Jan. 12, 2018
Communicating with clients regarding a lawyer departure
It is that time of year again. The holidays are over. Bonuses have been paid. Annual distributions to partners and shareholders have been made. Lawyers who have been putting off a move are now ready to make one.
It is that time of year again. The holidays are over. Bonuses have been paid. Annual distributions to partners and shareholders have been made. Lawyers who have been putting off a move are now ready to make one. But the process involves a lot of considerations, or at least it should.
Of course, as an initial matter, there are potential issues involving whether a move is even possible given considerations of conflicts of interests. And for contingency matters that have not concluded, there will inevitably be a discussion about compensation will be divided. But some of the biggest issues surround how the move should be communicated, particularly to clients.
There is little question that clients, in many instances, should be notified that a lawyer who has regularly been working on their matter is changing law firms. Rule of Professional Conduct 3-500 provides that California attorneys owe a duty to communicate "significant developments relating to the employment or representation." A change in the attorneys who will be providing legal services may be significant to some clients. This is particularly so in an environment, like ours, where one of the core concepts of client rights is the right to choose -- or disengage -- counsel. Accordingly, the client, not the departing lawyer or the law firm, decides who will continue to represent the client. To make this decision, the client must be informed of the departure.
Importantly, though, there may be instances where there is no such duty. For example, the departure of a lawyer who has provided minimal or no services on the case, worked under the supervision of a lead attorney, or who is on a team of attorneys representing an institutional client may not be a significant development to that client. In such an engagement, the departing lawyer may be a more junior member of a team providing the legal services, may have contributed to a relatively small percentage of the quantity and quality of work, and/or may have had little to no client contact. Generally, though, instances where there is some doubt of whether an attorney leaving the firm would matter to the client -- regardless of whether there is any likelihood of the client following the attorney to the new firm -- should be resolved in favor of disclosure.
Even once a determination has been made that an anticipated departure should be disclosed, there are often questions regarding who should notify the client and what that communication may include. In some instances, answers are often found through a common sense dialogue between the departing lawyer and the firm. Where a client has been a longtime client of a single lawyer or where the client has a much stronger relationship with lawyers remaining at the firm, the client's election of who will be counsel can be fairly predictable. Even in such cases though, the client should be notified and the client's choice for who will continue the representation confirmed.
Where the client controls the choice of counsel (which may not be the case in certain insurance defense contexts, for example) and the choice is less clear, the high level departing lawyer and the firm may send a joint communication to the client. It is important to keep in mind that many shareholder or partnership agreements require notice to the firm before clients may be contacted about an attorney's decision to change firms. Similarly, lawyers often owe fiduciary duties to their firms which prohibit them from unilaterally soliciting clients during their employment. It is also not uncommon for a lawyer who has breached this duty to implicate the lawyer's new firm, which is why most new employers are quick to stress that they do not want solicitation of clients until such time as the lawyer joins that new firm. As a general matter, utilizing a joint communication in appropriate situations ensures transparency in the process, helps the client understand the options, and avoids disputes between the departing lawyer and the firm. If, however, a joint communication is not possible, the departing lawyer should be very circumspect in that lawyer's communications with the clients. The departing attorney should neither urge the client to sever the relationship with the firm nor to disparage the firm. Rather, all communications should maintain objectivity and present the options to the client in a clear and concise manner. Ultimately, both the firm and the departing lawyer must put the interests of the client ahead of all other interests, and work together to ensure consistency and smooth handling of the matter at issue.
In addition to the issue of who will continue to represent the client, there inevitably is the need to discuss other matters with the client. Especially in the event of a transition to the new firm of the departing lawyer, there should be a discussion of liability for fees and costs, an accounting of what has already been paid, any refunds of unearned fees and costs, and the handling and potential transfer of the client's actual file.
And, of course, after notification, the client should be given a reasonable time to provide assess the situation and provide a response. That allows both the lawyer and firm to engage in any transitional activities so as to minimize any potential prejudice to the representation. Sometimes, a departing lawyer may believe that protecting clients' interests includes recruitment of other legal professionals who have worked on the clients' matter. While this poses a wide of range of issues beyond the scope of this article, it should also be considered whether such recruitment implicates a potential breach of fiduciary duty to the firm.
There are a variety of resources that are available in these situations that the prudent practitioner should take the time to examine. The first place to consult for an answer is the firm's governing documents. Again, often the partnership or shareholder agreement will provide guidelines for soliciting other stakeholders or employees of the firm, and may have different answers for each. Many bar associations and malpractice insurance companies offer specific resources and checklists that can be extremely helpful as well. There is also a variety of case law regarding the duties that a lawyer owes to the firm upon departure.
This time of the year is one that often brings new opportunities to lawyers. But with departures come a variety of interrelated obligations that need to be carefully considered by the firm, the departing lawyer, and the lawyer's new firm.