Validity of Nonsolicitation Pacts Among Lawyers Shrinks

Cohen and Denberg similarly involved a forfeiture of competition provisions in partnership agreements. Nonetheless, the Nixon court read Cohen to impose a broad duty of inquiry as to “whether the particular provision in question ‘undermin[ed] the prohibition against restraints on lawyers practicing law,’” irrespective of whether it was a partnership or employment agreement.¹¹ It then held Denberg’s statement that “out-right prohibitions on the practice of law are per se illegal” was the dispositive test and declared that the challenged provision, in its opinion, involved an “out-right prohibitio[n] on the practice of law.”¹² Concluding that the principle of “discouraging solicitation” as “an improper interference with the practice of law” has “been woven into the fabric of New York case law,”¹³ it held, as a matter of law, that the nonsolicitation clause in the NDA was unenforceable.

Aiding and Abetting a Breach

The aiding and abetting claim was not based upon the NDA, but rather was a claim that Mr. de Senilhes breached his fiduciary obligation as a partner to “avoid soliciting TWF’s nonequity partners to leave TWF and join NP while he was still a partner of TWF.”¹⁴ In Gibbs, the First Department held that it would not be a breach of fiduciary duty for a partner in law firm to have preresignation discussions regarding a joint move with another partner, but found that the partners in that case did breach their fiduciary duties with respect to their recruiting efforts directed toward associates.¹⁵ Thus the issue on which the Nixon court had to focus was into which category nonequity partners fell. As it noted, there was no case other than Gibbs providing guidance on this subject in the law firm context.¹⁶

In analyzing this issue, it first questioned whether Gibbs really meant to draw “a clear distinction between partners and associates for purposes of the recruitment rule.”¹⁷ Rather, it suggested that the Gibbs’ ruling was “primarily directed to the partner’s breach of fiduciary duty by reason of the prenotification disclosure of the associates salary, bonus and billable hour history to prospective new employers.”¹⁸ Even assuming, however, that Gibbs did clearly draw “a distinction between partners and associates for purpose of the recruitment rule,” it deemed nonequity partners to be governed by the same rules as equity partners for solicitation purposes, at least absent the “aggravating circumstances” of the confidentiality breaches present in Gibbs.¹⁹ In distinguishing nonequity partners from associates, it focused the fact that the nonequity partners were held out to the public as partners and were treated as partners in practicing law.

• Tortious Interference With Contractual Relations and Prospective Economic Advantage. The Nixon court gave short shrift to the tortious interference claims on the grounds that the breach of the nonsolicitation clause, which was alleged to constitute the “wrongful means” required to state such a claim with respect to at will employees was unenforceable. It further held that “wrongful means,” in any event, requires more culpable conduct. Finally, it found that the fact that NP could “establish its own justifiable economic interest in the transaction,” negated any finding that “the sole purpose of NP’s conduct was to harm TWF.”²⁰

• Should the Bar Rely on This Case to Invalidate Nonsolicitation Clauses and Preresignation Solicitation of Nonequity Partners, or Even Associates? As this case is, by the court’s own acknowledgement, the first attempt to set forth rules regarding these issues, the Bar should be cautious about considering this as the definitive word on the subject.

To begin with, the Nixon court focused solely on the public policies of lawyer mobility and client choice of counsel. It did not address the competing policies which the Court of Appeals in Graubard held must be balanced in determining these issues in a case involving the contours of pre-resignation client solicitation:

The Court of Appeals recognized that balancing the fiduciary obligations owed to partners with the fiduciary obligations owed to clients was not an easy task and did not, in that case or since, draw any “hard lines.”²² Noting that “factual variations can be crucial in determining whether an attorney’s duties have been breached,” it instead only set out the “broad parameters”: