In December, the American Bar Association's Committee on Ethics and Professional Responsibility issued Formal Opinion 489 (Formal Opinion 489 or the Opinion). Formal Opinion 489 confirms and solidifies the rights and obligations concerning transitioning lawyers from a legal ethics perspective.

The Opinion, for the most part, does not resolve any previously unsettled issues, but instead presents clear and concise explanations of the ethical rights and obligations of departing partners and their law firms and offers some useful suggestions. Particularly helpful is Opinion 489's application of the ethical rules and prior opinions to common issues encountered in law firm partner transitions, such as notification to clients, servicing client matters during transition, and the enforceability of notice provisions. The entire opinion is worth reading and should be attended to by lawyers contemplating leaving their firms as well as law firm partners and/or general counsels in anticipation of potential partner departures. In this column, we provide a summary and our analysis of Formal Opinion 489.

Formal Opinion 489

The Opinion's opening two sentences aptly set the stage for and reflect on our current professional and business environment: "Lawyers have the right to leave a firm and practice at another firm. Likewise, clients have the right to switch lawyer or law firms … ." ABA Formal Opinion 489 at 1. The Opinion also, at least implicitly, recognizes what the New York Court of Appeals referred to as "a modern-day law firm fixture: the revolving door." Graubard, Mollen, Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112 (1995).

Protecting Clients' Rights

The Opinion then goes on to discuss how clients' rights are best addressed in this process, and summarizes its task as follows: "This opinion discusses the ethical obligations of both a departing lawyer and their former firm in protecting client interests during the lawyer's transition. Such ethical obligations include providing the firm with sufficient notice of the intended departure for the firm and departing lawyer to notify clients, work together to ensure that the transition of files as directed by clients is orderly and timely, return firm property, update remaining firm staff/lawyers, and organize files that clients authorize to remain with the firm." ABA Formal Opinion 489 at 1.

Notifying Clients of the Departure

Based upon lawyers' obligation to represent clients competently and diligently, in Rule 1.3, and to communicate with clients in a timely manner, pursuant to Rule 1.4, departing lawyers and law firms have the obligation to promptly notify clients of the change in a lawyers' affiliation, which cannot be restricted. The Opinion states that: "Law firms may not restrict a lawyer's prompt notification of clients, once the law firm has been notified or otherwise learns of the lawyer's intended departure." Id. at 2.

No Interference With Departing Partner's Competent Representation

A firm also cannot interfere or impede a departing partner's ability to represent clients competently. The Opinion states that lawyers: "must have access to adequate firm resources needed to competently represent the client during any interim period. For instance, the lawyer cannot be required to work from home or remotely, be deprived of appropriate and necessary assistance from support staff or other lawyers necessary to represent the clients competently, including access to research and drafting tools that the firm generally makes available to lawyers. A lawyer cannot be precluded from using associates or other lawyers, previously assigned to a client matter or otherwise normally available to lawyers at the firm to represent firm clients competently and diligently during the pre-departure period." Id. at 6-7.

'Clients Are Not Property'

The Opinion also suggests that departing lawyers and their former law firms coordinate their efforts, if necessary, to protect clients' interests. Id. at 4. While sometimes in the emotional world of partner departures this coordination is difficult and clients can be mistreated or treated as "merchandise," lawyers and law firms are reminded to keep their wits about them and ensure that the clients are not prejudiced by an impending move. A well-established—almost 80-year-old—ethics opinion, and the 2019 Opinion make this point well.

In 1943 the New York County Bar Association issued an opinion which has had long-lasting ramifications. In it the Bar Association stated:

[c]lients are not merchandise. Lawyers are not tradesmen. They have nothing to sell but personal service. An attempt, therefore, to barter in clients, would appear to be inconsistent with the best concepts of our professional status.

Formal Opinion 489 reiterated and endorsed the fundamental idea that:

Clients are not property. Law firms and lawyers may not divide up clients when a law firm dissolves or a lawyer transitions to another firm. Subject to conflicts of interest considerations, clients decide who will represent them going forward when a lawyer changes firm affiliation.

ABA Formal Opinion 489 at 3.

Notice Provisions

Today, most written law firm partnership agreements include a notice provision by which, prior to departure, a lawyer and/or the firm must provide notice of the termination of a partner from the firm. The Opinion maintains that "agreements may request a reasonable notification period, necessary to assure that files are organized or updated, and staffing is adjusted to meet client needs." Id. at 5. But the Opinion also warns that "these notification periods cannot be fixed or rigidly applied without regard to client direction, or 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." Id.

The Opinion then analyzes New York Court of Appeals case law, which has concluded that a significant monetary penalty on a departing lawyer who remains in private practice violates Rule 5.6, which bars agreements that "restricts the right of a lawyer to practice after termination" from a firm. The Opinion warns against unreasonable notice provisions, although the notice period occurs prior to termination, and concludes on this point that:

There is no meaningful distinction for the purposes of Rule 5.6 between an agreement provision that imposes a financial disincentive to a competitive departure irrespective of the pre-departure notice requirements and a provision that imposes a financial disincentive for the failure to comply with a fixed, pre-established notice period that extends beyond the time necessary, generally or in a particular case, to ensure an appropriate transition, as discussed above. "Although 'reasonable' notice provisions may be justified to ensure clients are protected when firm lawyers depart, what is 'reasonable' in any given circumstances can turn on whether it is truly the client's interest that is being protected or simply a thinly disguised restriction on the right to practice in violation of RPC 5.6(a)." Moreover, to the extent that a firm routinely waives the full notice requirement, enforcement in a particular instance is problematic when used to penalize a lawyer who leaves to compete with the firm.

Id. at 6 (citing Mark J. Fucile, Moving On: Duties Beyond the RPCs When Changing Law Firms, Or. St. Bar Bull. (June 2013)).

Conclusion

Law firm partners are permitted to depart from their law firms, and clients get to choose who their counsel will be. Law firms and lawyers need to ensure that the rights of clients are protected even (and perhaps especially) when a lawyer's departure becomes contentious. Formal Opinion 489 provides helpful insight on how law firms and departing partners can accomplish this important goal and is, therefore, well worth reading.

Arthur J. Ciampi is the co-author of the treatise 'Law Firm Partnership Agreements' and is the managing member of Ciampi LLC. Maria Ciampi, of counsel to the firm, assisted in the preparation of this article.