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3585340 14 Conflicts Between Lawyers Mcguirewoods LLP and Their Clients: Part II T Conflicts Between Lawyers McGuireWoods LLP and Their Clients: Part II T. Spahn (8/6/15) Hypotheticals and Analyses ABA Master CONFLICTS BETWEEN LAWYERS AND THEIR CLIENTS PART II Hypotheticals and Analyses Thomas E. Spahn McGuireWoods LLP These analyses primarily rely on the ABA Model Rules, which represent a voluntary organization's suggested guidelines. Every state has adopted its own unique set of mandatory ethics rules, and you should check those when seeking ethics guidance. For ease of use, these analyses and citations use the generic term "legal ethics opinion" rather than the formal categories of the ABA's and state authorities' opinions -- including advisory, formal and informal. ______________________ © 2015 McGuireWoods LLP. McGuireWoods LLP grants you the right to download and/or reproduce this work for personal, educational use within your organization only, provided that you give proper attribution and do not alter the work. You are not permitted to re-publish or re-distribute the work to third parties without permission. Please email Thomas E. Spahn ([email protected]) with any questions or requests. 3585340_14 Conflicts Between Lawyers McGuireWoods LLP and Their Clients: Part II T. Spahn (8/6/15) Hypotheticals and Analyses ABA Master TABLE OF CONTENTS Hypo No. Description Page Practice Limitations: Partnership and Employment Agreements 1 Law Firm Non-Compete Arrangements ..................................................... 1 2 Other Law Firm Restrictions ....................................................................... 3 3 Restrictions in Connection with a Law Firm's Retirement Program ....... 17 4 Law Firms' Remedies Against Withdrawing Lawyers .............................. 22 5 In-House Lawyers' Practice Limitations .................................................... 48 Practice Limitations: Settlements 6 Litigation Settlements: General Rule ........................................................ 52 7 Litigation Settlements: Other Possible Provisions .................................. 58 Lawyers Selling Their Law Practice 8 Sale of Goodwill ........................................................................................... 70 9 Selling All or Part of a Law Practice ........................................................... 77 Limiting Liability to Clients 10 Forms of Practicing Law ............................................................................. 79 11 Limiting the Scope of Representation ....................................................... 87 12 "Unbundled" Legal Services ....................................................................... 94 13 Limiting Liability: General Rule ................................................................. 99 14 Limiting Liability: In-House Lawyers ......................................................... 103 Lawyers' Duties to Former Clients 15 Duty to Protect Former Clients ................................................................... 106 i 3585340_14 Conflicts Between Lawyers McGuireWoods LLP and Their Clients: Part II T. Spahn (8/6/15) Hypotheticals and Analyses ABA Master Hypo No. Description Page 16 File Ownership ............................................................................................. 108 17 File Ownership if the Client has not Paid the Lawyer ............................... 140 Clients' Claims Against Lawyers 18 Duty to Disclose Possible Malpractice ...................................................... 151 19 Malpractice Claims: Indemnity/Contribution Claims Against Successor Lawyers ..................................................................................... 159 20 Malpractice Claims: Assignability ............................................................. 163 21 Effect of Clients' Claims: Continued Representation .............................. 168 Resolving Disputes Between Lawyers and Their Clients 22 Agreements to Arbitrate Fee Disputes ....................................................... 175 23 Agreements to Arbitrate Malpractice Disputes ......................................... 180 24 Settlement of Clients' Claims ..................................................................... 185 Non-Clients' Claims Against Lawyers 25 Lawyers' Liability to Third Parties for Negligence .................................... 190 26 Breach of Contract....................................................................................... 224 27 Intentional Wrongdoing ............................................................................... 227 28 Aiding and Abetting the Client's Wrongdoing ........................................... 