Clients Are Not Property ABA Formal Opinion 489 & Phantom Rule 5.8, 0520 SCBJ, SC Lawyer, May 2020, #38

AuthorMichael J. Virzi, J.
PositionVol. 31 Issue 6 Pg. 38

Clients Are Not Property: ABA Formal Opinion 489 & Phantom Rule 5.8

No. Vol. 31 Issue 6 Pg. 38

South Carolina BAR Journal

May, 2020

Michael J. Virzi, J.

Much has been written, and more could be, on the various ethical considerations surrounding a lawyer’s departure from a law firm. For example, a departing lawyer’s duties to the firm prior to departure, the potential conflicts of interest created by joining a new firm, and the lawyer’s or the firm’s interest in fees later collected by the other could each be the subject of a separate article, and surely have been. This article focuses on the departing lawyer’s and the firm’s duties of communication with clients and on dispelling the myth of who “owns” the client files.

The required substance of communications with clients upon a lawyer’s departure has been well understood by the bar for more than two decades. In 1999, the American Bar Association (ABA) directed lawyers to notify clients of a lawyer’s departure and of the client’s three options: remain with the firm, depart with the lawyer, or hire any other lawyer of their choosing.[1] This practice appears to be well established and largely undisputed. Several finer points surrounding this notice to clients, however, have remained at best misunderstood and at worst hotly contested. Those include the appropriate timing of the notice, solicitation of clients, the status of the attorney-client relationships during the transition period, and access to client files. Some recent clarifications from the ABA, the South Carolina Supreme Court (in a sense), and other jurisdictions have brought much needed clarity. This article will explain the history of the issue, particularly in South Carolina, and hopefully encourage fewer disputes over who may do or say what and when in firm breakups. While our court has declined four successive proposals from the Bar for a Rule 5.8 that would govern firm breakups, the ABA seems to be advising that existing rules already cover the necessary ground and a new 5.8 is simply not needed.

It is worth noting that these issues arise in two sometimes distinct and sometimes overlapping circumstances: when a lawyer leaves a firm and when a firm breaks up in a larger sense. Attempts to cover both scenarios and the gray area between them (e.g. two lawyers leaving a 10-lawyer firm) has led to lengthy, detailed rule proposals, particularly when they also impose different obligations on the departing lawyers than on the remaining ones. Fortunately, recent guidance on the topic imposes obligations on both equally and is broad enough to cover all departure scenarios.

Some history

The modern guidance on handling firm breakups has been rooted for more than 20 years in the ABA’s 1999 Advisory Opinion 99-414, issued in response to the growing trend of lawyer mobility.2 99-414 focused largely on the departing lawyer’s duties, but portions of it were applicable to the conduct of both the lawyer and the firm. The basic guidance in that opinion was 1) the lawyer and firm should attempt to work together to send a joint communication, 2) if that effort fails, the lawyer or firm may unilaterally notify the client, and 3) in any case, the communication should inform the client of three options: remain a client of the departing lawyer, remain a client of the firm, or choose a new lawyer.3

In 2006, the Supreme Court of Florida created Rule 4-5.8, which made much of the ABA’s 1999 advice mandatory in Florida.4 Then in 2008, the South Carolina Bar petitioned the Supreme Court to adopt the Florida rule here, based on a recommendation from the Professional Responsibility Committee. Like Florida’s rule, however, that proposal included a noticeably one-sided provision that favored firms over departing lawyers. It declared that any client that failed to make an election of counsel would remain a client of the firm (and, by implication, not of the departing lawyer). If adopted, that would have been at odds with the prevailing view that a client has an attorney-client relationship with both the law firm and the individual lawyer or lawyers who work on the matter.

Unlike the Florida rule, however, the Bar’s proposal was more balanced between lawyer and firm in another respect. The Florida rule also prohibits departing lawyers from contacting clients until after first approaching the law firm to negotiate a joint communication. The prohibition includes soliciting the clients and merely notifying them of the anticipated departure. In many cases, the latter restriction could conflict with the departing lawyer’s duties of diligence and communication.

More to the point, though, this prohibition in Florida is imposed not on the firm but only on the departing lawyer, despite that the departing lawyer also has an attorney-client relationship with those same clients, as the ABA and others have recently...

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