PRACTICE MANAGEMENT
Somewhat Big Fish Seeks Larger Pond

By Twila B. Larkin

Whether you are in the middle of your practice years or closer to the end of your career, consider three important questions before you take the plunge from a solo or small firm into a larger firm: Who are you, where are you headed, and why? The time for soul-searching is now—not later.

Large law firms are made up of many different personalities. Joining the firm will require your meshing with at least some of them. To assess a law firm’s culture, look first at the personalities of the lawyers in the firm and then at its collective culture. Consider the firm’s reputation, the types of advertising and marketing it does, and generally how many hours its lawyers work.

Next, consider how your areas of practice mesh with the larger firm’s. Think about how you might convince the larger firm that it needs your practice. What do you bring to the table? For example, larger firms are beginning to see the need for an in-house family lawyer to serve their best business clients. Previously they may have referred these cases out.

Conflict checking. The larger firm may worry about possible conflicts of interest. However, a careful review of the rules of conflicts indicates that even if the firm has previously drafted an estate plan or incorporated a business, these matters are not so substantially related to, say, a divorce proceeding for which you were counsel as to preclude later representation of one of the parties. Occasional conflicts will arise between divorce and corporate counsel in the same firm if a party opposes or is substantially involved in a family business. These are more commonly referred to as relationship or loyalty conflicts and should be avoided. However, for the most part, conflicts of interest are rare, and large-firm attorneys with an appropriate client base and firm culture can find it quite helpful to refer business and estate planning clients to competent divorce counsel within the firm, especially if such referrals are rewarded in the firm’s compensation scheme.

Of course, compensation schemes are a large part of many lawyers’ decisions to move to a larger firm. Key things to consider in looking at compensation are: (1) Is compensation linked to dollars brought in; (2) is there a component for bringing a case in but allowing an associate or other colleague to work on it; and (3) is there a component for working on a case that another colleague refers to you within the firm? Find out how the firm arrives at compensation—is it calculated, or is it a popularity contest? Before deciding to move, find out what others in the firm are making and what you might make.

Firm sensibilities. Look closely at the physical surroundings of the firm. Will your office be located adjacent or accessible to the secretary and paralegal? A lawyer who is primarily a litigator might prefer to be situated near other litigators or in a similar practice area. Benefits are another important issue to consider. Typically, big firms offer more extensive benefits because the sheer numbers of employees make it possible to negotiate better packages. Investigate benefits and compare your current coverage with what the new firm has to offer. Review retirement plans, such as pension, 401(k), or profit-sharing plans.

Is it safe? The stability of the larger firm also is a factor. How often has the firm changed names in the past? Has it lost shareholders or associates often? Have a frank discussion with a contact within the firm regarding any major movements. Also review the financial stability of the firm. Is there diversity in either the firm’s clients or its practice areas—if a major client or all the lawyers in a certain practice area leave, can the firm recover? Does the firm have sufficient assets in both receivables and work in progress to meet its short- and long-term liabilities? What is the percentage of noncollected receivables? If there are problems with cash flow, how does the firm handle them?

Some firms use a type of percentage holdback against shareholder or partner compensation on a monthly basis. The holdback funds are then used for short-term cash flow issues; if not used, the funds are paid out to the shareholders or partners on a yearly basis. How often are hold-back monies used and paid back? Does the firm require or expect loans from shareholders, and how often does this happen?

Also investigate whether the firm pays for malpractice insurance and any mandatory bar dues.

Notifying clients. After disclosing your plans to your old firm (if you are not a solo), the first issue to be negotiated will be how to tell your clients. The ABA’s Ethics Committee determined in Informal Opinions 1457 and 1466 that a withdrawing partner or associate could send letters to clients with whom he or she has worked, advising them of a move to a new firm and stating: “I want to be sure that there is no disadvantage to you, as the client, from my move. The decision as to how the matters I have worked on for you are handled and who handles them in the future will be completely yours, and whatever you decide will be determinative.” Note that lawyers should send this letter only after their departure, and send it only to clients for whom the lawyer has worked directly.

Can the left-behind firm somehow restrict the departing lawyer’s right to practice law? The Model Rules of Professional Conduct prohibit noncompete agreements because these limit an attorney’s professional autonomy and the freedom of clients to choose a lawyer. Other issues for a partner to consider are any obligations to the left-behind law firm. If a law firm enters dissolution because a partner is leaving, each partner owes the partnership a fiduciary duty: (1) to keep the firm informed as to all financial information or a lawyer’s attempts to take the firm’s client with him or her; (2) to refrain from using the dissolution of the firm to reap private gain; and (3) to complete the partnership’s unfinished business regarding all existing clients. A well-written partnership or shareholder agreement can avoid many of these problems. According to the ABA/BNA Lawyers’ Manual on Professional Conduct, “Withdrawal and Termination,” it should include “(1) under what circumstances the partnership will dissolve; (2) what notice is to be given to the partnership by a withdrawing partner; (3) notification of clients; (4) retention and/or transfer of client files; (5) compensation of partners upon withdrawal or dissolution; and (6) allocation of responsibility and compensation for winding up unfinished business in the event of dissolution.”

Final billing, receivable, and trust account transfer issues also must be worked out. Usually a cutoff date is established, and a final bill is issued to each client. The money transferred from a trust account of the receivables generated then belongs to the old firm or may belong to the individual attorney if he or she was practicing solo before joining the large firm. The remainder of trust account monies should be disbursed as the client directs. 

For More Information About the Section Of Family Law

- This article is an abridged and edited version of one that originally appeared on page 16 of Family Advocate, Fall 2007 (30:2).

- For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.

- Website: www.abanet.org/family.

- Periodicals: Family Advocate, quarterly magazine with three issues that include how-to articles and current trends in family law for lawyers, and a fourth “Client Manual” issue for lawyers and their clients covering aspects of the divorce process; Family Law Quarterly, a scholarly journal that offers an analytical view of family law issues, including “Family Law in the Fifty States.”

- Books and Other Recent Publications: The Family Lawyer’s Guide to Bankruptcy, 2d ed.;
The Indian Child Welfare Act Handbook, 2d ed.; The Family Lawyer’s Guide to Stock Options; The Military Divorce Handbook; Assisted Reproductive Technology; How to Build and Manage a Family Law Practice; Creating Effective Parenting Plans; The Divorce Trial Manual.

- CLE and Other Educational Programs: The Trial Advocacy Institute offers an intense learning experience and is the nation’s premier trial training program for family lawyers. Other CLE programming includes teleconferences, spring and fall conferences, and our popular Hot Tips program at the ABA Annual Meeting. Past program materials are available for purchase on our website.

- Member Benefits: Discount on Family Law Section publications and CLE materials; Committees on topics such as adoption, custody, law practice management, and reproductive and genetic technologies; Case Update, a monthly digest of family law case decisions around the nation; monthly eNewsletter.

Twila B. Larkin is a certified family law specialist and a fellow with the American Academy of Matrimonial Lawyers practicing with the law firm of Sutin, Thayer & Brown in Albuquerque, New Mexico. She may be reached at .

Copyright 2008

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