Security interest survives dissolution and bankruptcy.

A bank's secured interest in a law firm's putative contingent fee survived the firm's dissolution and bankruptcy, the First Circuit held in Cadle Co. v. Schlichtmann, 258 F.3d 1 (2001).

The contingent fee agreement was part of a Boston law firm's accounts receivable, which became subject to a secured interest to the lender. About three months after a part of the contingent fee was paid into an escrow account as a result of a settlement, Jan Schlichtmann, the partner handling the case, filed for bankruptcy, causing the firm's dissolution under Massachusetts law, and the bankruptcy court later issued a "discharge of debtor" order releasing Schlichtmann of all his dischargeable debts. Following that, he continued to work on the case until its final resolution and payment of additional contingent fees. He claimed that the post-dissolution work was performed in his individual capacity and that the fees received for that work were not subject to the secured interest.

The First Circuit...