These summaries were prepared by McGuireWoods LLP lawyer Thomas E. Spahn. They are based on the letter opinions issued by the Virginia State Bar. Any editorial comments reflect Mr. Spahn's current personal views, and not the opinions of the Virginia State Bar, McGuireWoods or its clients. 
 
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  Topic: 12 - Withdrawing Lawyers (Including Non-Compete Issues)
LEO NumTopicsSummaryDate
1760

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12-Withdrawing Lawyers (Including Non-Compete Issues)

38-Fee Splitting

[WITHDRAWN 2006] As long as a court orders it, a law firm and a departed lawyer can share in personal injury case fees without the clients’ consent.10/11/2001
1571

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5-Lawyers Changing Jobs

8-Bills and Fees

12-Withdrawing Lawyers (Including Non-Compete Issues)

14-Ownership of Files and Attorney Lien Issues

21-Reporting Another Lawyer's Unethical Conduct

A client hired a lawyer who was acting as an independent contractor/associate of a law firm. The retention letter required the client to reimburse the law firm on a quantum merit basis if the client chose to terminate the relationship, and also required the client to pay one-third of any settlement amount to the law firm if negotiations had begun before the relationship was terminated. The individual lawyer left the firm and continued to represent the client. The law firm asserted an attorney's lien on any settlement amount, but refused to provide an itemization of services when requested by the client. The Bar held that the law firm's refusal was improper, and raised a substantial question about its lawyer's fitness to practice law and therefore must be reported to the Bar. 7/12/1994
1556

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A firm may not require a withdrawing partner to divide fees earned from representing clients the withdrawing partner took when the partner withdrew. A professional corporation may not ethically enforce a provision under which a withdrawing lawyer who competed with the firm (within a fifty mile radius) and took clients originally brought to the firm by retired lawyers must reimburse the firm for payments it made to the retired lawyers. The Bar overrules LEO 985 "to the extent that it approves a provision in an employment agreement permitting a law firm to exact a financial penalty from a lawyer (or lawyers) who withdraw and take clients of the law firm with them." 7/21/1994
1506

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12-Withdrawing Lawyers (Including Non-Compete Issues)

48-Criminal Defense Lawyers

A law firm fired an associate and decided to discontinue practicing in the areas in which the associate had concentrated (including criminal defense work). The firm wrote all of the associate's former clients, and referred them to another law firm (even if the client asked, the firm did not provide the former associate's new address). The Bar held that the clients should have been informed of all choices, including hiring the former associate. The firm acted improperly in requiring that the clients contact the firm instead of the associate, and refusing to provide the associate's new address. The law firm should also have provided the associate with a list of client names and addresses.2/17/1993
1403

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12-Withdrawing Lawyers (Including Non-Compete Issues)

14-Ownership of Files and Attorney Lien Issues

38-Fee Splitting

A law firm may not prohibit a withdrawing associate from contacting any of the firm's clients until they decide on counsel, because such a rule would restrict the withdrawing lawyer's right to practice. Likewise, the law firm may not declare that all client files belong to the firm and that the withdrawing associate must share fees with the law firm. 3/12/1991
0956

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12-Withdrawing Lawyers (Including Non-Compete Issues)

14-Ownership of Files and Attorney Lien Issues

45-Law Firms - Miscellaneous

A law firm may not sell its name or goodwill, but may sell physical assets. A lawyer taking over a practice should notify clients of their right to select another lawyer and give direction about the disposition of their files (which should not be transferred without disclosure to the clients). [Rule 1.17 permits the purchase or sale of a law firm's practice, including good will, under certain circumstances.]8/21/1987
0323

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12-Withdrawing Lawyers (Including Non-Compete Issues)

14-Ownership of Files and Attorney Lien Issues

A law firm may not withhold a client's file pending payment of a fee when the client is to be represented by an associate who leaves the firm. [This LEO is overruled by Rule 1.16(e), which governs a lawyer's duty to provide files to a former client.]5/15/1979
0985

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A law firm may reduce pay-outs to a withdrawing lawyer who leaves with other lawyers or takes business. [This LEO was overruled in LEO 1556.]11/16/1987
1113

