages are compensatory, not punitive in nature. See Johnson v. Hyundai Motor America, 698 A.2d 631, 639 (Pa. Super Ct. 1997); J. Calamari J. Perillo, The Law of Contracts § 14.3-14.4, at 542-544 (4th ed. 1998) ("The relief should place the non-breaching party in the position he or she would have occupied had the breach not occurred.").

Dissolution under the terms of the Partnership Agreement also does not reward Lundy for materially breaching the Partnership Agreement; he will receive nothing more than he would have received had he not breached. Haymond presumably brought this action because he believed Lundy was attempting to get more than he would have received under the Partnership Agreement, and leave Haymond less. The jury's verdict entitles Haymond to everything to which he was entitled under the Partnership Agreement, i.e., Lundy will not receive more. See Calamari Perillo, § 14.4 at 543. It does not entitle Haymond to ignore the dissolution terms and seek to place himself in a better position than he would have been in absent Lundy's breaches.

The jury's finding that Lundy breached the agreement mandates that the partnership be dissolved under the conditions that would have existed had Lundy not breached the Agreement and in accordance with the Agreement's dissolution provision. Any benefit Lundy received from breaching the Partnership Agreement must be rescinded. Appropriate injunctive relief is determined by examining dissolution under the Partnership Agreement and addressing each breach found by the jury and how it effects those terms.

II. Dissolution Under the Partnership Agreement

Article 9 of the Partnership Agreement contains the partners' plan for dissolution. The partners disagree on the meaning of several terms in this provision.

A. The Legal Standard:

"The paramount goal of contract interpretation is to ascertain and give effect to the parties' intent." Tuthill v. Tuthill, 763 A.2d 417, 419 (Pa.Super.Ct. 2000). To determine intent one looks first to the contract. See id. "Each and every part of the contract must be taken into consideration and given effect, if possible, and the intention of the parties must be ascertained from the entire instrument." Id. Where the intention of the parties is clear and unequivocal from the contract, this intention governs and must be given effect. See Krizovensky v. Krizovensky, 624 A.2d 638, 642 (Pa.Super.Ct. 1993).

A contractual term is clear if it is capable of only one reasonable or fair interpretation without reference to matters outside the contract. See id. A term is "not rendered ambiguous by the mere fact that the parties do not agree on the proper construction." Duquesne Light Co. v. Westinghouse Electricity Corp., 66 F.3d 604, 614 (3d Cir. 1995) (citations omitted). A party may introduce extrinsic evidence to show that a provision of the contract is ambiguous, but that evidence must show "the parties' linguistic reference," not merely the parties' subjective expectations. Id. If the court then determines the contract's term is ambiguous or susceptible to more than one reasonable interpretation, the court may then look outside the four corners of document to extrinsic evidence to determine the parties' intent. See Metzger v. Clifford Realty Corp., 476 A.2d 1, 5 (Pa.Super.Ct. 1984).

B. Liquidation of Partnership Assets:

The Partnership Agreement provides that, with two exceptions, "the assets of the Partnership shall be liquidated" and distributed in the order provided in the Agreement. See Partnership Agreement, § 9.02(e). The two exceptions are: (1) the open cases, which will be addressed below; and (2) the furniture, fixtures and equipment contributed to the partnership by Lundy under section 3.02(b)(ii) of the Partnership Agreement, which must be returned to Lundy. See Partnership Agreement, § 9.02(f).

The liquidation of the other assets of the partnership will take place as described in the Agreement. The partners may bid on or purchase any asset in accordance with § 9.02(d). The proceeds from the liquidation will be added to the funds in the partnership accounts; the total will constitute the partnership's capital for distribution.

C. Distribution of the Firm's Capital:

The firm's capital must first be used to pay the outstanding debts the partnership owes to third parties. See Partnership Agreement, § 9.02(a). Partnership debts include the bank debt, and, because Hochberg is no longer a partner, the money he loaned the partnership.

