69

Law Firms Changes:

The Ethical Obligations When Lawyers
Switch Firms

Lynda C. Shely*

I. Duties of Firms and Lawyers When Someone Leaves

Yes, there are specific ethical requirements when a lawyer leaves a law firm
– both for the lawyer and the firm. The following is a summary of the ethical con-
siderations whenever a lawyer leaves (or a firm dissolves).
A. Ethical Obligation to Communicate to Certain Clients
Two primary directives must be remembered when lawyers leave law firms:
1) lawyers have a duty to tell “their” clients that they are leaving; and 2) clients
are not chattels – the firm and departing lawyer cannot decide which clients can
stay and which can go – the clients decide. Lawyers must keep clients informed
so that clients may make informed decisions about what the clients want to do.1
As explained in ABA Formal Opinion 99-414, “The departing lawyer and
responsible members of the law firm who remain have an ethical obligation to
assure that prompt notice is given to clients on whose active matters she current-
ly is working.” Remember, Ethical Rule 1.4 requires that lawyers keep clients
reasonably informed – which would include the fact that a lawyer who has had
“significant personal contact” with a client is leaving the firm.
1. Which clients to tell
Arizona Opinion 99-14 provides some guidance on when a departing lawyer
may communicate directly with firm clients. A departing lawyer who has had
“significant personal contacts” with the client, should inform the client that the
lawyer is leaving the firm. Note: this does not mean that an associate who met a
client once or twice and has prepared discovery requests has had “significant per-
sonal contacts” – the standard is that if the client were asked “which lawyer(s) at
the firm represents you?” the lawyers mentioned would be those that have had
“significant personal contacts.”

* The Shely Firm, PC, Scottsdale, Arizona.

1. In addition to the ethical obligations departing lawyers have, they also must avoid interfering
with the contracts the firm has with existing clients. See, e.g., Raymond H. Wong Inc. v. Xue, No.
115269/04 (N.Y. Sup.Ct. N.Y. Cty. 1/21/05)(associate enjoined from attempting to lure away firm
clients); Reeves v. Hanlon, 33 Cal.4th 1140, No. S114811 (Cal. 8/12/04)(departed lawyers liable for
damages to firm for luring away clients and associates). Business tort litigation against departed
lawyers is a growing practice area. However, the caution to avoid stealing clients must be balanced
against the departing lawyer’s ethical obligation to notify clients that an attorney is departing.
70 THE PROFESSIONAL LAWYER

2. How to tell clients

The preferred method of advising firm clients about the impending departure
of an attorney is a joint letter from the firm and departing lawyer to all clients with
whom the lawyer had significant personal contacts.2 Such a letter should advise
the clients:
• When the lawyer is leaving
• The client has the option of going with the lawyer, staying with the firm,
or getting a new firm
• How any advance fee deposit will be treated
• A place for the client to sign and return the letter, with instructions on
where their file should go.
This letter should be sent prior to the lawyer’s departure and should be cal-
endared to assure that written responses are received from all clients. For those
clients that want their files sent with the departing lawyer, the firm should review
their malpractice policy for requirements on maintaining a copy of certain parts
of the file for a period of time – that copying of course is at the firm’s expense
because the client file is client property that belongs to the client. ER 1.16(d).
Note that if a joint letter is not sent, separate letters may be sent by the lawyer
(or the firm) to clients with whom the departing lawyer had substantial personal
contact as long as: 1) the letters do not disparage the firm or the lawyer; and 2)
the letters do not involve improper solicitation in violation of ER 7.3.
3. Other People Who Should Be Told About the Departure
Whenever a lawyer changes firms the following people/groups need to be
notified about the new address (and other contact information), and the effective
date of the change:
• State Bar Membership Records Department
• Courts: including clerk’s office and the Judicial Assistants for each
judge where the lawyer has a pending matter.
• Opposing counsels
• Other professional organizations in which the lawyer is a member
(ABA, MCBA, etc.)
• The firm’s malpractice carrier, accountant, and banker.
B. Trust Account Monies
Clients that have given the firm an advance fee or advance cost deposit take
the money with them (less earned fees and costs), if they go with the departing
lawyer. While simple in theory, application sometimes can be problematic. The
“old” firm should write a check, consistent with the written instructions of the
client, to either the client or to the trust account for the departed lawyer’s new firm.

