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Bell: 3 things to know when leaving a law firm

November 19, 2014

3 things-bell onlyAccording to the all-reliable Internet, the economy is improving. That may mean lawyers will soon be moving from their secure jobs to (possibly perceived) greener pastures. The act of leaving a law firm implicates several Rules of Professional Conduct that both law firm management and departing attorneys should be aware of. Here are three things to know about leaving a law firm.

1. The client’s choice: Should I stay or should I go?

Clients don’t belong to a law firm. They are the kind of free agents that the Steinbrenner family cannot buy. For example, Rule 5.6 of the Indiana Rules of Professional Conduct prohibits “non-compete” agreements when an attorney leaves a firm. The rationale for this is stated in 5.6’s Comment: “[a]n agreement restricting the right of lawyers to practice after leaving a firm … limits the freedom of clients to choose a lawyer.” Ind. Prof. Cond. R. 5.6, cmt. [1]. So the client has three choices when a lawyer leaves for another law firm: (1) the client can stay with the current law firm; (2) the client can depart with the departing lawyer; or (3) the client can go with a different law firm altogether.

In order to fulfill an attorney’s duty to communicate under Rule 1.4 of the Indiana Rules of Professional Conduct, the client should be notified as soon as possible about the departing lawyer’s plan to leave the firm. According to American Bar Association Opinion 99-414, “best practices” include the firm and the departing lawyer sending a joint letter to all affected clients. This letter should notify the clients that the departing lawyer is leaving, where that lawyer is going and that the client has the aforementioned choice. The client should then notify the firm and the departing lawyer of his or her choice. The client’s notification should be in writing to help avoid disputes.

2. A departing lawyer should not make cold calls.

The clients to be notified do not include clients who the departing lawyer does not know. Too often, the management of a firm finds out that the departing lawyer has solicited the lawyer’s clients, as well as the rest of the firm’s clientele. This practice is akin to “ambulance chasing” and is prohibited by Rule 7.3(a) which prohibits, in part, an attorney from contacting a prospective client if the attorney has no “prior professional relationship” with the client.

3. Where does the money go if the client leaves the old firm with the departing lawyer?

If the client is being billed hourly, the answer is easy. If the work took place while the lawyer was at the old firm, the money goes to the old firm and vice-versa. But what if it is a contingent fee case and the case is not over when the client leaves with the departing lawyer? Well, that is more complicated.

A similar situation took place in Galanis v. Lyons & Truitt, 715 N.E.2d 858 (1999), when a firm was discharged in the middle of a contingent fee case. A fee dispute arose, and the case was litigated to the Indiana Supreme Court. The court held that “in the absence of express written fee agreements providing otherwise” that “a lawyer retained under a contingent fee contract, but discharged prior to the contingency, is entitled to recover the value of services rendered if there is a subsequent settlement or award.”Id. at 860. Furthermore, the court held that “the fee is to be measured by the proportion of the total fee equal to the contribution of the discharged lawyer’s efforts to the ultimate result.” Id.

This standard is applicable to the departing lawyer as well. The departing lawyer was presumably paid for the work he or she did on the contingent fee case while at the old firm, and the old firm should receive quantum meruit or “the value of services rendered” while the departing lawyer worked at the old firm.

While this standard is clear, in practice it is often messy. What is the “fee equal to the contribution” of the departing lawyer’s efforts? Did the departing lawyer leave half way through the case or two-thirds of the way through the case? This is often difficult to determine. Unless an agreement can be reached, the amount divided between the departing lawyer and his or her old firm may have to be determined by a third party.•

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James J. Bell is an attorney with Bingham Greenebaum Doll LLP. He assists lawyers and judges with professional liability and legal ethics issues. He also practices in criminal defense and is a regular speaker on criminal defense and ethics topics. Bell can be reached at jbell@bgdlegal.com. The opinions expressed are those of the author.

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