A proposed Virginia rule governing law firm splits should recognize that departing lawyers usually leave suddenly, without warning to the firm, according to lawyers who have experienced firm breakups.
The chaos and acrimony that often follows a split is on full display in a still unfolding drama involving a group of seven lawyers who left Geoff McDonald & Associates, a Richmond-based personal injury firm, in January. Lawyers who commented on a proposed rule pointed to that situation as they suggested changes to the proposed rule.
The Virginia State Bar’s Standing Committee on Legal Ethics is considering language for a rule that would govern lawyers leaving law firms and the dissolution of law firms. Previously, ethical guidance for law firm splits has come only from legal ethics opinions.
Proposed rule would guide firm splits
The proposed new Rule 5.8 of the Rules of Professional Conduct rule would bar unilateral contact with clients about an anticipated departure without an effort to agree on a joint client letter. Letters explaining the client’s choice of options must explain how fees and costs would be handled.
If a client fails to choose in the case of a departing lawyer, the client stays with the firm. For a dissolving firm, the undecided client goes with the lawyer who primarily worked on the client’s file.
Seventeen lawyers submitted comments on the proposed rule, many offering real world examples of conflicts over clients, fees and access to files.
Clients are the prize, lawyers say
Clients and their cases are regarded as property in the world of high volume plaintiffs’ personal injury, claimants’ workers compensation and Social Security disability practices, one lawyer said.
Ethical principles including a client’s right to choose counsel and a lawyer’s right to compete are seen as “direct threats to the business models of such firms,” wrote J. William Snyder Jr. of Winston-Salem, who practices in both Virginia and North Carolina.
Snyder said ethical obligations requiring that cases be put on hold while lawyers sort out the distribution of clients could interfere with the lawyers’ duty to maintain representation of clients.
Most lawyers offering comments said the proposed rule would only help the often-tense situation.
Former Norfolk Circuit Judge Norman A. Thomas said litigation in his court over law firm splits was “some of the most acrimonious that I ever witnessed as a judge.”
The rule at least will require the parties to meet in good faith to try to resolve differences, Thomas said.
Rules should acknowledge surprise factor, lawyers say
Richmond lawyer Brad Marrs – a one-time “departing lawyer” and now counsel for two departing lawyers involved in litigation with their former firm – welcomed a rule to “clarify responsibilities.”
Marrs urged a provision to allow quick client notice of a departure to give contact information, since most break-ups happen quickly. Lawyers “frequently move out over a weekend and open for business Monday morning,” he said. There is a risk clients would not be able to contact their lawyers for a number of days after a split, he said.
Abrupt departures are not only common, they often are necessary for the protection of clients’ interests, Marrs said, suggesting the recent mass departure from a Richmond personal injury firm serves as an example.
Marrs also said other law firms may be little more than “office-sharing arrangements,” where requiring an election letter to clients would be “pointless and needlessly onerous.”
Another attorney – now representing law firms doing battle with departing lawyers – urged stronger language requiring efforts to reach agreement on a negotiated joint communication to clients.
Leslie A.T. Haley of Midlothian said the two sides in a firm split often will immediately present drafts of joint letters. When neither side agrees, both sides quickly begin telephoning the clients, “which is very troubling and confusing for clients,” Haley said.
Haley also suggested that once clients are notified of their choices, no further communication should come from the departing lawyer or the firm. “Clients get frustrated and angry that folks continue to contact them after they have made choices,” Haley said.
Rule should address plunder of client files
Two lawyers urged that the proposed rule be expanded to ban removal of client files until the client is properly notified of an attorney’s departure.
K. Ruppert Beirne said his firm discovered one Monday morning that a departing lawyer had taken all the paper files and had copied and deleted the digital files for his clients. The firm “had no way of knowing the identity or even the number of matters this lawyer had taken with him,” Beirne said.
Beirne also said the VSB should address lawyers’ employment contracts. Current rules bar noncompete clauses for lawyers.
“Sadly, the current rule seems to encourage law firms to train attorneys and feed them clients, only to wake to news that these attorneys have taken their newly acquired skills and clients and opened their own shop or moved to another firm,” Beirne wrote.
Another lawyer proposed special terms for criminal clients, who often are slow to respond to contact from their lawyers. Andrew J. Cornick of Fredericksburg suggested the client be deemed to remain a client of the departing lawyer if the departing lawyer is counsel of record in a pending criminal matter.
The Washington Metropolitan Area Corporate Counsel Association urged the rule be expanded to include language clearly establishing all clients’ right to choose their own counsel in any law firm split.
Some oppose any new rule
Other lawyers say the proposed new rule will only add a new source of bar regulation for what should be regarded as common business disputes.
“In light of existing rules and opinions that address lawyer departures and lawyer solicitation of clients I do not understand why a new rule is needed in Virginia,” wrote Karen L. Lebo of Richmond.
The proposed rule would most likely “completely stifle the market” for lawyers, said Benjamin Y. Cooper IV of Richmond. He objected to the proposed restriction on unilaterally contacting clients about an unannounced anticipated departure.
“Without any sort of ability to test the waters and determine if a client would be willing to follow a lawyer to a their new firm or other office, lawyers with client relationships would have almost all incentive removed for switching law firms,” Cooper said.
The rule proposal comes amid two publicized court battles between Virginia law firms and departing lawyers.
In one case, the Boleman Law Firm PC brought a $2.35 million lawsuit against two departed lawyers, claiming they used fraud to solicit clients for a new bankruptcy practice while still working at Boleman. Haley represents the firm and Marrs represents the departing lawyers.
In a more recent dust-up, seven lawyers are at odds with Richmond’s Geoff McDonald and Associates PC after they left that plaintiffs’ personal injury firm en masse in January. Haley is defending GMA against claims that the firm hindered access to client files and improperly tried to persuade clients to stay with the firm.
In a March 7 letter, Richmond Circuit Judge Melvin R. Hughes Jr. said he plans to hold an evidentiary hearing on a motion to impose sanctions on GMA for contempt of court.
In a parallel action in Henrico Circuit Court, GMA seeks a declaration that some of the departing lawyers breached their employment contracts.!