Despite its dissolution, HL also continues to incur debts to third parties. For example, the firm is a defendant in an ongoing lawsuit captioned Tupper v. Haymond Lundy, LLP. The attorney's fees and costs of this litigation continue to accrue. In order to ensure this and other debts of the partnership that continue to accrue will be paid, the amount of $500,000 shall be set aside to cover these debts before any partnership capital is distributed to either Haymond or Lundy.

If any capital remains after the debts of the partnership are provided for, those funds will be distributed to the partners. First, the partnership shall pay Haymond the balance of his capital account. See Partnership Agreement, § 9.02(a)(i). Next, the partnership must repay any loans or advances made by the partners. See Partnership Agreement, § 9.02(a)(ii).

According to the testimony of David Easterly, each of the partners made cash loans to the partnership. See Trial Tr., Jan. 22, 2001, at 151-53. Lundy's cash loans to the partnership totaled $325,000, and Haymond's totaled $275,000.

In addition, the Partnership Agreement acknowledges that "Lundy has incurred expenses in connection with the Lundy Cases" which shall be deemed a loan to the partnership. See Partnership Agreement, § 3.06(b). Between July 29, 1997, the date Lundy's former firm, MLL, dissolved, and the formation of HL in October, 1997, Lundy expended money to continue litigating the cases he received from MLL post-dissolution (the "Lundy Case Expenses" in the Partnership Agreement). For the first two years of the partnership, when Haymond Lundy collected fees from any of the cases for which Lundy personally incurred costs, Lundy was not reimbursed; the amount was deemed loaned to the partnership. See id. The partnership was to repay these loans in installments beginning the twenty-fifth month of the partnership, see id., but the partnership was dissolved before the twenty-fifth month and Lundy was never repaid. The Lundy loan must be repaid with the cash loans made by the partners.

If there are insufficient funds for the partnership to repay the total amounts loaned to the partnership by the partners, the remaining partnership funds must be disbursed to Haymond and Lundy in proportion to the amount each is owed. See Partnership Agreement § 9.02(a)(ii). If the partnership capital is sufficient to pay the partner loans in their entirety, any funds remaining must be disbursed to the partners in accordance with their percentage interests in the partnership, i.e., half to Haymond and half to Lundy. See Partnership Agreement § 9.02(a)(iii).

1. Lundy's Breach of § 3.02

At trial, Haymond argued Lundy delayed resolution of the MLL arbitration and the distribution of the MLL fees until after he dissolved HL, contrary to the best interests of the partnership, so that he, not the partnership, would receive the fees. The evidence of the breach included the testimony of Haymond and Lundy, and correspondence between Haymond, Lundy and Hochberg.

In late August, 1999, Haymond wrote to Donald Marino, an HL attorney representing Lundy in the arbitration against Manchel. The memorandum stated:

Judge Katz has indicated his readiness to rule on a formula for division of the monies between Donald Manchel and Haymond Lundy. Since the fee portion of any distribution has been assigned to the Haymond Lundy Law Firm, you are hereby instructed on my behalf to contact Judge Katz and request his ruling immediately.

P. Ex. 34. Haymond testified that he made the request because the firm needed the cash for operating expenses. See Trial Tr., Jan. 17, 2001, at 94-113; see also, P. Ex. 35. Lundy confirmed that at the end of September the firm faced a shortfall of $121,000. See Trial Tr., Jan. 19, 2001, at 135.

Hochberg wrote Lundy by memorandum dated September 27, 1999 that the advertising budget would be affected by the monetary problems facing the firm. P. Ex. 36. In that memo, Hochberg stated: "[i]f you [Lundy] had not unilaterally decided to postpone the receipt of MLL funds due to Haymond Lundy the current cash problem would not exist." P. Ex. 36. Lundy responded to Hochberg's allegation of delay by letter dated September 28, 1999:

I could not reach an agreement with Don on this issue, and, as it turned out, I did not want to reach an agreement because Don is running short of money and I believe this is the best way to make him settle matters in a manner favorable to me.

