Making Ends Neat
This article was published in the American Bar Association’s Law Practice Magazine, Volume 38 Number 5, September/October 2012.
While the loyalty of an attorney to a single firm for the entirety of his or her career is admirable, the fact is that today's lawyers change firms with increasing regularity.
As headlines trumpet the defection of partners from one-time law firm giants, it makes sense to review the ethical and practical issues faced by partners making the decision to move on and the law firms they leave behind. From a practical point of view, once an attorney has made the decision to depart, both the law firm and the attorney need to put aside what might otherwise be an acrimonious exchange and instead concentrate on acting professionally and placing the rights and needs of the client first.
The duties owed by a departing attorney to his or her former firm differ depending upon the attorney's status at the firm and any written agreement between the law firm and the attorney. As a result, be certain to review any existing written agreements before charting the course of the separation. Partners owe each other fiduciary duties not inherent in a standard employer-employee relationship. Describing the fiduciary duties inherent in a partnership, the court in Meinhard v. Salmon summed it up: "Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior" (164 N.E. 545 (N.Y. 1928)). The failure to maintain the integrity of these fiduciary duties can expose the former partner to civil liability or even ethical discipline (Graubard Mollen Dannett & Horowitz v. Moskovitz, 653 N.E.2d 1179 (1995); Gibbs v. Breed, Abbott & Morgan, 710 N.Y.S.2d 578 (N.Y. App. Div. 2000)). Engaging in deceitful tactics while surreptitiously planning a departure from the law firm is not consistent with a partner's fiduciary duties or professional responsibilities. From the perspective of either the law firm or the departing attorney, taking the high road pays off in the long term.
Who Can I Tell I want To Go?
Generally speaking, partners may discuss a planned departure with other partners and close colleagues without breaching the fiduciary duty owed to the remaining partners. While it may not be completely prohibited in all jurisdictions, it is a better practice not to solicit associates and other employees before the departing partner gives notice to the law firm. At no time should the departing attorney provide a competing law firm with proprietary information that would enable the competing firm to undercut the prior firm.
When a partner decides to leave a law firm, clients should not be told in advance of the departing partner's notice to the law firm. In effect, leaving a firm is a leap of faith by the departing attorney, who hopes and believes that clients will follow.
How Much Notice?
A departing partner should provide the law firm with sufficient notice so as to afford the orderly transition of the ongoing workload. The exact period of time depends upon the attorney's active matters, upcoming court dates and a myriad of other contingencies. In any event, notice should be given well in advance of a planned departure. This may have the unintended effect of giving the law firm ample time to dissuade employees or other attorneys who have announced an intention to join the departing attorney. The departing attorney should also be prepared in the event the law firm decides that immediate termination is the appropriate response to the departing attorney's notice. Law firms are cautioned that responses to inquiries from people attempting to reach the departing attorney may not be misleading and should be dealt with in an honest, forthright manner. The key is for both the law firm and the departing partner to avoid any conduct that would adversely impact the client's representation.
Notifying The Client
Placing the client in the middle of a tug-of-war between a law firm and its departing attorney is unprofessional and serves no legitimate purpose. In a perfect world, the departing lawyer and the firm should jointly notify the clients for whom the departing attorney provided a direct and principal role in the representation. The communication should be informational in nature and not be an evident solicitation for the client's business. The notice should advise the client that the attorney is leaving the firm and the time parameter for departure; the identity of the law firm the departing attorney is joining or forming; and the client has the option of staying with the law firm or going with the departing attorney. Of course, situations may exist where it is not possible for the client to stay with the firm (such as where the firm no longer has the capacity to service the client) or the client cannot follow the departing attorney (such as where the attorney is no longer practicing in the same field, or a conflict exists with the new firm). In those circumstances, notice to the client should explain why an option is not available. As is always the case, the client should also be advised that a completely new attorney or law firm may be chosen. Finally, the communication should indicate who will be protecting the client's interest while the client decides which course to take.
Even under circumstances where joint notification is not possible, ABA Rule of Professional Conduct 1.4 still mandates that the client be notified of the material change in representation, whether by the departing attorney or the law firm or both. Written correspondence is always the best evidence of exactly what was communicated. However, there are circumstances, such as where there are time constraints, that a telephone call may be appropriate in the first instance. From a risk management standpoint, the substance of any oral communications should be reduced to writing.
Other Issues To Consider
The financial stability of the law firm being left behind should also be considered. A growing body of case law predicated upon the California decision in Jewel v. Boxer, 203 Cal Rptr. 13 (1984), provides that when partners leave a dissolved law firm and bring unresolved client matters to a new firm, the profit the transferred matters generate belongs to the original law firm. Recent case law suggests that this premise holds true even if the client matters are billed on an hourly basis (Development Specialists, Inc. v. Akin Gump Strauss Hauer & Feld LLP, 2012 WL 1918705 (S.D.N.Y. May 24, 2012)). This exposure may be eliminated based upon the terms of the dissolving law firm's partnership agreement. However, the expansion of the "unfinished business" doctrine does present an additional item of consideration for the departing attorney.
An attorney's professionalism is his or her stock in trade. Law firms and attorneys that honor the spirit of the profession rather than the letter of the law will find appreciative clients during the difficult period of transition. Given the differences in law and ethics opinions in the various jurisdictions, however, an attorney contemplating departure or the law firm faced with the announcement of a departing partner would be well advised to seek professional advice.
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