2. See ABA Formal Ethics Op. 99-414.

 ETHICAL OBLIGATIONS WHEN LAWYERS SWITCH FIRMS 71

C. Fee Divisions In General

There is some disagreement regarding how fees earned after a law firm split
may be apportioned between the firm and the departed lawyer, when the case ini-
tiated with the old firm. For example, in contingent fee cases where some or much
of the work was performed at the existing firm, but the case is going with the
departing lawyer, the firm and lawyer must agree how the contingent fee will be
apportioned among them, based upon their respective contributions to the case
(i.e., quantum meruit) or based upon terms in the partnership agreement.
But can a departing lawyer keep all of a contingent fee case that came into
the old firm but ultimately settled when the lawyer was at a new firm? Probably
not, according to several cases. 3 A lawyer may be entitled to only his partnership
portion of the fees earned on a case, even if he performed most of the work after
the dissolution of the firm.4
Nevertheless, some courts will find that when a lawyer leaves a firm and
takes a case with him, he may be entitled to the quantum meruit value of the work
he performed.
Additionally, the majority view of “no extra compensation” upon dissolution
of a firm does not apply to either the situation where the firm is completing work
for a deceased partner or if the partnership agreement provides for a different
compensation plan upon dissolution or departure. Such terms in partnership
agreements will be upheld as long as they are not grossly inequitable.5
Note also that Comment [8] to ABA Model Rule 1.5 explains that “Paragraph
(e) does not prohibit or regulate division of fees to be received in the future for
work done when lawyers were previously associated in a law firm.” This means
that the decision on how fees will be split between the former firm and the depart-
ed lawyer does not need to comply with the writing and joint responsibility
requirements of paragraph (e) of Rule 1.5.
Regardless of whether the fees go to the firm, are divided on a quantum meruit
basis, or divided by agreement, the fees must be reasonable for the services per-
formed. In other words, the clients cannot be charged more than a reasonable fee.
D. Files
Do not hold client files hostage, even if the client that is leaving with the

3. See, e.g., Meyer & Susman v. Cohen, 194 Cal.Rptr. 180 (Calif. Ct.App. 1983)(“The partner
may take for his own account new business even when emanating from clients of the dissolved part-
nership and the partner is entitled to the reasonable value of the services in completing the partner-
ship business, but he may not seize for his own account the business which was in existence during
the term of the partnership”).
4. See Jewel v. Boxer, 203 Cal. Rptr. 13, 1 LAW. MAN. PROF. CONDUCT 106 (Cal. Ct. App. 1984);
Frates v. Nichols, 167 So.2d 77 (Fl. Dist. Ct. App. 1964); Ellerby v. Spiezer, 485 N.E.2d 413 (Ill
App. Ct. 1985); Resnick v. Kaplan, 434 A.2d 582 (Md. Ct. App. 1981); Smith v. Daub, 365 N.W.2d
816 (Neb. 1985); Platt v. Henderson, 361 P.2d 73 (Or. 1961).
5. See Smith v. Daub, 365 NW2d 816 (Neb. 1985).
72 THE PROFESSIONAL LAWYER

lawyer owes the current firm money. Model Rule 1.16(d) requires that the client’s
interests not be prejudiced when the attorney/client relationship is terminated.
Have the client or a runner from the departed lawyer’s new firm sign for the file,
if it is going to the new firm. Also, it is appropriate to request in a litigation mat-
ter that the departed lawyer file a substitution of counsel or at least notification of
address change with the court, to assure that the old firm is still not listed as coun-
sel of record.
Note that a recent New Hampshire Ethics Opinion6 advises lawyers that when
a client asks for their file, you must give them both the paper and the electronic doc-
uments – including emails. And remember that the client file is client property, so
you cannot charge the client for the cost of downloading everything to disks….
E. Phones
It is ethically inappropriate to have the receptionist tell callers who are look-
ing for a lawyer who recently left the firm “we don’t know where he is.” That
game is not professional and not acceptable. Assure that all staff are instructed to
provide the departed lawyer’s phone number and mailing address. Also, assign a
partner to answer any client inquiries. Moreover, mail should be forwarded to the
departed lawyer.
F. Partners and Associates Leaving Must Abide By Fiduciary Duties to
Firm
It is worth noting again that lawyers who are leaving a firm have certain fidu-
ciary duties to the firm to not interfere with the contracts that the firm has with exist-
ing clients, to not use firm resources to set up their new firm, and to not attempt to
steal away associates and staff while the lawyers are still working for the firm. As
explained in the ABA/BNA Lawyers’ Manual on Professional Conduct7:
In Meehan v. Shaughnessy, 535 N.E.2d 1255, 5 Law. Man. Prof.
Conduct 119 (Mass. Sup. Jud. Ct. 1989), a distinction was drawn between
the “logistical arrangements” made by partners planning their departure,
and concerted efforts they made in secret, while still at the firm, to lure
away some of the firm’s clients immediately after the lawyers’ withdraw-
al. The former, the court said, did not constitute a breach of the partners’
fiduciary duties. They were free to make pre-withdrawal arrangements
for their new firm, such as leasing office space and obtaining financing
by preparing for the bank a list of clients they expected to take with them
and the fees they anticipated these clients’ cases would generate. But the
secret plans to contact and persuade clients to remove their cases to the
new firm were a violation of the departing lawyers’ fiduciary duties, the
court said. As partners, they were required to act in utmost good faith and