P. Ex. 37.

In his testimony, Lundy clarified that in late-September Manchel had offered to split the accumulated money equally with him. See Trial Tr. Jan. 19, 2001, at 137. Lundy refused to agree to an equal division, see id.; it was for that reason he and Manchel "could not reach an agreement." P. Ex. 37; see id. Haymond argued to the jury that Lundy's failure to accept the Manchel's settlement offer, equally divide the money, and solve the firm's financial problems violated his duty under Partnership Agreement § 3.02 to use his best efforts to obtain as large a percentage of the MLL fees as possible for the benefit of the partnership. See Trial Tr. Jan. 25, 2001, at 72-73. The jury found that Lundy breached Partnership Agreement § 3.02.

Despite the jury's finding, Lundy argues that none of the MLL money should be returned to HL because Haymond did not prove that, absent Lundy's actions, money would have been distributed to the firm. Lundy notes that "any agreement with Mr. Manchel would have required that each agree to not only the amount of the distribution but also to the percentage distribution each would receive." L. Brief on Appropriate Relief, at 23. According to Lundy, "[t]here is no evidence whatsoever from which one can speculate as to the sum of money, if any, which Manchel and Lundy would have agreed was appropriate." Id.

Lundy's testimony demonstrated that Manchel offered to settle the matter by an equal division of the money in September. The evidence of Manchel's offer is sufficient to show the minimum the partnership would have received had Lundy acted in the partnership's best interest, in accordance with his duty under § 3.02. To remedy this breach, Lundy must cause fifty percent of the MLL money available in the arbitration escrow account on the date of dissolution to be transferred to the HL account; it is partnership capital for the purposes of dissolution. The parties stipulated that on October 8, 1999, the sum of $1,765,918.55 was in the MLL arbitration escrow account. Half of that amount, or $882,959.28, must be made part of HL's capital for division in the manner discussed above.

2. Other Capital Adjustments

a) The Easterly Adjustment

Haymond owes the partnership $17,246.00 for services rendered by David Easterly for the benefit of his new firm, Haymond Napoli Diamond, P.C., while Easterly's salary was paid in full by Haymond Lundy, LLP. See Order, May, 17, 2001. To accomplish the dissolution calculations correctly, this money must be repaid and included in the partnership capital for distribution.

b) The Request for a Rent Adjustment

Haymond's new Philadelphia firm, HND-PA, claims Lundy's new firm, The Law Offices of Marvin Lundy ("LOML"), inequitably occupies more than one-half the office space formerly occupied by Haymond Lundy, LLP and should have to reimburse a portion of the rent paid on the property since the date of dissolution.

Haymond Lundy, LLP relocated to the space at issue, the 19th floor of Seven Penn Center, in January, 1999. The lease began in November, 1998 and expires on October 31, 2009, although there is an early termination provision which, if exercised, would end the lease on January 31, 2006.

Haymond, Lundy and Hochberg signed a limited guaranty and suretyship agreement stating they would be jointly and severally liable for the firm's obligations under the lease for the first forty-eight months. These personal guarantees do not expire until at least the end of November, 2001. For these reasons, the parties agreed that Haymond Lundy, LLP should continue to pay the rent post-dissolution, and, in the event that HL could not pay the rent, Haymond and Lundy would divide the rent obligation equally.

Upon the dissolution of HL in October, 1999, Haymond and Lundy each formed new law firms. The newly formed law firms began to operate within the space leased to HL. On the occasions when HL could not pay the lease, the new law firms, rather than the former partners of HL, have each paid half the rent. See Mtn. for Payment of Rental for Excess Space, at 2. This has occurred twice since the dissolution of HL. See id.

HND-PA now claims that Lundy's firm, LOML, should have to reimburse HL and HND-PA for a portion of the rent paid because LOML occupies more than half the space leased by HL. Specifically, HND-PA moves that the court order LOML to reimburse: (1) HL $119,342.89 constituting one-third of the rent paid by HL since the dissolution; and (2) HND-PA $2,581.04, one-sixth of the rent it paid during the two months HL was unable to fulfil its obligations under the lease.

