Rule 5.6 Restrictions on Right to Practice

• Library: Minnesota Legal Ethics: A Treatise (MSBA) (2022 Ed.)

Rule 5.6—Restrictions on Right to Practice

I. OVERVIEW

A. Coverage

Rule 5.6 forbids contracts that impose either of two specific restrictions on a lawyer's right to practice. The first forbidden restriction is one that would prevent, or discourage, a lawyer who is leaving a law firm from taking firm clients along. The second forbidden restriction would typically seek to prevent or hamper a plaintiff's lawyer who is settling a case from bringing other lawsuits against the defendant.

B. Policy

A comment states the main policy reason for the restrictions in Rule 5.6(a). "An agreement restricting the right of lawyers to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer." Rule 5.6 cmt. 1. This description of the policy purpose of Rule 5.6(a) applies equally to Rule 5.6(b).

C. Operative Principles?

Rule 5.6 limits the freedom of lawyers to enter into certain restrictive contracts, even though such contracts are generally enforceable as to nonlawyers. However, as explained below, Rule 5.6 permits other restrictive contracts. Rule 5.6 and its comments do not state a general principle that explains why some restrictive contracts are prohibited and others are permitted. Several possible principles may apply: (1) lawyers' increasing mobility should not be unduly restricted; (2) lawyers' bargaining power is limited regarding the prohibited contracts; (3) the prohibited contracts' limitations on clients' rights to choose counsel are problematic; and (4) lawyers, as professionals, are to be differentiated from business employees.

D. Case Law Anchor

The policy of promoting client freedom to choose counsel is anchored in Minnesota case law. A client has been said to have an unconditional right to be represented by counsel of his choosing. Lawler v. Dunn, 145 Minn. 281, 176 N.W. 989 (1920).

E. Limits on Client's Choice of Counsel

In fact, a would-be client does not have an unconditional right to counsel of choice. Several limits may apply.

1. Public Policy. Freedom of contract sometimes is outweighed by public policy. "Public policy requires that freedom of contract remain inviolate except only in cases when the particular contract violates some principle which is of even greater importance to the public." Rossman v. 740 River Drive, 308 Minn. 134, 136, 241 N.W.2d 91, 92 (1976).

2. Other Rules. A client's freedom to choose a lawyer may be outweighed by other rules, e.g., a client's right to retain a particular lawyer may be defeated by the conflict the lawyer would have in the engagement, by reason of obligations to the opposing party.

3. Lawyer's Choice. A lawyer may simply decline to represent a prospective client. A lawyer may withdraw from representing a client, where "withdrawal can be accomplished without material adverse effect on the interests of the client." Rule 1.16(b)(1).

4. Organizational Clients. In recent years, the right of organizational clients to discharge lawyers has come to be subject to financial remedies the lawyers may have for wrongful discharge claims. Cases involving these issues are discussed in the chapter of this treatise on Rule 1.13.

F. Permitted Restrictive Agreements

Rule 5.6 prohibits only some restrictive agreements. The fact that Rule 5.6 impliedly allows other restrictive agreements shows that the principles of lawyer and client freedom are limited. For example, outside counsel guidelines for large corporate clients often include provisions that restrict a law firm's representation of competitors or of clients who will take positions adverse to the client's industry. A law firm might agree with its insurer that it will not practice in a particular area, e.g., intellectual property law. In the above circumstances, Rule 5.6(a) does not apply because the agreements do not spring into application "after termination of the relationship." Rule 5.6(b) does not apply because the agreement is not "part of the settlement of a client controversy."

G. A Closer Question

Would law firms A and B violate Rule 5.6 if B accepted a referral of A's client C, on the condition that B would agree not to accept further engagements directly from C? Insofar as the restriction would apply after the case A referred to B is concluded, the agreement would restrict "the right of a lawyer to practice after termination of the relationship." In that event, Rule 5.6(a) still will not apply unless the agreement is an "operating, employment or other similar type of agreement." Rule 5.6(a). There are many types of referral agreements, co-counsel agreements, etc. It is possible that some such agreements might be thought to be "similar" to "operating" or "employment" agreements, but it would be the burden of the discipline authority or the party alleging such similarity to prove the same. "Similar" appears seldom in the Rules, but often in the comments, because it is not a precise term. "Operating" appears only once in the Rules or comments and, again, lacks a precise meaning.

H. "Shall Not Participate in Offering or Making"

The lawyers on both sides of agreements prohibited by Rule 5.6 are covered by the Rule. "There's no harm in asking" is not a maxim consistent with Rule 5.6. "Participate" should be construed broadly, e.g., a lawyer who negotiates and closes a settlement agreement that restricts opposing counsel's practice should not be able to defend a charge of Rule 5.6(b) violation by asserting that a nonlawyer businessperson did the specific dirty work.

I. "There Must Be a Way ... Be Creative!"

Law firm partners are sometimes determined to prevent lawyers who leave the firm from "poaching" the firm's clients. Defendants are sometimes determined that they will never have to face plaintiff's counsel again. When told that the Rules thwart these desires, partners and defendants will sometimes insist, "Be creative, find a way around these Rules!" Lawyers should realize that the opportunities for creative bypasses of Rule 5.6 are few and the opportunities for discipline and unenforceable contracts are many.

J. Enforcement

Contracts that violate Rule 5.6 are likely to be found unenforceable, as against public policy. See Christensen v. Eggen, 577 N.W.2d 221 (Minn. 1998) (fee-splitting agreement between lawyers held unenforceable as against public policy where agreement violated Rule 1.5(e)). A high percentage of disputes involving Rule 5.6(a) arise in civil litigation regarding enforcement of restrictive law firm agreements. Although Rule 5.6(b) issues would be expected to arise in discipline...