Trends and Analysis on Significant Issues Related to Law Firm Transitions, Partner Departures and Dissolutions
Partner departures and lateral moves can create winning scenarios for both the partners and the firms. But taking a disciplined approach to projecting the performance of any practice is the key to avoiding potential unpleasant surprises for both sides.
It is critically important to respond to partner departures in the right way. But like any risk management analysis, it is not enough to put protections in place to react. To manage the firm properly, you also must analyze whether the firm's culture is aligned with the goal of retaining talented partners in the first place.
For law firm partners, most departures issues are foreseeable and manageable with planning and preparation.
Law firms are full of lawyers, so why would a firm full of lawyers need its own counsel? Lots of reasons, it turns out.
Well-managed firms try to anticipate situations that can lead to partner departures to prevent departures or to manage them. However, the starting point is to know what can trigger partner departures.
The best risk management approach for partner departures is to prevent the right partners from wanting to leave the firm in the first place. For the others, well, they should go.
Law firms have a range of options to reduce the likelihood of partner departures and to ethically and thoughtfully protect the firm when they occur.
Succession planning for your law practice is more than just prudent preparation. It is imperative to protect client interests, is good business, and protects the value of one of your most significant assets.
In a year full of law firm transitions, departures, and dissolutions, more change is surely on the horizon. This is still the perfect time to add a critical item to your list: Set the goal of reviewing your law firm’s risk management in a systematic way this year.
Law firms are not entitled to future profits from the firm’s clients as an ongoing property right, but this does not mean that the law firm can't do anything to protect themselves in the event of a departure.
While it is a good practice for any law firm to periodically assess its exposure to potential partner departures, the pandemic’s impact on law firms has made this task more important than ever.
Does your firm have Non-Equity Partners? Of Counsel, Consulting, or Contract Attorneys? All of the above? What is the nature of their relationship with the firm, and how are they compensated?
As the legal industry continues to adjust to life during a pandemic, things are still changing every day as law firms make economic and other adjustments to their traditional ways of doing business. And all this change is likely to lead to even more change. As a result, we will continue to see law firm […]
As the legal industry continues to adjust to life during a pandemic, some law firm transitions and transformations inevitably will lead to law firm closures and dissolutions. But is dissolution always the best option? And will its partners and clients be protected?
We read the news daily of law firms – big and small – announcing cutbacks, furloughs, layoffs, reductions in salaries, and distribution freezes. Every industry has been feeling the impact of this global pandemic, and the legal industry is no different. As lawyers who inherently crave predictability, it is difficult to conceive of when and […]
Although we routinely see headlines about partner and group departures, especially during this time of the year, the ABA’s recent ethic’s opinion on obligations for lawyers changing firms (ABA Formal Opn. 489, December 4, 2019) received much less attention. Law firms should have taken notice, however, because the opinion represents some significant new thinking on […]
The new California Rules of Professional Conduct are now in effect and have changed how law firms and lawyers must identify and analyze conflicts when considering lateral hires. As we have previously reported, the new rules have a tremendous impact on all California attorneys, including for law firms and lawyers navigating attorney departures and law […]
As most of you likely know by now, on November 1, 2018, the new California Rules of Professional Conduct will go into effect changing the regulation of the practice of law for all California attorneys. The significant changes to the prior rules and the enactment of some entirely new rules will have a tremendous impact […]
In the world of lawyers and law firms, attorney mobility is a continuing reality. Thoughtful lawyers who plan to depart their law firms are prudently getting advice on how to comply with their legal and ethical obligations to the firm and to their clients as part of the departure process. Law firms that have comprehensive […]
A recent legal ethics opinion from North Carolina provides interesting insight into the ethics of a non-solicitation agreement between law firms that restricts attorney mobility but not necessarily a client’s choice of counsel. The North Carolina 2017 Formal Ethics Opinion No. 5 analyzed the issue of whether two law firms could enter into a non-solicitation […]
Partner or group departures seldom go smoothly – at least that is what we hear in the legal news headlines. However, the transitions that do go well, and there are many of those, tend not to be newsworthy events. Most of us tend to be interested in the salacious details of where it all went […]
Are you Really a Partner? Non-Equity or Income Partners May Have Unique Issues During a Departure or Lateral Move
In today’s legal world, the traditional view of what it means to be a “partner” seems to be ever-changing. As more law firms move from two-tier to multi-tier partnerships, the question of what it truly means to be a non-equity, income, or salaried partner is becoming an increasingly important issue. Specifically, during any partner departure […]
Mitigating Risks During Departure, Part 2: Minimize Exposure to Potential Claims Following a Partner Departure
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 […]
Taking the plunge to embark upon an attorney transition inherently involves some risk. Like with most things, some of the risk you can control, some may be outside of your control. However, taking steps to mitigate risk whenever possible will reduce the likelihood that you are subject to ethical scrutiny, disputes with the firm or […]
In an important order that impacts the field of partner departures nationwide, a district court judge in the the Eastern District of Virginia held that a provision in a law firm’s operating agreement that provides that a withdrawing partner who “takes clients” forfeits up to fifty percent of his equity in the firm is void […]
Earlier this month, California’s Fourth District Court of Appeal agreed with an Orange County trial court that several emails sent by a departing partner to clients and former clients announcing his departure to a new firm did not qualify as protected speech under anti-SLAPP laws. Although the Court of Appeal’s opinion was unpublished, the Court […]
Court Found No Conflict of Interest with Dual Representation of Law Firm and Partner Against Claims from Departing Partner Shareholder
Earlier this year, California’s Fourth District Court of Appeal found that a partner’s status as 50% shareholder of a law firm did not give rise to a conflict of interest which would preclude the firm’s counsel from defending the firm and another partner against the departing partner’s lawsuit. (See Coldren v. Hart, King & Coldren […]
Are Recent Ethical Rules that Establish Attorney Notification Protocols For Departing Attorneys Really in the Best Interest of the Clients?