HND-PA may not assert this claim in this action: it is not a party to this action, nor is LOML, the firm from which it demands reimbursement. A non-party cannot move the court to order another non-party to do anything. The actions of these firms are properly before the court only because they are directed by the parties, who may have assigned them much of the HL property in dispute, but this claim is not brought on behalf of Haymond, calling himself HND-PA. The motion is signed, not by Haymond's attorney, but by the attorney for HND-CT. HND-CT is a separate corporate entity from HND-PA and does not occupy any portion of the space at issue.

Assuming arguendo the court could address the portion of the motion requesting reimbursement of HL, the court would deny the motion. The lease between HL and the Arden Group obligates HL to pay the rent for the 19th floor of Seven Penn Center no matter how the space is divided, or whether it is occupied at all. HL has not assigned its rights to the space or sublet it to LOML and HND-PA, nor could it under its lease. The court will not order Lundy, or his new law firm, to reimburse HL or HND-PA for past rent.

When the dissolution of Haymond Lundy is completed, the tenant on the lease will no longer exist. The new firms will be required to relocate or negotiate a new lease for this space with the landlord, at which time issues of payment and space division may be reconsidered by the new tenants.

D. Division of the Cases:

Section 9.02(e) of the Partnership Agreement governs the division of open cases upon dissolution of the partnership. The cases that originated at HL are treated distinctly from those brought to HL from MLL by Lundy upon the formation of the firm (the "MLL cases").

1. The Haymond Lundy Cases:

The HL cases are the cases that originated at Haymond Lundy, LLP, i.e., the client came to HL during the term of the partnership. As to these cases, the Partnership Agreement provides:

[I]f . . . dissolution occurs prior to the third anniversary of the commencement of the Partnership, Lundy shall receive from the Partnership two-thirds of such cases and Haymond and Hochberg together shall receive from the Partnership one-third of such cases, the specific manner of such allocation to be agreed upon in good faith by the parties . . . provided, however, that the net fee recoveries from all such cases other than the Lundy Cases shall be divided 80/20 such that 80% of the net free recoveries shall be retained by the Partner handling the matter and the remaining 20% shall be paid to the Partner(s) not handling the matter.

Partnership Agreement, § 9.02(e)(i)(B). The division of cases did not take place by agreement of the parties. The jury found that Lundy breached this provision by refusing to meet with Haymond to divide the cases and/or by soliciting HL clients.

After commencement of the litigation, the court ordered the parties to cease communications with all clients of the dissolved firm. The special master sent letters to these clients, and much of the case division took place by client choice. Such choices must not be disturbed. See Hiscott Robinson v. King, 626 A.2d 1235, 1237 (Pa.Super.Ct. 1993) (client has absolute right to fire an attorney and select new counsel); M. Epstein B. Wisoff, Winding Up Dissolved Law Partnerships: The No-Compensation Rule and Client Choice, 73 Calif. L. Rev. 1597, 1603-1604 (1985).

Approximately twenty months have passed since the dissolution and the division of the cases. During that time, the attorneys who received the case post-dissolution have worked with the clients. Litigation of the cases has progressed, and many have reached final resolution. The parties generally agree that it is not feasible for the court to redistribute the cases now. For these reasons the court finds it inappropriate to attempt a re-distribution of the cases.

Had § 9.02(e) been followed upon dissolution, the potential value of the HL cases would have been estimated; Lundy would have received two-thirds and Haymond would have received one-third of those cases by estimated potential value. Then, after the cases were closed by settlement or verdict, the costs of litigation would be repaid and the net fees earned would be apportioned. The partner's firm handling the case would keep 80% of the net fee recovery and send the other partner's firm 20%.