6. No. 2005-06/3, issued January, 2006.

7. § 91:707 (2005).
 ETHICAL OBLIGATIONS WHEN LAWYERS SWITCH FIRMS 73

loyalty toward their fellow partners, and to “render on demand true and
full information of all things affecting the partnership to any partner.”
These duties were contravened when, in secret, the withdrawing partners
prepared authorization forms and letters, on the firm’s stationery, inform-
ing clients with whom they worked of their departure and failing to make
clear to the clients that they could choose to keep their business with the
firm rather than removing their cases to the lawyers’ new firm.
Even after the partners made known to the partnership their
impending withdrawal, they continued to violate their fiduciary duties,
the court said, by sending the letters to firm clients and to referring attor-
neys, and delaying giving a list to the partnership of clients they intend-
ed to solicit until after a majority of these clients had already authorized
removal of their cases to the new firm. The court held the former part-
ners would be required to pay to their former colleagues the profits the
new firm earned on all cases taken from the partnership, except on those
cases for which the former partners could prove that the clients had acted
of their own accord in deciding to remove their cases to the new firm.
A partnership/shareholder agreement should include at least the following
provisions to assure that measures are in place to address what happens when a
partner leaves the firm:
— the expulsion of a partner
— the death of a partner
— what notice is to be given to the partnership by a withdrawing partner
and timing of the notice
— the firm’s right to accelerate the departure of a withdrawing partner
— the timing and method of notification of clients
— which clients will be contacted
— the content of the notice
— the retention and/or transfer of client files
— the compensation of partners upon withdrawal or dissolution, including
repurchase of shares
— the formula for the distribution of profits and losses
— the payment of the capital account
— whether a withdrawing partner shall be paid any share of work in
process and accounts receivable
— the method by which the practice and assets shall be valued
— the allocation of responsibility and compensation for closed files and
ongoing financial obligations of firm
• Don’t place restrictions in partnership agreements that restrict the
lawyer’s ability to practice.
Most lawyers form partnerships with other lawyers with the anticipation that
74 THE PROFESSIONAL LAWYER

you’ll stay together for a while. Thus, no one wants to think that the severance pro-
visions in the partnership agreement will ever be needed. The reality is that lawyers
are becoming more mobile; they change locations, they change practice areas, and
they change firms. A partnership agreement cannot restrict a lawyer’s ability to
practice law after the lawyer leaves the firm. ABA Model Rule 5.6 provides:
A lawyer shall not participate in offering or making:
(a) a partnership, shareholders, operating, employment, or other
similar type of agreement that restricts the right of a lawyer to practice
after termination of the relationship, except an agreement concerning
benefits upon retirement. . . .
That appears to be pretty clear but apparently not – at least when it comes to
firms merging with each other. In a twist on the usual departing partner scenario,
the D.C. Bar Legal Ethics Committee explained that Rule 5.6 also precludes a
firm from making an agreement among partners that they won’t get paid for work
done before the merger unless they agree to stay with the merged firm. Opinion
325 (Oct. 2004) explained that it is a violation of the Ethical Rules for a partner-
ship agreement to say that a partner forfeited his or her right to pre-merger receiv-
ables if the partner leaves the new firm within two years of the merger (unless he
dies, retires, or is sick).
II. Duties When Switching Firms
A. Duties of Lawyers Interviewing With Other Firms
Hypothetical: You are interviewing with Aye, Bigge & Cable for a lat-
eral position in their corporate litigation section. While interviewing
with partner Aye, she asks you what cases you’re currently working on.
What can you say?
Ethical Rule 1.6 prohibits disclosing “information relating to the representa-
tion of a client” unless the client consents to the disclosure or one of the excep-
tions to the confidentiality rule applies. This ethical duty is far broader than the
evidentiary rule on attorney/client privilege. A lawyer’s duty of confidentiality
will even include the client’s identity and whereabouts.8
This suggests that, technically, under the confidentiality Rule, you may not
disclose the names of your clients to anyone outside of your current firm unless
the clients impliedly authorize you to do so.
If you cannot disclose the names of your clients, how can Aye, Bigge &
Cable check to see if they have any conflicts of interest, if they hire you? The
firm has a duty to assure that they are not going to hire someone who will dis-
qualify the firm from current representations.
A District of Columbia Bar Ethics Opinion9 has several suggestions for how

