September 11, 2014
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 Conduct, Formal Opinion 2014-190.) The Committee looked at the scope of duties of both associates and partners (in various positions in the firm) in light of the requirements set forth by California Rules of Professional Conduct, Rule 3-700(A)(2). In essence, the Committee found that in the event of a firm’s dissolution, all attorneys who are employed by, or are partners of, a firm are required to comply with Rule 3-700(A)(2) with respect to the firm’s clients.
The Committee found this to be true regardless of the nature of each attorney’s connection to any specific client or the specific nature of his or her affiliation with the firm. However, the Committee found that the “reasonable steps” an attorney is required to take under the Rule could vary depending on the circumstances of the representation or the particular role the attorney played within the firm and with the client.
Rule 3-700(A)(2) of the Rules of Professional Conduct provides that: A member shall not withdraw from employment until the member has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for employment of other counsel, complying with rule 3-700(D) [concerning the delivery of the client’s papers and property, and refunding advanced fees that have not been earned], and complying with applicable laws and rules.
The hypothetical fact pattern examined by the Committee involved a client that retained a firm to file a complaint six months prior to the firm’s dissolution. Prior to the dissolution, Partner A was the primary partner handling the matter, and an associate did extensive research and development of the claims. When the firm decided to dissolve its partnership, the applicable statue of limitations was approaching for the client’s matter. Partner A joined a new firm and informed the client that he could not take on the matter at the new firm. The associate brought the matter to the attention of Partner B, who had not been involved in the case, but was on the firm’s dissolution committee. The State Bar Committee opined that all three of these attorneys had obligations to comply with Rule 3-700(A)(2) and take “reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client.” In this circumstance, given the pending statute of limitations on the client’s claims, “reasonable steps” may have included the obligation by any of the attorneys to assist the client in finding new counsel and/or to assist the client with the drafting of the complaint, to avoid prejudicing the client’s rights until new counsel could be obtained. The Committee opined that Partner A had not done enough by simply informing the client of his departure and leaving the matter with the dissolved firm. However, the Committee also found that the associate had independent obligations to the client (which may have been satisfied by bringing the matter to the attention of Partner B). Furthermore, the Committee found that Partner B had independent obligations to the client because, as a partner of the firm, he had the obligation to make sure that all of the firm’s client matters were being handled in a way to avoid prejudice to each client under the circumstances.
Although the Committee’s fact pattern dealt specifically with an attorney’s obligation to comply with Rule 3-700(A)(2) in the event of a firm dissolution, Rule 3-700-(A)(2) obligations also adhere to an attorney or partner who withdraws from a firm where the firm’s business remains ongoing. In such circumstances, the attorney must still take “reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client,” including timely and accurate notice to all clients of the change in the attorney’s employment status. (State Bar of California, Committee on Professional Responsibility and Conduct, Formal Opinion 1985-86j.) Even if the attorney does not envision that a client will continue to retain the attorney after his or her departure from the previous firm, the attorney may have specialized knowledge of the client’s matter that requires more communication and assistance to make sure the client’s rights are not prejudiced by the attorney’s move.
It is important to remember that the obligations set forth in Rule 3-700 apply to all attorneys, whether or not they are associates or partners. However, as noted above, what “reasonable steps” an attorney must take to protect a particular client’s rights may vary considerably depending on the circumstances, including the attorney’s relationship to the client and its matter and the attorney’s position within the firm. In addition, sometimes Rule 3-700 obligations intersect with a competing requirement articulated in a firm partnership agreement governing non-solicitation. Before considering any departure, an attorney should consult with counsel to ensure that he/she has the tools to comply with the standards set forth in the Rules of Professional Conduct, the related case law, and any provisions set forth in the departing partner’s own partnership agreement. The Committee’s opinion highlights the need of all attorneys, regardless of their position at their firm, to be extremely mindful of the impact that their departure has on all of the clients that they represent in any capacity.