Assuming (1) the initial division based on potential value had occurred perfectly, i.e., the parties had estimated the potential value of each case correctly and potential value equaled actual value, and (2) the total value of all the HL cases was $3,000,000, initially Lundy would have received $2,000,000 worth of cases and Haymond would have received $1,000,000. Upon resolution of the cases, Lundy would have transferred 20% of the net fees or actual value recovered for him portion of the cases to Haymond ($400,000). Haymond would similarly have transferred 20% of the actual value or net fees recovered by him on his one-third share of the cases ($200,000) to Lundy. After these transfers, Lundy would have received $1,800,000 in net fees from the HL cases. Lundy's $1,800,000 represents 60% of the original $3,000,000 total value. Haymond would have had $1,200,000, or 40%, of the original $3,000,000 total value. If, upon resolution of any HL case, 40% of the net fees recovered are paid to Haymond and 60% of the net fees recovered are paid to Lundy, the parties' intentions for the division of the HL cases can be given full effect without having to re-divide the cases.

2. The MLL Cases:

The MLL cases were those cases brought to HL by Lundy from his former firm, Manchel, Lessin Lundy, LLP. As to the MLL cases, the Partnership Agreement states that upon dissolution "Lundy shall receive from the Partnership all right, title and interest in and to the Lundy cases." Partnership Agreement § 9.02(e)(i)(A).

a) MLL Cases Open at the Time of Dissolution

The plain language of this provision requires that, upon dissolution, Lundy should receive all the cases he brought to HL from MLL that remain open, unless the client chooses another attorney. See Hiscott, 626 A.2d at 1237; Partnership Agreement § 9.02(e)(ii) (acknowledging the client's absolute right to choose counsel). Under this provision, Lundy is entitled to retain 100% of the net fees recovered from MLL cases handled by his new firm post-dissolution.

Certain MLL cases are being handled by Haymond's new firm, Haymond Napoli Diamond, P.C.-PA ("HND-PA"). At trial, Lundy alleged that Haymond acquired these cases for HND-PA through solicitation in violation of the Partnership Agreement. The jury found that Haymond did not breach the contract in this regard, so the court must assume that those MLL cases are being handled by Haymond's new firm as a result of client choice.

Despite the jury finding, Lundy contends that these cases should be transferred back to Lundy or, in the alternative, that the court should require Haymond to disgorge the profits. According to Lundy, he "should receive 80% of the fee on settlement or other disposition with 20% going to HND, and HND bearing the costs." There is no basis for Lundy's request in the Partnership Agreement.

Section 9.02(e)(ii) of the Partnership Agreement provides: "[i]n any circumstance in which . . . a client selects the Partners other than the Partner to whom his case was allocated . . . the lawyer selected by the client may take the case and pay to the other [partner] . . . 20% of the net fee recovery from that case." This provision applies to MLL cases handled by Haymond's new firm, HND-PA post-dissolution. Upon receipt of the fees from any such case, Haymond, or his firm, must transfer 20% of the net fees recovered to Lundy.

b. Lundy's Claim to the Net Fees from the MLL Cases Closed Prior to Dissolution:

Between the formation of HL in October, 1997 and its dissolution in October, 1999, many of the MLL cases brought to HL by Lundy were settled or tried to verdict. The fees from those cases were paid to HL. According to Lundy, HL received a total of $6,141,000 in net fees from MLL cases closed prior to dissolution. Lundy claims he is entitled to the return of those fees upon dissolution under Partnership Agreement § 9.02(e).

Under Partnership Agreement § 3.02(b) the MLL cases were part of Lundy's capital contribution to HL. He was to "transfer [them] or cause [them] to be transferred to the Partnership." Partnership Agreement, § 3.02(b). Lundy accomplished this transfer by permitting HL to handle the MLL cases.

Partnership Agreement § 3.05 states that "[e]xcept as specifically provided in this Agreement, no partner shall be entitled to demand or receive a return of his capital contribution." The dissolution provision of the Agreement does not specifically address the fees recovered by HL from settling or successfully trying MLL cases to verdict during the term of the partnership.