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12-Withdrawing Lawyers (Including Non-Compete Issues)

45-Law Firms - Miscellaneous

A lawyer fulfills the ethic Rules' obligations by sending notices to all of a law firm's clients that the law firm is disbanding. A lawyer has fewer obligations to clients that have been retained by the lawyer' partner before the partnership began and who therefore never engaged the partnership to represent them. 8/24/1988
1615

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5-Lawyers Changing Jobs

12-Withdrawing Lawyers (Including Non-Compete Issues)

31-Protecting and Disclosing Confidences and Secrets

57-In-House Lawyers

71-Representing Corporations

A lawyer hired as a company's inside general counsel may not enter into a non-competition agreement with the company (under which the lawyer could not serve as any competitor's in-house counsel for a period of one year). The Bar notes that the lawyer must protect the former client's confidences and secrets if the lawyer begins to represent a competitor. 2/7/1995
ABA-414

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A lawyer planning to leave a firm has an ethical obligation to inform the pertinent clients in a timely manner, but must comply with applicable restrictions on solicitation; any notice before the lawyer leaves the firm should be "limited to clients whose active matters the lawyer has direct professional responsibility at the time of the notice; should "not urge the client to sever its relationship with the firm, but may indicate the lawyer's willingness and ability to continue her responsibility for the matters upon which she currently is working," and should emphasize that the client may choose to stay with the firm or hire the withdrawing lawyer;" despite implications to the contrary in earlier informal opinions [1457 and 1466], "we reject any implication . . . that the notices to current clients and discussions as a matter of ethics must await departure from the firm;" the departing lawyer "must ensure that her new law firm would have no disqualifying conflicts of interest" preventing the new firm from representing the client; although it would be best for the firm and the departing lawyer to provide joint notice to the clients, the firm's failure to cooperate entitles the departing lawyer to send a separate notice; legal rules govern a departing lawyer's actions before the firm receives notice of the departure; "the departing lawyer may avoid charges of engaging in unfair competition and appropriation of trade secrets if she does not use any client lists or other proprietary information in advising clients of her new association, but uses instead only publicly available information and what she personally knows about the clients' matters"; citing the case of Graubard Mollen v. Moskovitz, 653 N.E.2d 1179 (N.Y. 1995) and providing helpful guidance on a departing lawyer's fiduciary duties, including the fact that "informing firm clients with whom the departing lawyer has a prior professional relationship about his impending withdrawal and reminding them of their right to retain counsel of their choice is permissible"; a withdrawing lawyer generally may retain documents the lawyer prepared or which are in the public domain, although "principles of property law and trade secret law" govern these issues; a lawyer "does not violate any Model Rule in notifying the current clients of her impending departure by in-person or live telephone contact before advising the firm of her intentions to resign, so long as the lawyer also advises the client of the client's right to choose counsel and does not disparage her law firm or engage in conduct that involves dishonesty, fraud, deceit, or misrepresentation. After her departure, she also may send written notice of her new affiliation to any firm clients regardless of whether she has a family or prior professional relationship with them."). 9/8/1999
0298

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A lawyer retiring from a law firm may advise clients that they may continue using the firm or hire another lawyer. 2/3/1978
0321

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12-Withdrawing Lawyers (Including Non-Compete Issues)

55-Firm Names and Letterhead

A lawyer selling a law practice may advise clients that they may retain the new lawyer or some other lawyer. The lawyer purchasing the law practice may not purchase clients' files or an interest in pending litigation, and may not use the selling lawyer's name in the letterhead. [Rule 1.17 permits the purchase or sale of a law firm's practice, including good will, under certain circumstances.]4/19/1979
0381

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A lawyer who has withdrawn from a partnership may advise clients of the departure, and may recommend that clients consult another particular attorney if the lawyer cannot adequately represent the clients on a specific case. 7/29/1980
1023

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12-Withdrawing Lawyers (Including Non-Compete Issues)

19-Judge Conflicts

A lawyer-turned-judge may continue to receive contingency payments from the judge's former firm. 1/22/1988
1711

