Part 2: Ethical Duties That Lawyers and Firms Have to One Another

Ethics Corner Article

Dear Ethics Committee:

I am a partner planning to leave my current firm to join a new firm. Apart from the issues surrounding the division of clients, what duties do I have to my current firm? What duties does my current firm owe to me?

Leaving a law firm, especially one where you are a partner, for a new firm can be a process fraught with personal and professional contentiousness. However, despite these frictions, the transitioning attorney and the firm must each faithfully abide by several duties that each owes to the other to assure that the attorney’s departure does not harm the interests of any clients. General guidance for these corresponding duties can be found in the ABA’s Formal Ethics Opinion #489, Obligations Related to Notice When Lawyers Change Firms (Dec. 4, 2019; the New Hampshire Rules of Professional Conduct (“Rules”); any agreements between the lawyer and the firm; the law of partnerships, business entities, agency, property, and trade secrets; as well as the Restatement (Third) of the Law Governing Lawyers § 9 (2000) (“Restatement”).  This article will focus on the parties’ ethical and fiduciary obligations.

Departing Attorney’s Duties to Firm

Fundamentally, an attorney has fiduciary obligations to his or her firm, as well as an obligation to cooperate with the firm in winding down the attorney’s business.  Restatement (Third) of Agency §§ 8.01-8.09; see e.g., Kramer v. Nowak, 908 F. Supp. 1281, 1292 (E.D. Pa. 1995) (supervising attorney may sue former associate for violation of fiduciary obligations of care and skill).  These obligations include the duty “not to actively exploit their positions within the [law firm] for their own personal benefit, or to hinder the ability of the [law firm] to conduct the business for which it was developed.”  Burke v. Lakin Law Firm, 2008 U.S. Dist. LEXIS 241, *10 (S.D. Ill. Jan 3, 2008).

The attorney must provide reasonably sufficient notice of the transition to the firm.  While there had been a split of authority about whether the departing attorney may notify clients of the attorney’s impending departure before notifying the firm, a 2019 ABA Opinion  concluded that “[u]nder the Model Rules, departing lawyers need not wait to inform clients of the fact of their impending departure, provided that the firm is informed contemporaneously”).  ABA Formal Ethics Op. 489 at 3 (Dec. 2019).   This guidance reversed a 1999 Opinion providing that it is ethically permissible for a departing lawyer to notify current clients before advising the firm of the lawyer’s intention to resign.  See ABA Formal Ethics Op. 99-515 (Sept. 1999).  Relatedly, the lawyer should not solicit firm staff prior to notifying the firm of the lawyer’s impending departure.

The attorney has a duty to cooperate with the firm concerning client files that stay with the firm by updating the incoming attorney, assuring that the file is up to date with all electronic and paper records relating to the representation (taking special care to review text messages and emails), and by continuing to communicate with the firm after the transition as necessary to protect the client’s interest. In addition, a lawyer should ensure that the required documentation for all IOLTA accounts is in the possession of the firm for proper retention. See Rule 1.15; see also NH Supreme Court Rule 50 (2). If the client ultimately follows the departing attorney, the firm would be obligated to follow the standard steps for discharging funds from a client’s IOLTA account and either dispensing the funds to the client or, at the client’s request, dispensing the funds to the departing lawyer to be applied to the client’s account going forward.[1]

Logistically speaking, the attorney must return all firm property, including technological hardware, such as laptops and phones, to ensure that confidential client information is retained by the firm. See ABA Formal Op. 489 at 2. If the attorney used their own devices during their time at the firm, they must ensure that they delete all confidential client information from personal devices for clients not transitioning with the attorney. See id. at 4-5; See generally Rule 1.6(c). The attorney is allowed to keep a list of client names and contact information to allow for conflict screening at their new firm.  See Rule 1.6(b)(5).

A thornier question is presented when the attorney wishes to take files and documents, such as research memos, pleadings, and forms. The law on this is currently emerging and state specific. We have located no New Hampshire cases on point. But the ABA has suggested that the attorney may take copies of documents that “were prepared by the lawyer or considered to be in the public domain.”  ABA Formal Opinion 99-414 (September 8, 1999). However, the ABA Ethics Committee then acknowledging that this area is unsettled and notes that whether it is permissible to remove individual documents likely turns on questions of property, trade secret and intellectual property law. Id. This uncertainty and the possibility of contentious post-departure litigation is yet another reason why it is best for the departing lawyer to work closely with the firm in anticipation of the departure and to keep a positive and honest relationship so that these issues can be worked out by the parties.

Firm’s Duties to Departing Lawyer

A firm owes a reciprocal fiduciary duty to its attorneys, as well as an overall duty to cooperate with a departing attorney’s transition to a new firm. The firm must allow an attorney to provide reasonable notice of their departure.  ABA Formal Op. 489 provides that the firm cannot require unreasonably long notice or otherwise unreasonably delay lawyer’s transition to a new firm. Firms cannot require any kind of non-compete agreement from a departing attorney. See Rule 5.6.

The firm must cooperate in a timely and orderly organization and transfer of client files to departing attorney’s new firm or to the client’s new choice of firm. The firm cannot close off a departing attorney’s access to firm staff, email, or associate attorneys during the transition as that would hinder the departing attorney’s representation of current client matters. The firm and lawyer should determine how best to handle new client matters that emerge during lawyer’s departure transition period. The firm must timely account and settle any remaining financial obligation to the attorney. See generally, ABA Formal Op. 489.

Conclusion

Rule 5.1(a) requires a firm to have measures and policies in effect to reasonably assure that all lawyers in the firm conform with the Rules. Simultaneously, each lawyer has the independent obligation to diligently and competently represent current clients and protect the interest and confidentiality of past clients. Lawyers and firms are both best served by having specific established policies regarding departures and transitions including notice periods, technological device access, and agreements on contact with current clients. Such policies will establish the expectations and obligations between the lawyer and firm. The best course of action for both the lawyer and the firm is to cooperate with one another to ensure that the transition is quick and orderly to the benefit of all involved, most importantly, the clients.

[1] The New Hampshire Attorney Discipline Office has a helpful set of ethical guidelines relating to IOLTA accounts. It can be found at https://nhattyreg.org/NHADO%20Client%20Trust%20Accounting%20Guidelines.pdf.

This Ethics Corner Article was submitted for publication to the NHBA Board of Governors at its May 20, 2021 Meeting. The Ethics Committee provides general guidance on the New Hampshire Rules of Professional Conduct and publishes brief commentaries in the Bar News and other NHBA media outlets. New Hampshire lawyers may contact the Committee for confidential and informal guidance on their own prospective conduct or to suggest topics for Ethics Corner commentaries by emailing the Ethics Committee Staff Liaison.