The following is an excerpt from chapter 4 of Changing Law Firms: Ethical Guidance for Pennsylvania Law Firms and Attorneys,
Second Edition, PBI 8887
© 2015 PBI
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4
Deciding Whether
to Leave
Lawyers leave law firms for many reasons, although the reasons are generally separate from and not relevant to the obligations that arise once the decision is made to either explore changing firms or to actually make the move. In many
cases, lawyers will merely move on to another firm; in others, they will either go solo or join with other lawyers and
hang out their own shingle. Depending upon their ultimate
destination, these transitioning lawyers must comply with
the Rules of Professional Conduct, honor any agreements
they have with their former firms, and be certain to protect
client confidentiality and avoid any conflicts of interest.
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Negotiations with Other Firms
When negotiating with another firm, or discussing the possible makeup of a newly created firm, lawyers are not permitted to disclose confidential information, other than the minimum permissible to address any conflicts of interest that
will arise with the new association. Pa.R.P.C. 1.6, which was
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Chapter 4
amended in 2013, provides limited guidance about what information attorneys may disclose. The rule now states in relevant part:
(c) A lawyer may reveal such information to the extent that the lawyer reasonably believes necessary:
...
(6) to effectuate the sale of a law practice consistent with Rule 1.17; or
(7) to detect and resolve conflicts of interest
from the lawyer’s change of employment or
from changes in the composition or ownership
of a firm, but only if the revealed information
would not compromise the attorney-client
privilege or otherwise prejudice the client.
Comment [17] outlines the limited nature of the permissible
disclosures relating to the sale of a practice:
[17] Eighth, it is recognized that the due diligence associated with the sale of a law practice authorized
under Rule 1.17 may necessitate the limited disclosure of certain otherwise confidential information.
Paragraph (c)(6) permits such disclosure. However,
as stated above, the lawyer must make every effort
practicable to avoid unnecessary disclosure of information relating to a representation, to limit disclosure to those having a need to know it, and to obtain
appropriate arrangements minimizing the risk of
disclosure.
New comment [19] addresses the limited disclosure permitted when lawyers are considering changing firms, or entering into a merger or other arrangement:
[19] Paragraph (c)(7) recognizes that lawyers in different firms may need to disclose limited information to
each other to detect and resolve conflicts of interest,
such as when a lawyer is considering an association
with another firm, two or more firms are considering a
merger, or a lawyer is considering the purchase of a
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Deciding Whether to Leave
law practice. See Rule 1.17, Comment [4]. Under
these circumstances, lawyers and law firms are permitted to disclose limited information, but only once
substantive discussions regarding the new relationship have occurred. Any such disclosure should ordinarily include no more than the identity of the persons and entities involved in a matter, a brief
summary of the general issues involved, and information about whether the matter has terminated. Even
this limited information, however, should be disclosed
only to the extent reasonably necessary to detect and
resolve conflicts of interest that might arise from the
possible new relationship. Moreover, the disclosure of
any information is prohibited if it would compromise
the attorney-client privilege or otherwise prejudice
the client (e.g., the fact that a corporate client is seeking advice on a corporate takeover that has not been
publicly announced; that a person has consulted a
lawyer about the possibility of divorce before the person’s intentions are known to the person’s spouse; or
that a person has consulted a lawyer about a criminal
investigation that has not led to a public charge). Under those circumstances, paragraph (a) prohibits disclosure unless the client or former client gives informed consent. A lawyer’s fiduciary duty to the
lawyer’s firm may also govern a lawyer’s conduct
when exploring an association with another firm and
is beyond the scope of these Rules.
Thus, even the disclosure of basic information, such as the
names of clients, must still comply with the Rules of Professional Conduct. As noted above, the rules provide limited
guidance about what information about clients may be disclosed; it should be the minimum information necessary.
Comment [4] to Pa.R.P.C. 1.17, which was modified in 2013,
also addresses these restrictions:
[4] Negotiations between seller and prospective purchaser prior to disclosure of information relating to a
specific representation of an identifiable client no
more violate the confidentiality provisions of Rule
1.6 than do preliminary discussions concerning the
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Chapter 4
possible association of another lawyer or mergers between firms with respect to which client consent is
not required. See Rule 1.6(c)(6) and (7). Providing the
purchaser access to the client-specific detailed information relating to the representation, such as the client’s file, however, requires client consent. The Rule
provides that before such information can be disclosed by the seller to the purchaser the client must
be given actual written notice of the contemplated
sale and file transfer including the identity of the
purchaser and any proposed change in the terms of
future representation, and must be told that the decision to consent or make other arrangements must
be made within 60 days. If actual notice is given, and
the client makes no response within the 60 day
period, client consent to the sale will be presumed.
Attorneys should consult Rule 1.6 (Confidentiality of Information) as well as Rule 1.17, and disclose only as much information as is necessary for any new firm to evaluate
whether any conflicts exist and, if so, whether the conflicts
are of such significance that they would render the association ethically impermissible.
Lawyers planning to leave a firm do not breach their fiduciary
duty of loyalty by secretly making pre-departure logistical arrangements, including preparing a list of clients expected to
leave with them, and making financial arrangements with
their new firm on the basis of these lists. Lawyers should not
claim, however, that certain clients have already been asked
to come along or that the clients have already agreed to
switch to the new firm unless this information is accurate. As
noted in Adler, Barish, Daniels, Levin & Creskoff v. Epstein,
393 A.2d 1175 (Pa. 1978), attorneys may not take advantage
of a still-subsisting confidential relation created during their
employment; similarly, they should not disclose financial or
other information unless they have the clients’ approval.
Similarly, lawyers who are exploring an affiliation with another firm may be tempted to boast about their “book of
business.” To avoid claims of breach of fiduciary duty, however, a lawyer who is in talks with another firm should not
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Deciding Whether to Leave
reveal any confidential business information about the current firm other than those permitted within the parameters
of the rules. Any such disclosure without client consent
should also go no further than necessary to enable the new
firm to comply with its obligations to avoid conflicts and to
confirm the lawyers’ ability to provide competent and diligent representation. Finally, when negotiating, all statements must be truthful.
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