8. See In re Goebel, 703 N.E. 2d 1045 (Ind. 1998).

9. No. 312 (April 2002).
 ETHICAL OBLIGATIONS WHEN LAWYERS SWITCH FIRMS 75

to survive – ethically – the interviewing dilemma. First, however, note that the
D.C. Confidentiality Rule 1.6 prohibits the disclosure of “confidences and
secrets,” as opposed to Arizona’s Rule language of “all information related to the
representation.”
Nevertheless, the D.C. Opinion is instructive in suggesting that one option
for the interviewing lawyer is to disclose the opposing parties in matters for
which he is personally involved. That list will at least notify the interviewing firm
if they currently represent any of those clients who might have a conflict with you
joining the firm. Another suggestion from the Opinion is to discuss the general
nature of the matters that you are handling – although in some circumstances, that
might disclose confidential information. For instance, if you stated that you’re
working on a merger between two large amusement parks, that probably would
divulge the identity of your client. Such confidential merger deals should not be
disclosed without client consent.
Realistically, if you’re working on a litigation matter that has been filed, it
probably is acceptable to disclose the name of your client. Another suggestion
from the D.C. Opinion is to provide a list of all clients and opposing parties on
matters for which you have worked and then let the new firm determine whether
anyone on the list was a problem – then you would need to follow-up with them
on which ones are clients – after you have client consent.
Conclusion: Be very careful when interviewing to not disclose any client
identifying information unless either the matter is public record and could be eas-
ily confirmed or the client(s) have consented to the disclosure. Otherwise, the
interviewing firm should first confirm whether it is adverse to the lawyer’s current
law firm and then discuss with the lawyer whether there are specific matters that
the interviewing lawyer knows are adverse and on which the lawyer has worked.
B. Screening an “Infected” Lateral Hire
Some jurisdictions versions of Ethical Rules 1.10 and 1.18 permit screening
of lawyers with certain types of conflicts. For instance, Arizona Rule 1.10(d) per-
mits screening a lawyer who has a former client conflict as long as, among other
things, it was not a litigation matter in which the conflicted lawyer played “a sub-
stantial role.” The U.S. District Court for the District of Arizona helped define
what constitutes “a substantial role” in Eberle Design, Inc. v. Reno A & E.10 The
court determined that a lawyer’s drafting of voir dire questions and billing only 9
hours of time to the former client did not constitute a “substantial role.” Caution:
whenever a firm is considering hiring a lateral who may have a conflict the firm
should assure that it checks for conflicts before extending an offer….
Assuming that the conflict is one that can be screened, the screening proce-
dures according to ABA Model Rule 1.0 Comment [9] must include the following:

10. 2005 U.S. Dist. LEXIS 2323 (D. Ariz. Feb. 8, 2005).
76 THE PROFESSIONAL LAWYER

1. Prompt notice to the affected client that the conflicted lawyer has been
screened.
2. Notice to all staff regarding the lawyer or staff person who is screened.
3. Physical notice in the paper file of the conflicted matter as follows:
This assumes that the conflict is one that is screenable and that the other
lawyers in the office will not have their independent professional judgment mate-
rially limited by the screened lawyer’s conflict. In order to be effective, screen-
ing must occur as soon as the conflict is known and must be thorough.
A thorough screen should assure that:
• all firm staff have been notified of the screen,
• measures are implemented to lock out the infected lawyer or employee
from the document database,
• measures must be implemented to assure that the infected lawyer not
receive emails or voicemails that discuss the matter (e.g., an email sent
to all partners discussing a matter must not be sent to the infected
lawyer),
• the screening notice is resent periodically to all staff, and
• the paper file must have a written warning and should be in a secure
location (not stored in the general file room).
Note that the “prompt” notice to the affected client must identify what
screening precautions have been implemented.
III. Law Firm Mergers
When two firms “marry” the first thing they must do before walking down
the aisle and signing the marriage/partnership agreement, is to check for conflicts.
• When considering merging with opposing counsel, you will need to
tell your client – eventually.
Hypothetical: You are interested in moving to opposing counsel’s firm.
When must you tell your current client?
ABA Formal Opinion. 96-400 (1996) helps clarify when you must tell your
client that you want to join the opposition. The ABA Opinion concluded that
lawyers must disclose the possibility of joining the opposing firm when the
lawyers’ interest in combining becomes “concrete, communicated and mutual.”
• When two firms are considering merging, you will need to clear conflicts.
In a recent decision in Iowa, Kinzenbaw v. Case LLC, 11 a court refused to dis-
qualify a firm that only learned two years after a merger that it had a conflict of
interest caused by merging with an opposing firm–but this should not be relied
upon to ignore checking for conflicts prior to merging. In 2002 Cahill, Christian
& Kunkle was acquired by Perkins Coie. At the time Perkins Coie had numerous