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A limited liability law partnership may vary the time period over which the firm will repay a withdrawing partner's capital depending on whether the withdrawing partner retires from the practice of law (withdrawing lawyers who stopped practicing received their capital over sixty months, while others received their capital over 120 months). Such an agreement affects "only the termination of the relationship itself" and is "not a restriction on the attorney's right to continue to practice law at the termination of the relationship." This determination moots the question of whether payment of the capital account "constitutes a retirement benefit" which could be directly tied to a non-compete provision. 11/21/1997
0246

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A partnership agreement may not contain a non-compete clause. 6/28/1974
0428

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A partnership agreement may not include a non-compete clause; termination compensation provisions are not "retirement benefits". 8/14/1981
0880

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12-Withdrawing Lawyers (Including Non-Compete Issues)

A partnership agreement may not restrict payment of "deferred compensation" if a withdrawing partner practices within a certain area; such a restriction would be acceptable if funding for the deferred compensation comes from an employer corporation, partnership or a third party. 3/11/1987
1232

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12-Withdrawing Lawyers (Including Non-Compete Issues)

38-Fee Splitting

A professional corporation's agreement may not contain a covenant not to compete after withdrawal. The corporation may not demand part of withdrawing lawyer's future fees because it would be impermissible fee-splitting. 4/6/1989
1574

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12-Withdrawing Lawyers (Including Non-Compete Issues)

31-Protecting and Disclosing Confidences and Secrets

33-Office Sharing with Other Lawyers

A retired lawyer may retain an office in a prior law firm but must be careful not to obtain any confidences or secrets of the former firm's clients. 2/8/1994
0406

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12-Withdrawing Lawyers (Including Non-Compete Issues)

An associate leaving a law firm may advise clients of the move, and the clients should be given the choice of staying with the firm or being represented by the associate, although the associate may not include in the announcement a list of services and fees. 4/6/1981
0794

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12-Withdrawing Lawyers (Including Non-Compete Issues)

It is improper for a law firm to require a withdrawing partner to continue working for the former firm's clients and have all bills submitted to the former firm (which would pass payments along to the former partner after deducting one-third of the payment for "continuing overhead burden within predecessor law firm"). 5/1/1986
ABA-429

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12-Withdrawing Lawyers (Including Non-Compete Issues)

21-Reporting Another Lawyer's Unethical Conduct

45-Law Firms - Miscellaneous

Lawyers practicing in law firms, law departments or similar organizations must establish policies and procedures assuring that all lawyers in the organization fulfill their ethical requirements and protect their clients -- even if a lawyer becomes impaired by substance abuse, mental illness, etc. Lawyers learning of ethics violations by an impaired lawyer may have an obligation to report the violation. Even if not obligated to report violations, lawyers may choose to reveal information about violations or the impairment -- unless confidentiality duties to clients or some other rules prohibit the disclosure. Lawyers in a firm or other organization from which an impaired lawyer has withdrawn may have an obligation to reveal the impairment if clients are deciding whether to retain the now departed impaired lawyer. The law firm or other organization does not have a duty to reveal the impairment if a client has already shifted its relationship to the departed lawyer, but must avoid any endorsement of the departed lawyer’s ability to represent the client (such as a joint letter from the law firm and the departed lawyer regarding the transaction, which "could be seen as an implicit endorsement by the firm of the departed lawyer's competence"). 6/11/2003
1822

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12-Withdrawing Lawyers (Including Non-Compete Issues)

Pointing to ABA LEO 414 and Virginia LEO 1332, the Bar explains that a lawyer withdrawing from a firm: should limit any notice of his departure to "clients whose active matters the lawyer has direct professional responsibility [for] at the time of the notice"; should not "urge the client to sever his relationship with the firm," but should instead indicate his willingness to continue representing the client; should make it clear that "the client has the ultimate right to decide who will complete or continue the matter"; and "must not disparage the lawyer's former firm." A joint letter is best (although not required), but if the law firm is uncooperative the withdrawing lawyer may send a unilateral letter. The law firm does not have the right to review any letters the withdrawing lawyer sends, and does not have the right to know to whom the withdrawing lawyer has sent the letters. The withdrawing lawyer's letter here passed ethical muster, even though it indicated that the lawyer had checked with the Virginia State Bar Ethics Counsel, and placed last in the letter the option of the client staying with the firm.1/10/2006
1732