Lundy contends these fees are governed by the general statement in § 9.02(e) that Lundy "shall receive all right, title and interest in and to the Lundy cases." Lundy argues that the use of the term "Lundy cases" in § 9.02(e) is dispositive because that term is defined in Partnership Agreement § 3.02(a) to include all MLL cases, not merely those open at the time of dissolution. The court must look to the contract as a whole to determine whether Lundy's interpretation is reasonable. See Tuthill, 763 A.2d at 419. Lundy's interpretation requires the court to find that § 9.02(e) of the Agreement applies not only to cases open at the time of dissolution, but to the fees from cases which were closed prior to the date of dissolution. This interpretation is inconsistent with Lundy's own interpretation of § 9.02(e) as it applies to the HL cases and the MLL fees at issue in the arbitration between Manchel and Lundy.

Were the court to read § 9.02(e) to govern the fees HL acquired from closed cases, the fees from HL cases closed prior to dissolution would have to be divided in accordance with § 9.02(e)(ii) also. Yet, Lundy has never claimed he is entitled to two-thirds of the net fees received by HL from HL cases settled or tried to verdict prior to dissolution under § 9.02(e).

Similarly, under Lundy's reasoning, § 9.02(e) would also apply to the fees at issue in the MLL arbitration. Those fees were also to be assigned to the partnership as part of Lundy's capital contribution and defined as part of the "Lundy cases" under § 3.02(a). Under Lundy's reading of § 9.02(e), any MLL arbitration fees distributed to the partnership during its term would have to be returned to Lundy upon dissolution. Yet, Lundy has never claimed that any distribution of the MLL fees in the arbitration escrow made during the term of the partnership had be returned to him under § 9.02(e). He fought vigorously against Haymond's claim that MLL arbitration fees should have been disbursed prior to the dissolution because he understood that, if those fees had been distributed during the term of the partnership, the fees would have remained part of HL's capital under the Agreement. Lundy has tacitly acknowledged that Partnership Agreement § 9.02(e) addresses only the distribution of cases open on the date of the dissolution of HL.

The court finds that the only reasonable interpretation of § 9.02(e) is that the section applies to cases open at the time of dissolution. Lundy is not entitled under that provision to the return of any of the fees received by HL during the term of the partnership for settling or litigating MLL cases to verdict.

3. Adjustments to Case Entitlements

At a hearing on December 13, 2000, the court heard argument on cross-motions for contempt. Each party alleged the other had contacted a client for the purpose of attempting to influence the client's choice of counsel in violation of orders of this court. The court found both parties in contempt by clear and convincing evidence. See Order, Dec. 14, 2000.

Lundy alleged Haymond's staff attempted to coerce a client named Marlo Jones to choose HND-PA to represent him. Haymond's staff failed in this effort, and Jones continues to be represented by Lundy's new firm. As a sanction against Haymond, the court held that the case of Marlo Jones, which originated at HL, would be treated as an MLL case for the purposes of dissolution, rather than a HL case. See Order, Dec. 14, 2000. The fees received from the representation of Jones shall be retained completely by Lundy. See supra Section II(D)(2)(a).

Haymond alleged Lundy attempted to coerce a client named Ron Hammock to choose his new firm to represent him. Lundy failed at this effort, and Hammock continues to be represented by HND-PA. As a sanction against Lundy for improperly communicating with Ron Hammock, the court ordered that Hammock's case be treated as an HL case rather than an MLL case. Hammock's case was originally brought by Lundy to HL after the dissolution of MLL. After the dissolution of HL, Hammock affirmatively chose an attorney who joined HND-PA as his counsel.

Upon comprehensive examination of the provisions governing dissolution of the HL partnership, the court must acknowledge that treating the matter as an HL case will reward, rather than sanction Lundy. Treating Hammock's case as an HL matter will entitle Lundy to 60% of the fees, see supra Section II(D)(1), rather than entitling him to 20% of the fees were the case treated as an MLL case in which the client chose an HND attorney. See supra Section II(D)(2)(a). Therefore, the court finds the sanction it awarded by Order dated December 14, 2000 inappropriate. Hammock's action will be treated as if it originated at HND-PA; HND-PA will be entitled to retain all fees derived therefrom.