11. No. C 01-133 LRR (N.D. Iowa 5/20/04).

 ETHICAL OBLIGATIONS WHEN LAWYERS SWITCH FIRMS 77

offices. Lawyers in Perkins Coie’s Seattle office were representing Case Corp. on
a variety of matters. Cahill’s Chicago office was representing a company named
Kinze. When the merger occurred the conflict check between Cahill and Perkins
noted that there might be a conflict with Case but for some unknown reason the
red flag was not investigated further. After the merger Seattle lawyers of Perkins
continued to represent Case, while Chicago lawyers of former Cahill–now
Perkins, represented Kinze–against Case.
When Perkins ultimately learned of the conflict in 2004 all work for both
clients was frozen until Perkins could investigate the matter. Several months later
the firm terminated its relationship with Case and the Chicago Cahill/Perkins
lawyers continued to represent Kinze.
Ruling upon Case’s motion to disqualify Perkins, the court declined to dis-
qualify the firm even though it did find that the firm violated DR 5-105 (Iowa’s
conflict of interest rule at the time) because the court concluded that disqualifica-
tion is only one of several different sanctions that can be imposed for a conflict
and the hardship that would be imposed upon Kinze for losing its counsel of
choice would be too great. The court explained that a conflict of interest does not
mean per se disqualification. In this matter Perkins lawyers did not represent
Case on any matters that were related to the litigation and did not have confiden-
tial information that could be used against Case.
This case presents a practical reminder: when two firms are considering
merging, you will need to provide both your current and former client lists to
check for conflicts. Either one lawyer from each firm or a committee of lawyers
in each firm must be assigned responsibility for investigating and resolving all
potential conflicts that appear when the client lists are cross-referenced. Only the
information necessary to check for conflicts should be disclosed to the commit-
tee. The due diligence checklist for pre-merger should include a memo from that
committee/lawyer, confirming that all potential conflicts have been resolved and
providing copies of letters to affected clients obtaining their “informed consent”
to waive the conflicts or memos to the file explaining the committee’s conclusion
on why the firm does not need to obtain such waivers.
• Selling a Law Firm
ABA Model Rule 1.17 permits the sale of law firms….with very specific
requirements. The new Rule provides:
A lawyer or a law firm may sell or purchase a law practice, or an area of law
practice, including good will, if the following conditions are satisfied:
(a) The seller ceases to engage in the private practice of law, or in
the area of practice that has been sold, in the geographic area(s) in
which the practice has been conducted;
(b) The entire practice, or the entire area of practice, is sold to one
or more lawyers or law firms;
(c) The seller gives written notice to each of the seller’s clients
regarding:
78 THE PROFESSIONAL LAWYER

(1) the proposed sale;

(2) the client’s right to retain other counsel or to take posses-
sion of the file; and
(3) the fact that the client’s consent to the transfer of the
client’s files will be presumed if the client does not take any action
or does not otherwise object within ninety (90) days of receipt of
the notice.
If a client cannot be given notice, the representation of that client
may be transferred to the purchaser only upon entry of an order so
authorizing by a court having jurisdiction. The seller may disclose to
the court in camera information relating to the representation only to the
extent necessary to obtain an order authorizing the transfer of a file.
(d) The fees charged clients shall not be increased by reason of the
sale.
These criteria are similar to when a lawyer leaves a firm: the clients are not
chattels – they get to decide who will be their lawyer and their fees cannot be
increased because of the change.
IV. Death of a Lawyer
Law firms with more than one lawyer always should have provisions for
what happens to handle client matters if a lawyer passes away or becomes inca-
pacitated for an extended period of time. Law firms with more than one lawyer
usually do not have significant ethical issues regarding deaths within the firm.
Solos must have back-up counsel who can come into the firm and notify clients
of the lawyer’s incapacity, file for extensions of time and/or obtain new counsel
for clients. Remember that partnership/shareholder interests may be paid to the
estate of the deceased lawyer pursuant to ER 5.4(a) even if this means the money
will be paid to a non-lawyer surviving beneficiary.