Earlier this year, the Virginia State Bar enacted a new ethical rule governing how attorneys and law firms should notify clients in the event of an attorney departure or firm dissolution. The new rule, Rule 5.8 of the Virginia Rules of Professional Conduct, is an effort by that state to regulate what it viewed as a […]
Perhaps the single biggest factor partners underestimate when transitioning their practice to a new firm, or starting a new practice, is the emotional impact of the move. Even those who consider themselves stoic and rational by nature are often caught off-guard by how highly emotional this transition can be, for both the departing partner and […]
Departing Partners And Potential Conflicts With Current And Former Clients: The Featured Role Of The “Substantially Related” Test In Two Recent Disqualification Decisions
In the space of fifteen months, the Northern District of Texas and the District Court of Delaware have each issued significant attorney disqualification orders. In both cases, the “substantially related” test regarding past and present representations had a featured role in the courts’ decisions to disqualify the same California law firm from significant patent cases. […]
Nelson Levine v. Lewis Brisbois Just Settled: Firm Laptops and the Computer Fraud and Abuse Act – Lessons from A Recently Resolved Attorney Departure Case
As many attorneys who follow partner departures and lateral moves know, in 2014 a group of attorneys at Nelson Levine De Luca & Hamilton, LLC (“Nelson Levine”) in Montgomery County, Pennsylvania, left the firm to join Lewis Brisbois Bisgaard & Smith LLP (“Lewis Brisbois”), a California limited liability partnership. This departure resulted in litigation that […]
Partner Departures and Golden v. California Emergency Physicians Medical Group: Does California’s Business and Professions Code § 16600 Void Any Partnership Provision that Restricts a Departing Partner’s Right to Compete?
The Ninth Circuit’s recent decision, filed April 8, 2015, in Golden v. California Emergency Physicians Medical Group (9th Circuit) Case No. 12-16514, has potentially far-reaching implications for what is deemed to be an unlawful professional restraint in violation of California’s Business and Professions Code § 16600. In closely examining the statute, the Ninth Circuit concluded that the reach of § 16600 […]
If you are a partner in a law firm, your partnership agreement is the key document that defines your rights and obligations as a partner. It can govern everything from how you get paid, to how the firm is managed, to what liabilities you have agreed to assume. In addition, it most likely has specific […]
Best Practices For Firms In Considering Whether to Provide a Departing Attorney with a Copy of His or Her Entire Mail Folder upon Departure from the Firm
Once a firm is given notice from a departing partner that the partner plans to leave the firm, there are a myriad of issues that need to be resolved prior to, and following, the partner’s actual departure. One important issue relates to the handling of the departing attorney’s email once he or she leaves the […]
The Obligations of Departing Attorneys to Avoid Prejudice to Clients Upon Firm Dissolution or Withdrawal Analyzed in California State Bar Opinion
The State Bar of California’s Standing Committee on Professional and Responsibility and Conduct’s (the “Committee”) first Formal Opinion for 2014 addresses the duties of an attorney to former clients when that attorney will no longer be representing a client following the dissolution of the attorney’s firm. (State Bar of California, Committee on Professional Responsibility and […]
Significant Victory in Challenge Against Unfinished Business Rule’s Application to Hourly Fee Matters in California
On June 11, 2014, U.S. District Judge Charles Breyer issued a significant ruling in favor of several large law firms in the ongoing fight regarding whether and if a dissolved law firm has the right to profits from unfinished legal work its former partners brought to their new firms. In his Order granting summary judgment in favor […]
Bankruptcy Court finds that Unfinished Business Rule is Valid in California and May Apply to Hourly Rate Matters
There has been a lot of recent press about the validity of Unfinished Business Claims in California (also known as Clawback claims) following a ruling earlier this year by U.S. Bankruptcy Judge Dennis Montali in San Francisco related to the Howrey, Simon, Arnold & White LLP (“Howrey”) bankruptcy. At issue, was whether the trustee of […]
Ethical Obligations Regarding the Use and Handling of a Law Firm’s Domain Name upon a Partner Departure and Change In the Firm’s Name
An interesting ethics issue is being considered by the Virginia State Bar with respect to whether and how a firm can continue to use its URL after a partner departure when the URL contained the former partner’s name in it and the firm’s name has changed. At present, the Virginia State Bar Standing Committee on […]