III. The Appointment of a Receiver:

The Partnership Agreement does not specifically provide for who shall oversee the liquidation of the partnership assets and the disbursement of HL funds. Section 9.02(d) of the Partnership Agreement appears to assume that either the partners will agree to perform the required tasks jointly or a liquidator will be appointed. The provision states: "the Partners or the liquidator, as the case may be, shall determine" how to proceed with liquidation. Partnership Agreement, § 9.02(d).

Courts have an inherent equitable power to appoint a receiver to oversee the dissolution of a partnership. This power must be "exercised sparingly, with caution and circumspection, and only in an extreme case under extraordinary circumstances." Tate v. Philadelphia Transportation Co., 190 A.2d 316, 321 (Pa. 1963).

Haymond contends there are no grounds for appointment of a receiver and seeks to be appointed liquidating partner. Citing Hankin v. Hankin, 420 A.2d 1090 (Pa.Super.Ct. 1980), Haymond asserts that there must be evidence of waste, risk of dissipation of assets, fraud or mismanagement before a court may appoint a receiver. The Hankin decision cited by Haymond was overturned by the Pennsylvania Supreme Court, which held that the circumstances listed by the Superior Court are not the exclusive justifications for appointing a receiver. Hankin v. Hankin, 493 A.2d 675, 677 (Pa. 1985). The Pennsylvania Supreme Court held that "trial courts, sitting in equity, [are] vested with wide discretion when partnership liquidation cases are brought before them and are primarily responsible for determining whether a receiver is required." Id.

The history of this action demonstrates the impossibility of joint dissolution by the former partners of HL or one partner performing this task. The parties and their counsel have repeatedly demonstrated their acrimony toward and distrust of one another. This litigation has surpassed adversarial and is more accurately described as bellicose.

This court has addressed no less than eight motions for contempt thusfar. In those motions, each of the parties has alleged that the other has failed to follow the procedures established by the court and/or the special master for ensuring that the partnership property is protected and maintained until the court's decision on the manner of dissolution. See, e.g., Haymond's Mtn. to Hold Alan Epstein in Contempt Response (containing cross-allegations that attorneys failed to properly escrow funds). Were the court to appoint one partner to oversee dissolution, innumerable such situations would inevitably arise.

The appointment of a neutral receiver will not work an irreparable injury to the rights and interest of the parties. See Hankin, 493 A.2d at 678. Greater injury would more likely result from the failure to appoint a neutral. The court finds substantial evidence to support the appointment of a receiver.

The Special Master, Martin Heller, Esq., has worked with the parties since his appointment in November, 1999. He has developed an extensive background in the HL partnership and has proved to work well with the parties. He has facilitated numerous agreements between the parties, including settling disputes concerning files and the operation of the common office space. The court believes it a logical extension of his current role to serve as Receiver.

As Receiver, Mr. Heller will have the authority to seek assistance from an accountant or other professionals as he believes necessary to complete the dissolution of the partnership in accordance with the terms of the Partnership Agreement. For work done as Receiver, in connection with the dissolution, he shall be paid from HL assets.

Conclusion

Special Master, Martin Heller, Esq. will serve as Receiver and oversee the dissolution of Haymond Lundy, LLP in accordance with the terms of the Partnership Agreement. Dissolution shall proceed as promptly as feasible. The court shall receive a monthly report on the progress of dissolution, and a final report upon its completion. An appropriate order follows.

ORDER

AND NOW this 31st day of August, 2001, in consideration of the jury's liability verdict in favor of John Haymond on a breach of contract claim against Marvin Lundy, for the reasons stated in the foregoing memorandum, it is ORDERED that:

1. Judgment is entered in favor of John Haymond.

2. Martin Heller, Esq. is hereby appointed Receiver of Haymond Lundy, LLP.

A. The Receiver shall, with the aid and cooperation of the parties, implement an orderly dissolution of Haymond Lundy, LLP in accordance with Article 9 of the Partnership Agreement as interpreted by the foregoing memorandum of the court.

