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January 29, 2020 Articles

A Red Line at Last: ABA Formal Opinion 489 (2019)

Law firms must now take care to enable the process of changing firms to happen smoothly, without overreaching or coercion—or risk the consequences.

By Ronald C. Minkoff

As the business environment in which law firms operate becomes more competitive, lawyer movement from one firm to another has become more fraught. Law firms have revised their partnership and shareholder agreements to discourage partners from leaving. They have implemented longer notice periods, extended the time period for return of capital, restricted departing partners’ ability to notify and/or solicit clients, and have even restricted departing partners’ access to firm email systems—all to discourage these partners from competing.

Is any of this ethical? Mostly, no. In ABA Formal Opinion 489, issued on December 4, 2019, the ABA Standing Committee on Ethics and Professional Responsibility drew a red line prohibiting some of these anti-competitive practices. It addressed four important areas, many for the first time:

Notice periods. Opinion 489 goes where no ethics opinion had gone before, prohibiting the 30-, 60-, or 90-day notice periods found in most law-firm partnership agreements. According to the committee, while firm partnership agreements “may request a reasonable notification period, necessary to assure that the files are organized and updated and staffing is adjusted to meet client needs, . . . lawyers cannot be held to a fixed notice period.” (Emphasis added.) Just as strikingly, the committee directs that notice periods “cannot be . . . used to coerce or punish a lawyer for electing to leave the firm, nor may they serve to unreasonably delay the diligent representation of a client.” The committee could not be clearer on this point: “The lawyer cannot be required to work from home or remotely, or deprived of appropriate and necessary support staff or other lawyers necessary to represent the clients competently,” or cut off from the internet or online research tools. In short, firms may no longer treat a notice period like a gardening leave, preventing departing lawyers from servicing or contacting clients while the firm attempts to keep the lawyer’s business for itself.

Notifying clients of an impending departure. The committee made clear that lawyers have an obligation to promptly notify their clients of an impending move to another firm. Moreover, their law firms may not prevent them from doing so. Repeating advice from an earlier opinion, ABA Formal Opinion 99-414 (1999), the committee said “the departing lawyer and the firm each may unilaterally inform clients of the lawyer’s impending departure” at or around the same time the departing lawyer gives notice to the firm. While the committee recommends that the departing lawyer and the firm negotiate a joint letter to the clients, that is not required, and if “the firm and the lawyer cannot promptly agree on the terms of a joint letter, [the firm] cannot prohibit the departing lawyer from soliciting clients.”

“Ownership” of firm clients. Partnership agreements often state that clients belong to the firm, not any individual lawyer. Opinion 489 emphasizes that this is just not so: “Clients are not property. . . . Clients decide who will represent them when a lawyer changes firm affiliation.” This has two important corollaries. First, departing lawyers and their firms must both explicitly give clients being solicited a choice of staying at the current firm, following the departing partner to the new firm, or going to another firm entirely. Second, law firms may not, after the departing lawyer gives notice, unilaterally staff a case the departing lawyer was handling with new lawyers in an effort to keep the client, at least not without the client’s express permission.

Protecting clients who remain behind. The firm must have procedures to protect the confidential information of clients who remain, by requiring “departing attorneys [to] return and/or delete all client confidential information in their possession, unless the client is transferring with the departing attorney.” Op. 489. This includes having the ability to wipe a lawyer’s devices, including phones, tablets, and laptops.

Opinion 489 reiterates that the underlying policy behind the Model Rules is to allow lawyers and clients to move from firm to firm. Law firms must now take care to enable that process to happen smoothly, without overreaching or coercion—or risk the consequences.

Ronald C. Minkoff is the chair of the Professional Responsibility Group at Frankfurt Kurnit Klein & Selz, P.C. in New York, New York.  He is cochair of the Attorney Liability Subcommittee of the ABA Section of Litigation Professional Liability Committee.

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