Law Firms have Ethical Obligations with Respect to the Handling of a Departing Partners Email Communications and Account
According to the Philadelphia Bar Association’s Professional Guidance Committee, ethical rules permit a law firm to review a departing partner’s emails in order to determine what emails should be forwarded to the departing partner and what emails relate to current firm matters of which the law firm should be aware. (See Philadelphia Bar Association Professional Guidance […]
Absent an Agreement to the Contrary, the California Uniform Partnership Act Controls the Scope of a Departing Partner’s Liability to a Former Partnership for Partnership Obligations Incurred by the Firm after Partner Dissociation
A significant issue for departing partners is to understand and evaluate the scope of any potential liability he or she may have to their former partnership once the departing partner provides notice of departure and dissociates with that partnership. In some instances, partnership agreements set forth specific terms upon which a departing partner may continue […]
Departing Partners Must Properly Navigate California’s Uniform Trade Secrets Act When Making a Lateral Move to a New Firm
A departing partner must be familiar with and properly navigate California’s Uniform Trade Secrets Act (Civil Code Section 3246 et seq.)(“UTSA”), which governs misappropriation of trade secrets, when informing clients of a move to a new firm. In the seminal 2004 case Reeves v. Hanlon (2004) 33 Cal.4th 1140, the California Supreme Court defined the scope of the […]
Not long ago client files consisted only of hard-copy documents in physical file folders and typically contained filed briefs, discovery, transcripts, correspondence and memoranda of law. While there was a split in authority on whether attorney notes and drafts should be included as part of a client’s file, the California Rules of Professional Conduct states that essentially […]
A substantial body of case law and ethics opinions addressing the handling of client files has developed over the years surrounding the concept that a client’s file is a client’s property. (Rose v. State Bar (1989) 49 Cal.3d 646.) This notion is based on the underlying idea that clients may discharge an attorney at any time, […]
According to the California Supreme Court in Edwards v. Arthur Andersen, There is No “Narrow Restraint” Exception to General Rule Voiding Noncompetition Agreements
As a general rule under California law, contracts that restrict or penalize competition among former employees and employers are void and unenforceable under Business & Professions Code Section 16600. In Edwards v. Arthur Andersen, the California Supreme Court examined the issue of whether or not there was a “narrow restraint” exception to this general rule, which would […]
California Supreme Court and Non-Compete Provisions in Partnership Agreements: Howard v. Babcock Holds that Partners Imposing a Reasonable Toll on Departing Partners who Compete with the Firm is Enforceable
Prior to considering departing from an existing partnership, a partner needs to give careful consideration and analysis to any non-compete agreement or restrictions on his/her right to practice law imposed by the existing partnership agreement. Understanding these types of provisions and their potential enforceability can properly shape a departing partners strategy for departure and help to minimize […]
California Rules of Professional Conduct: Responsibilities and Restrictions on Departing Partners in Communication and Solicitation of Law Firm Clients
The California Rules of Professional Conduct place restrictions on an attorney’s conduct in soliciting clients for employment. The Rules define “solicitation” as “any communication concerning availability for professional employment of a member (of the State Bar of California) or law firm in which a significant motive is pecuniary gain,” whether in person or by telephone. (Cal. […]
About the Author
Dena Roche is a trusted advisor to California law firms and law-related businesses, helping her clients understand, prepare for and resolve the critical issues facing law firms every day. She acts as outside general counsel to law firms, and provides counsel on legal ethics, law firm structures, policies, transitions, and dissolutions.
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- Attorney Conflicts
- Claims Relating to Partner Departures
- Client Solicitation
- Departure Considerations
- Ethical Obligations
- Fiduciary Duties
- Handling of Client Files
- Lateral Hiring
- Law Firm Dissolutions
- Law Firm Formations
- Law Firm Transitions
- Non-Compete Clauses
- Partner Departure Tips
- Partnership Agreements
- Post-Departure Considerations
- Pre-Departure Considerations
- Providing Notice of Departure
- Separation Agreements