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Attorney departures are fraught with risk

LLawyer defections often come with hurt feelings, a sense of betrayed loyalty and bitter recriminations.

They also come with ethical snares that can lead to distracting and costly litigation just when both sides need to get on with business.

One issue that has arisen in two recent cases is the ethical prohibition on lawyer noncompete agreements.

A pending Richmond lawsuit pitting a bankruptcy law firm against two departing associates reveals a pitfall for both sides: It is unethical to offer a noncompete agreement and also unethical to sign it when offered, according to a strict reading of the rule.

Rule 5.6 of the Virginia Rules of Professional Conduct bars lawyers from “offering or making” noncompete agreements, and the prohibition applies to both sides of the deal, according to Virginia State Bar Ethics Counsel James M. McCauley.

Even if you’re a new hire and eager not to make waves at the office, “My advice is to redline that provision out,” McCauley said. “You can’t accept that term of employment. It’s unethical,” he said.

“I don’t think a lot of lawyers realize this,” McCauley said.

The touchstone 1988 New York appellate decision is Cohen v. Lord, Day & Lord in which the court disapproved of a financial penalty for a law firm partner who sought to compete with his former firm.

Principles of agency law apply, McCauley said, with accompanying fiduciary duties for the lawyer.

Actions that might bring trouble include raiding the law firm roster for the best support staff, soliciting key clients on the sly, and grabbing client lists, proprietary materials or other firm work product, McCauley said.

Partners remaining at the firm also need to carefully consider their reactions when employees leave. Refusing to cooperate in notifying clients of their right to choose lawyers could bring trouble, McCauley said.

The most difficult part of the process could be setting aside animosity to work out an “election letter” to clients. Legal ethics opinions recommend a joint neutral letter giving the client the option of the old firm, the new firm or some different counsel.

If the firm and the departing lawyers cannot agree, the duty to notify falls on the departing lawyer, McCauley wrote in a recent article on the subject of lawyers changing law firms.

A legal ethics opinion says the remaining lawyers must allow the departing lawyer access to the office to retrieve client files and other information, McCauley said. Withholding files for clients who move to the new firm is against the rules, he said.

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