Don’t Let The Screen Door Hit You: The Ethics Of Switching Firms

Michael E. McCabe, Jr.Confidentiality, Deceit, IP Ethics, Law Firm Breakups, Patent EthicsLeave a Comment

You are sitting at your desk when the phone rings.  It’s a head hunter. The caller tells you about an amazing opportunity with another firm across town.  That call starts a series of calls and meetings.  Eventually, the new firm offers you a position.  There are, however, two strings attached.  First, the new firm expects you to generate a certain level of revenue.  Second, the offer is contingent upon clearing conflicts of interest.

You will need to disclose information to the new firm in order to get the job.  But the new firm is also asking questions that implicate your ethical and legal duties, including the duty of confidentiality owed to clients and fiduciary or contractual obligations owed to your present firm.

What can you do?  What can’t you do?  How does the lawyer cross the road without getting run over by a Mack Truck of alleged ethics violations or civil claims?  The following is a list of common questions lawyers might consider asking when they are contemplating a switch to another firm.

What does my firm’s partnership agreement say?

Step one in any withdrawal analysis is to read your agreement with your existing law firm.  It is quite common for partnership or employment agreements to include provisions triggered by a lawyer’s departure.  An agreement that purports to prohibit a lawyer from competing or soliciting clients will violate ABA Model Rule 5.6, which is adopted in every state and prohibits a lawyer from “offering or making” an agreement that “restricts the right of a lawyer to practice after termination of the relationship.”

Most firms are smart enough not to include such blatant non-compete agreements.  Sometimes, however, a firm will economically punish a lawyer who departs to compete.  For examples, some agreements will reduce equity valuation or forfeiture of profits the lawyer earned while still employed.  Whether such provisions are ethical and enforceable tends to be a matter of degree—the more extreme or harsh the economic terms, the more likely the provision will be viewed as a de facto non-competition agreement.

What can I say to the new firm about my current clients?

Generally speaking, a lawyer is prohibited by their state’s equivalent of ABA Model Rule 1.6(a) from revealing information relating to the representation of a client, unless the client gives informed consent or the disclosure is impliedly authorized.  This rule, therefore, would seem to prohibit a lawyer who seeks to switch firms from identifying clients and matters to their new firm, thus making it impossible for the new firm to pre-screen new hires for potential conflicts. Such a rule, however, is untenable since it would render “impossible” compliance with the ethics rules requiring law firms to avoid conflicts of interest with current clients (Rule 1.7), former clients (Rule 1.9), and the rule imposing imputed qualification of a firm based upon any one lawyer’s conflict (Rule 1.10).  See Disclosure of Conflicts Information When Lawyers Move Between Law Firms, ABA Formal Op. 09-455 (Oct. 8, 2009).  As the ABA guidance notes, “[i]n most situations involving lawyers moving between firms, however, lawyers should be permitted to disclose the persons and issues involved in a matter, the basic information needed for conflicts analysis.”

To comply with the requirements on protecting confidentiality, a lawyer looking to clear clients with a new firm should disclose only information that is “reasonably necessary” for the purpose of detection and resolving conflicts of interest.  That information would typically include the names of the clients, adverse parties, and issues involved in the relevant matter.

Can I make departure plans without telling my firm?

As a general rule, an attorney may take steps to “transition to” or set up a new law firm while still employed at a previous law firm.  See The Restatement of the Law (Third) of The Law Governing Lawyers, sec. 9, cmt. i (2000) (an attorney may take steps to transition or set up a new firm while still employed at his or her previous firm).  As the New York Court of Appeals made clear in Graubard Mollen Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112 (1995), attorney conduct in transitioning to a new firm lies on a spectrum, and “[a]t one end of the spectrum, where an attorney is dissatisfied with the existing association, taking steps to locate alternative space and affiliations would not violate a partner’s fiduciary duties.”  Id. at 120.  This preparatory conduct includes things such as leasing office space, incorporating, creating a firm name and letterhead, reserving a URL, obtaining malpractice insurance, and similar steps.

What can I say to clients before I tell my law firm?

Lawyers who are still employed with their law firm must be careful about what they say to clients and when.  A lawyer owes a fiduciary duty to their employer.  In the law firm context, this means that a lawyer should not solicit an existing or prospective firm client to leave the firm and join them at a new firm before announcing their planned departure to their existing firm.  Such conduct—commonly referred to as “grabbing” clients—is frowned upon by some ethics regulators, who may consider the practice dishonest and an improper solicitation.

In its 1999 guidance on how lawyers might appropriately communicate with clients before the lawyer announces their intention to depart from the firm, the ABA advised that the departing lawyer’s notice should:

  • be limited to current clients in active matters the departing lawyer has direct responsibility for;
  • not urge the client to sever its relationship with the firm, but may indicate the lawyer’s willingness to continue his or her responsibility for the matters upon which the lawyer is currently working;
  • not disparage their firm; and
  • make clear that the client has the ultimate right to choose counsel.

On the other end of the spectrum, some forms of conduct may be considered a breach of fiduciary duty. Such conduct includes secretly attempting to lure firm clients (even those the partner has brought into the firm and personally represented) to the new firm, lying to clients about their rights with respect to the choice of counsel, lying to partners in the existing firm about plans to leave, and taking client files.

Should I send a joint notice to firm clients?

The ABA’s 1999 guidance notes, and many commentators agree, that the best practice is for the departing lawyer and their firm to issue a joint communication to clients.  This approach has the benefit of both sides buying into the substance of the notice.  And it might also be seen by clients as a more professional way of communicating a lawyer’s intended departure.

Can I take client files?

Many lawyers believe they have a proprietary interest in the clients they represent, including the client’s work product.  But the clients’ files are client property—they belong only to the client.  Thus, the departing lawyer should not take or duplicate client files.  If after notice the client determines they desire to transfer their business to the departing attorney’s new law firm, then the client can very simply notify the old law firm to transfer their files.  Lawyers should not take it upon themselves or presume they have some inherent “right” to client files.

Can I take firm forms and templates?

Departing lawyers may also have access to files that are probably more appropriately considered to be firm property.  This could include things such as firm forms, templates, checklists, manuals, and similar materials.  Such files could also include general firm lists, like master client contact folders.  Such files are property of the firm and may even be considered trade secrets.  Departing lawyers should avoid making copies of such files and documents with them.

What can I say after I have told my law firm of my departure?

Once a lawyer has announced their departure plans, the lawyer and the firm are considered to be on a level playing field when it comes to retaining a particular client’s business.  Both are generally free to communicate with existing clients and pitch the client’s business.  While a joint notice may still be the preferable way to go, sometimes a joint notice is impossible or impractical to achieve.  Still, even in this context, both the departing lawyer and law firm should be mindful not to disparage the other.

What else should I do?

Get educated.  The ABA’s guidance is not followed by every jurisdiction.  Moreover, many states have developed a robust body of common law and ethics opinions specific to those who practice in that jurisdiction.  See, e.g., W. Outten & C. Greene, Jumping Ship: Ethical Considerations in Lateral Movements (Nov. 9, 2013), A lawyer contemplating a lateral move to another firm should familiarize themselves with the specific rules of conduct and ethical norms adopted by the rules of the jurisdiction in which the lawyer practices or intends to practice.

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