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12-Withdrawing Lawyers (Including Non-Compete Issues)

38-Fee Splitting

The fee-splitting rules prohibit a law firm employment agreement under which a lawyer who leaves the firm must share a diminishing percentage of whatever contingent fee is earned on cases the lawyer takes from the firm (depending on how soon the case is settled), but which does not require client consent to the fee splitting arrangement. In addition to violating the fee-splitting rules, the provision "creates an improper financial disincentive which has the effect of penalizing the attorney for leaving and competing with the old law firm, and impairs the client's right to select counsel of his choice." [Amended on 10/23/12 to indicate that Rule 1.5(f) allows fee sharing between former law firm colleagues without client consent.]6/29/1999
1873

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12-Withdrawing Lawyers (Including Non-Compete Issues)

55-Firm Names and Letterhead

82-Advertising

The hypothetical law firm of "Smith & Jones, P.C.," need not immediately stop using the Internet domain name and URL "smithjones.com" after Smith withdraws from the P.C. An immediate termination would not serve "the interests of the public" or "the partners in the former firm who collectively built goodwill and created value associated with that firm name." The "appropriate way of explaining why smithjones.com is no longer the Smith & Jones website" is to place a notice on that website. Although the P.C. owns the former domain name, it may not indicate on the website that the Smith & Jones "has now become" the "Jones Law Office," because that implies that Smith is no longer practicing law. Similarly, any redirection of visitors to the smithjones.com website to the "joneslawoffice.com" website also requires additional information. Such redirection is appropriate only if the joneslawoffice.com website, or a page visable during the process of redirecting, "explains the change from Smith & Jones to Jones Law Office and that Smith continues to practice law in a different firm."3/20/2014
1332

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12-Withdrawing Lawyers (Including Non-Compete Issues)

14-Ownership of Files and Attorney Lien Issues

This LEO answers numerous questions about a lawyer's withdrawal from a firm, including the following: (1) the ethics rules prohibit the remaining lawyers from contacting the withdrawing lawyer's clients without advising them of their right to select the lawyer of their choice, or even arranging to meet the clients as they pick up their files from the firm, if the purpose of the telephone call or meeting is to attempt to dissuade a client from hiring the withdrawing lawyer if the client has expressed an intent to do so; (2) the ethics code prohibits the remaining lawyers from contacting opposing counsel and advising them of the firm's continuing representation of a client when the client has already indicated an intent to retain the withdrawing lawyer; (3) a law firm may not condition release of a client's files upon the client's signing of a release; (4) retention of a client's papers may be unethical even if the client has not paid its bills (if retaining the files would be prejudicial to the client); (5) law firm may not deny the withdrawing lawyer access to files it if would harm the clients. [Rule 1.16(e) governs a lawyer's duty to provide files to a former client.]4/20/1990
ABA-444

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5-Lawyers Changing Jobs

12-Withdrawing Lawyers (Including Non-Compete Issues)

45-Law Firms - Miscellaneous

Under Rule 5.6(a), lawyers and their employers have "significant latitude" in restricting lawyers' rights to engage in the practice of law if the restrictions are tied to a legitimate "retirement benefit." To constitute a legitimate "retirement benefit," "the benefit must be one that is available only to lawyers who are in fact retiring and thereby terminating or winding down their legal careers." Normally, the benefit should be payable upon the satisfaction of some minimum age and minimum years of service, and include such indicia as "(i) the presence of benefit calculation formulas, (ii) benefits that increase as the years of service to a firm increase, and (iii) benefits that are payable over the lifetime of a retired partner," or interrelationship with other retirement or Social Security benefits. Other indicia include a separate partnership or other employment provision dealing with the benefit, and an extended pay out period. The term does not include a partner's capital account or previously earned income. If they are tied to a legitimate "retirement benefit," the restrictions can range from a permanent cessation of practicing law to geographic, temporal or practice limitations. Lawyers willing to forfeit their retirement benefit will not be bound by the restrictions, although permissible arrangements could include forfeiture of future benefits or the disgorgement of previous benefits if a lawyer violates the restrictions.9/13/2006

Copyright 2000, Thomas E. Spahn