Despite recent signs of a slowdown, the lateral attorney market continues to boom. Whether the attorney departing is a counsel or partner—it is crucial that How clients are notified of the departure and how client files are handled are critical considerations in the departure process, which must be handled with care. To better understand these key issues, I recently sat down with Tina B. Solis, a partner at Nixon Peabody LLP in Chicago, to discuss key issues that recruiters and attorneys should be aware of when an attorney is making a lateral move. The lessons learned and practical takeaways provide an important value-add service that recruiters can offer their clients.
Q 1: When and how should an attorney inform clients of their departure?
Departing attorneys should not solicit clients before departing from their firm. Best practices dictate that the attorney and the law firm from which the attorney is departing attempt to first send a joint statement notifying clients of the attorney’s departure. Consistent with its prior guidance, ABA Opinion 489 continues to encourage a joint written communication from the firm and the departing attorney. ABA Formal Opinion 489 states, however, that firms may not prevent departing attorneys from providing prompt notice to clients. Put differently, a firm can no longer delay in refusing to agree to a joint communication and simultaneously prevent a departing attorney from communicating the details of their upcoming departure to the clients.
The opinion also imposes a requirement to be prompt with regard to the notification of clients and states that departing lawyers need not wait to inform clients of the fact of their impending departure, provided that the firm is informed contemporaneously. Before this opinion was published, the firm had to be notified first, and then, after providing the firm a “reasonable” amount of time to agree to a joint communication to the client, the lawyer could notify clients of the impending departure. This opinion suggests a much narrower window of time, going so far as to suggest that the firm and clients may be informed “contemporaneously” if the firm does not have an established policy to allow a prompt joint communication.
Q 2: Are departing attorneys allowed to solicit other attorneys and staff from the prior firm?
Overall, the best practice is for departing attorneys not to solicit associates or support staff before departing. But the rules in each state vary, and counsel should be consulted to ensure proper compliance. In addition, some firms are including non-solicitation provisions in their partnership agreements to prevent additional departures. These provisions, for example, prohibit direct or indirect solicitation of colleagues for a certain period of time after a partner leaves their current firm. Generally, however, these types of provisions are not enforceable post-departure.
Q 3: Are there any contractual provisions that may be relevant to an attorney’s departure?
Yes. Departing attorneys should review the partnership agreement (if applicable) and any addenda or employment agreements prior to resigning for any relevant departure-related provisions. Provisions to pay close attention to are notice period, clawback, set-off, and non- solicitation provisions. Equity partners should also pay particular attention to provisions governing the return of capital as well as how the timing of the departure could determine whether the departing attorney must repay certain amounts to the firm. The enforceability of all these provisions depends on the laws in the various states. Counsel should be consulted.
Q 4: Are notice provisions enforceable?
It depends. Law firms have a duty to ensure that client matters transition smoothly when a lawyer departs. Thus, notice provisions in law firm partnership/shareholder/member agreements are commonplace in the profession today. The reasoning behind such provisions is easily understandable—firms must make certain that client-related issues prior to an attorney’s departure are completed, including organizing and updating files, adjusting staffing needs, and continuing to meet upcoming deadlines.
While acknowledging the use of these provisions, ABA Opinion 489 holds that notice provisions that do not take into account client considerations or improperly impede the departure process may be unenforceable. While firms may require some period of advance notice of an intended departure, the notice period should be the minimum necessary, under the circumstances, for clients to make decisions about who will represent them and the firm if it is to continue as counsel, to assemble files, adjust staffing on matters previously handled by the departing attorney, and secure firm property in the departing lawyer’s possession. Firm notification requirements, however, cannot be so rigid that they restrict or interfere with a client’s choice of counsel or the client’s choice of when to transition a matter.
A departing lawyer, however, may not be held to a notice period where there is no reasonable justification for doing so—for instance, when the files are updated, client elections have been received, and the departing lawyer has agreed to cooperate post-departure in the final billing. Also, a lawyer who does not seek to represent firm clients upon departure should not, according to the opinion, be held to a pre-established notice period because client elections have not been received. The opinion also suggests that if a firm typically waives the notice requirement for departing attorneys, it would be unwise for a firm to enforce the provision against a particular attorney who left to compete with the firm.
Overall, the guidance today suggests that notice periods—especially those that exceed 30 days—will be examined closely. Previously fixed-notice periods were presumptively permissible—a presumption firms often used for their benefit. This is no longer the case. The burden has now been placed upon the firm to justify the “reasonableness” of its provision. If a firm intends to rely upon a fixed-notice period, it must be justified, given the particular circumstances, and must account for the departing lawyer’s offer to cooperate post-departure in these and other matters. Otherwise, a firm’s imposition of a fixed-notice period may be inconsistent with Rule 5.6(a).
Q 5: What rights do the departing attorneys have?
The guidance provides that after the firm has been notified of the intended departure but before the lawyer has left the firm (the “transition period”), a firm must continue to provide the lawyer with access to firm resources to service the clients’ needs. Oftentimes, after a lawyer has announced their resignation, a firm asks the lawyer to work remotely or moves the lawyer to a different office within the firm. Such conduct is not permissible. A departing 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 or lose access to research and drafting tools that the firm generally makes available to its lawyers. Likewise, the firm cannot restrict a lawyer’s access to its electronic filing systems, email, voicemail, or files during the transition period. In short, the firm must continue to provide the departing lawyer with access to the tools needed to diligently represent the clients during the transition period, including client files, office space, support staff, and firm phones.
Q 6: At what point should counsel be consulted in the departure/hiring process?
The implications of moving firms, especially when a large book of business is involved, are far- reaching and can have serious consequences for the departing attorneys if they fail to time the departure correctly, fail to take certain steps in the proper sequence, and/or do not understand their fiduciary and ethical obligations. The rules vary from state to state and may not be intuitive. Departing attorneys are not necessarily familiar with this area of law. Thus, it is recommended that the departing attorney hire counsel to assist with the transition. Involving counsel as soon as the departing attorney first contemplates a potential move is best. Waiting has pitfalls. Counsel experienced in this area can provide a roadmap of tasks that should be completed prior to departure and provide the proper sequencing of each step in the departure process. The issues involved in an attorney’s departure are wide-ranging. They include complying with ethical and fiduciary obligations, properly timing the departure, structuring the departing attorney’s deal with the new firm, and logistics, such as what information, if any, can be taken with the departing attorney and when. Put simply, nobody closes “million dollar” deals without counsel, neither should a departing attorney. It is best to consult with an attorney who is knowledgeable in this area to ensure a smooth transition for all parties.
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About Tina B. Solis, Litigation Partner Nixon Peabody, Chicago, IL
Tina advises businesses on issues involving trade secrets, unfair competition and complex commercial litigation in state and federal courts. She also counsels lawyers and law firms on professional responsibility issues. Tina regularly represents regulators in federal court litigation related to the failure of banks.
Tina is also leader of the firm’s Financial Institutions & Banking Disputes team, which represents institutions and individuals in a full range of civil litigation, enforcement matters, Financial Industry Regulatory Authority (FINRA) arbitrations, and compliance investigations on issues such as consumer protection, fair lending, anti-money laundering, and violations of fiduciary duties.
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