B. The Receiver shall be compensated for his work as receiver at a rate of $250 per hour. All reasonable expenses incurred by the Receiver in the course of the performance of his duties, including but not limited to long distance telephone, printing, travel, parking, data processing and postage, shall be reimbursed. The fees and expense of the Receiver shall be paid from the assets of Haymond Lundy, LLP.

C. The Receiver shall have the power to seek the aid of an accountant, if he deems it necessary. The appointment of an accountant shall require the approval of the court. The Receiver is further empowered to use bank accounts in his representative capacity to hold sums in escrow for the payment of bills and distribution of profits to the parties.

D. The Receiver shall have access to all property, case files, books, records and facilities he deems necessary to perform the duties set forth herein. All communication with the Receiver, including files examined by him, shall be confidential and shall not constitute a waiver of attorney/client privilege.

E. The Receiver shall submit to the court and the parties a monthly report of hours and expenses incurred on this matter. The court will consider any objections submitted by the parties within five days of receiving the report.

F. The Receiver shall file a report on the first of each month concerning his activities, and shall file a final report prior to his discharge. These reports may be submitted without holding a formal hearing.

G. All activities of the Receiver are subject to the review and supervision of the court and may be revised, expanded or modified with notice to the parties.

H. The Receiver, as a court appointee, shall be held harmless from liability arising out of his activities in this matter. Any action against the Receiver may be taken only on application to this court.

I. The court may meet privately with the Receiver as necessary to facilitate a prompt and fair dissolution of Haymond Lundy, LLP.

3. The Receiver shall proceed with the dissolution of Haymond Lundy, LLP as follows:

A. Lundy shall cause to be contributed to Haymond Lundy, LLP $882,959.28, representing 50% of the fees present in the MLL arbitration escrow account on the date of Haymond Lundy, LLP's dissolution.

B. Haymond shall contribute to Haymond Lundy, LLP $17,246.00 for services rendered by David Easterly for the benefit of his new firm, Haymond Napoli Diamond, P.C., while Easterly's salary was paid in full by Haymond Lundy, LLP.

C. The furniture and fixtures Marvin Lundy contributed to Haymond Lundy, LLP shall be returned to Lundy.

D. Net fees received from any HL case open at the time of dissolution shall be divided between the parties as follows: Lundy shall receive 60% of the net fees and Haymond shall receive 40%.

(i) The sole exception to this rule shall be the case of Marlo Jones. The fees from Jones' case shall be retained entirely by Lundy or his new firm.

(ii) Net fees accumulated during the pendency of this action and held in escrow by the parties in accordance with this court's orders may be distributed as soon as the amounts held in escrow are verified correct by the Receiver.

(iii) Additional net fees received from HL cases by the parties shall be placed in escrow pending an approval of the amount and distribution by the Receiver.

E. Net fees received by Lundy, or his new firm, from MLL cases settled or litigated to verdict shall remain the property of Lundy or his new firm.

F. Net fees received by Haymond, or his new firm, from MLL cases settled or litigated to verdict shall be placed in escrow. These fees shall be distributed 80% to Haymond, or his new law firm, and 20% to Lundy, or his new law firm, with one exception. The fees from the case of Ron Hammock shall be retained entirely by Haymond, or his new firm. All such distributions shall be approved by the Receiver.

G. All assets of Haymond Lundy not otherwise provided for shall be liquidated, and the proceeds shall be made part of the capital of Haymond Lundy for distribution.

H. The capital of Haymond Lundy shall be disbursed in the following manner and order:

(i) Debts owed by the partnership to third parties shall be paid, including the bank debt and the loan made to the partnership by Hochberg;

(ii) $500,000 shall be set aside for the payment third party debts the partnership continues to accrue;

(iii) The loans made to the partnership by Haymond and Lundy shall be repaid. If there are insufficient funds to repay these loans in full, the remaining funds shall be paid in proportion to the total amount owed each partner;

(iv) Any remaining partnership capital shall be to the partners in accordance with their percentage interests in the partnership: 50% to Haymond and 50% to Lundy.