Law Firm Breakups
Law firm breakups are fraught with the potential for attorney misconduct. Attorneys who determine they can no longer work together will often take the additional step of accusing one another of inappropriate conduct. Frequently, we hear about attorneys taking law firm files in the dead of night, or allegations that compensation was at least improperly, if not fraudulently, determined.
Recently, after a seven-day hearing, in an 87-page opinion, an Ad Hoc Hearing Committee of the District of Columbia Bar recommended that the founders of the firm Tully Rinckey each be suspended from the practice of law for 90 days as a result of their repeated use of employment agreements which included “a host of restrictions and penalties they imposed or sought to impose on departing lawyers,” including liquidated damages for leaving the firm without “Good Reason.” The employment agreements also included restrictions on contacting firm clients, working with other former firm attorneys, and hiring firm employees.
Although there is very little information on discipline imposed in Pennsylvania for violations of Rule 5.6(a), the Pennsylvania Bar Association’s Legal Ethics and Professional Responsibility Committee has issued several informal ethics opinions related to restrictions in employment agreements for attorneys. See e.g., Informal Opinion 2017-040, Informal Opinion 2016-024, Informal Opinion 2012-006, Joint Opinion (with Philadelphia Bar Association) 99-100 “Considerations for Departing Lawyers.” All of these opinions are consistent with the determination that engagement agreements for attorneys cannot restrict the rights of the attorney to practice and cannot restrict attorneys from associating with law firm employees. See also, ABA Informal Opinion 1417 (a law firm may not require that a withdrawing partner agree not to hire or be associated with for a period of years any of the firm’s associates who are working for the firm at the time of the withdrawal); Philadelphia Bar Association Professional Guidance Committee, Formal Opinion 96-5 (provision in letter of employment that provides that a former employee may not directly or indirectly solicit or retain current or former employees, restricts the right of a lawyer to practice by restricting the right of association).
While actual discipline arising primarily from violations of Rule 5.6(a) is rare, the Tully Rinckey matter emphasizes the seriousness with which law firms need to treat potential restrictions in employment contracts. Disciplinary matters arising from these issues have occurred in Pennsylvania. According to the Pennsylvania Disciplinary Board’s website, in 2019, an attorney received an Informal Admonition as a result of an employment agreement that included a provision that required departing attorneys to pay reimbursements in connection with departing client matters, including future related matters. The agreement also required departing attorneys to provide copies of client bills that evidenced the legal fees incurred, which included confidential and privileged information in violation of RPC 1.6(a). Law firm managers need to take care in drafting employment agreements to avoid restrictions which may violate the Rules of Professional Conduct.
Legal Update for Lawyers’ Professional Liability – May 2024 is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2024 Marshall Dennehey, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.