It is important to remember that there are no absolute safe harbors protecting you from potential liability even when you endeavor to do all the right things when departing your firm. This is true in large part because there are often grey areas within the rules, tensions between those rules and your obligations to your firm, and a disparity between what is in the best interest of the firm versus the client, and even potentially you. In addition, you cannot control the response, behavior and/or motivations of certain firm members that may not want to see you succeed or are angry that clients may leave with you. Yet, making informed decisions, strategically planning and consciously navigating these grey areas helps to mitigate many of these risks.
As stated in part one on this topic, there are two main categories of risk a departing partner faces when considering his/her transition to a new firm. First, the risk that your firm will find out about the potential departure (or departure considerations) prior to the time that you are ready to tell the firm or provide formal notice. Second, the risk that your conduct with respect to your departure plans or considerations will expose you to potential claims by your firm or your clients of unlawful or unethical conduct. Sometimes attorney conduct will potentially implicate both categories of risks. Part two on this topic of mitigating risks analyzes ways to minimize your exposure to potential claims or allegations of misconduct following a partner departure.
Review Your Ethical Obligations to Your Clients Prior to Making the Transition
Regardless of whether you plan to transition any of your current clients to another firm (which most partners plan to do), it is important to understand the scope of your ethical obligations to clients before, during and after any law firm departure. For example, understanding if you are permitted to solicit, communicate with and/or provide notice to clients, and under what circumstances and when, is a crucial component to developing a successful transition plan.
Don’t Use Firm Resources for Your Departure Plans
This is related to the notion of not using firm technology, but is a bit broader, and has a greater potential risk if ignored. You should avoid using any firm resources, include staff, financial information, expense accounts, and other firm proprietary information to further your departure plans. While most firms like to categorize almost any internal or firm used information (even if acquired or developed by other sources or publicly available) as confidential and proprietary, avoid taking anything that is not attorney work product and/or personal information or client-related (subject to client approval) information. And in a world where most firms can easily track anything you access, download or email to yourself, be cautious about doing so. Regardless of whether you believe the firm could legitimately claim any of this information as confidential or proprietary, if you become involved in a particularly contentious departure, you risk exposing yourself to claims of misappropriation of trade secrets, tortious interference and unfair competition (Cal. B&P Code Section 17200). Even if these claims have no merit, they are an expensive distraction. And it is always best to avoid that fight if possible.
Know Your Firm’s Partnership or Shareholder Agreement
Whether you are an equity partner, non-equity partner, shareholder, owner or non-owner, you should be aware of your contractual obligations to the law firm that you are considering departing. If possible (and without causing undue speculation about your potential departure), obtain access to and have someone analyze any agreements you have with your firm. Most agreements provide answers to important questions regarding your notice requirements, how transitions are handled in the firm and how and when your capital will be returned following your departure, among other things. Understanding which provisions are valid and enforceable and which potentially collide with your obligations to your clients or your right to practice law and change firms, is extremely important. Again, you can avoid potential breach of contract claims by properly analyzing these issues in advance of any departure.
Be Mindful of Any Fiduciary Duties to Your Partners
In addition to any contractual obligations you may have to the partners or shareholders of your firm, in all likelihood you have fiduciary duties to these partners as well. In planning and executing a law firm departure, make sure that you understand how your duties of loyalty and care to your partners impact this process. Furthermore, sometimes these duties directly or indirectly conflict with your duties and obligations to your clients and you need to thoughtfully navigate these areas in a way that is ethical and limits your exposure to allegations of breach of fiduciary duty claims.
Plan your Departure Strategically and with Proper Legal Advice
The most important advice for anyone considering transitioning from one firm to another is to plan your departure strategically. When you are first considering making a move, there are many serious issues to consider and work through, but you also have a tremendous amount of control over the process during this period and you should take advantage of this time. In consultation with a knowledgeable attorney, you should develop a transition plan that considers your ethical obligations to your clients and the firm, your fiduciary duties and contractual obligations to your partners, the firm policies and procedure for handling departures and the numerous pragmatic and logistical realities involved in any partner departure. Proper analysis and planning allows you to successfully navigate these grey areas, make informed decisions and to reduce many of the risks inherent in partner departures and lateral moves.
Dena M. Roche
O’Rielly & Roche LLP