235 29 Lawyers' Liability for Conspiring with Clients .......................................... 238 30 Clients' Vicarious Liability for their Lawyers' Misconduct ....................... 241 ii 3585340_14 Conflicts Between Lawyers McGuireWoods LLP and Their Clients: Part II T. Spahn (8/6/15) Hypotheticals and Analyses ABA Master Law Firm Non-Compete Arrangements Hypothetical 1 You are starting your own law firm, and want to avoid some of the troubles that you have seen at larger law firms for whom you have worked. Among other things, you would like to have every lawyer joining the firm agree not to work for another law firm in the same city for two years after leaving your firm. May you include such a provision in your partnership or employment agreements? NO Analysis The ABA Model Rules indicate that [a] lawyer shall not participate in offering or making . a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except in an agreement concerning benefits upon retirement. ABA Model Rule 5.6(a). The Restatement has essentially the same prohibition. A lawyer may not offer or enter into a law-firm agreement that restricts the right of the lawyer to practice law after terminating the relationship, except for a restriction incident to the lawyer's retirement from the practice of law. Restatement (Third) of Law Governing Lawyers § 13(1) (2000). A comment explains this provision. [A] lawyer may not offer or enter into a restrictive covenant with the lawyer's law firm or other employer if the substantial effect of the covenant would be to restrict the right of the lawyer to practice law after termination of the lawyer's relationship with the law firm. The rationale for the rule is to prevent undue restrictions on the ability to present and future clients of the lawyer to make a free choice of counsel. The 1 3585340_14 Conflicts Between Lawyers McGuireWoods LLP and Their Clients: Part II T. Spahn (8/6/15) Hypotheticals and Analyses ABA Master rule applies to all lawyers of the firm and prohibits both making and accepting such a restriction. Restatement (Third) of Law Governing Lawyers § 13 cmt. b (2000). Every state has adopted such a restriction -- usually using the identical language. The many court and bar analyses of this provision emphasize the clients' right to hire lawyers of their choice -- which the non-competition provision would inhibit. ABA/BNA Lawyers' Manual on Professional Conduct § 51:1201 ("The restrictions hinder the ability of clients to choose which lawyers they want to represent them, and impermissibly constrain the ability of lawyers to practice law."). Only one state seemed to have taken an opposite approach (at least until the late 1990's). Maine LEO 126 (9/25/92) (explaining that a law firm could require that an associate sign a non-compete as a condition of employment; "It is not a violation of the Bar Rules for a law firm to require or utilize non-competition agreements."; explaining that most states specifically forbid non-competes, but that "no such provision in any form appears in the Maine Bar Rules"). Maine superseded this opinion in a February 1997 rules change. The prohibition on law firm non-competition provisions is another example of how lawyers are treated differently from other professionals, most or all of whom may freely enter into non-competes. Best Answer The best answer to this hypothetical is NO. n 2/12; b 10/14 2 3585340_14 Conflicts Between Lawyers McGuireWoods LLP and Their Clients: Part II T. Spahn (8/6/15) Hypotheticals and Analyses ABA Master Other Law Firm Restrictions Hypothetical 2 As your firm's managing partner, you have asked for recommendations from a partnership committee about how to protect the firm and its clients from harm caused by lawyers suddenly leaving the firm (either individually or in groups). May you include the following provisions in your partnership agreement: (a) Partners must provide a sixty-day written notice of their departure, and forfeit all of their capital in the firm if they leave before the end of the sixty days? YES (PROBABLY) (b) Partners who leave the firm and take clients with them must pay the firm a percentage of those clients' receipts for a one-year period after their departure? NO (PROBABLY) (c) Partners who leave the firm will be responsible for their pro rata share of any lease payments for the law firm's offices (unless the firm is able to replace the departed lawyers with others to occupy the space)? MAYBE Analysis Imaginative law firms have tried numerous tactics to discourage lawyers from leaving their firms and taking business with them. In some cases, the motivation is purely pecuniary, but in other situations the firms act out of concern for the smooth transition of their clients' business. Courts or bars nullify nearly every one of these
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