SC Lawyer, January 2008, #1. Leaving on Good Terms.

• Author: By John Freeman

South Carolina Lawyer

Ethics Columns.

SC Lawyer, January 2008, #1.

Leaving on Good Terms

South Carolina LawyerJanuary 2008Leaving on Good TermsBy John FreemanFor many young lawyers, the law firm departure question is not "if" but "when." A poll by the ABA's Young Lawyers Division found that only 10 percent of practicing lawyers below the age of 36 said they "definitely" would not be leaving their current employment in the next two years. American Bar Ass'n, ABA Young Lawyers Division Survey: Career Satisfaction 9 (1995). In contrast, more than one-third of those polled said they were "strongly considering" leaving their firms. According to one study, more than 40 percent of law firm associates leave their firms by the end of the third year. NALP Found. for Research & Educ., Keeping the Keepers: Strategies for Associate Retention in Times of Attrition 54 (1998). Given the reality that most lawyers eventually will change firms at some point, it is worth reviewing some of the basic things to do and to avoid doing when the challenges of lawyer mobility arise.

The starting point to solving problems arising from lawyer departure quickly and fairly is to understand the basics. Fortunately, there is an ABA Ethics Opinion directly on point. That opinion, 99-414, is entitled "Ethical Obligations When a Lawyer Changes Firms." It is available on Westlaw in the ABA-ETHOP database, and it is a great skinny for use both by the departing lawyer and the lawyer's firm. Additionally, the South Carolina Bar has published on its Web site a helpful set of materials captioned, "A Practical Guide to Leaving a Law Firm." The Bar's set of materials comes complete with checklists, draft documents and insights calculated to make the departure process easier for both sides. The guide is available at www.scbar.org/pmap/transitions/transitions.asp.

The ABA opinion and case law make several things clear about the protocol for handling departures and informing clients. First, Job #1 is not about protecting the firm's financial interests or the leaving lawyer's. Job #1 is to protect the client with accurate, complete, honest information about what is transpiring and about the client's options. Where the departing lawyer has been serving clients, both the firm and the lawyer have an obligation to be sure the client is properly informed about the client's options. Those options typically entail moving the file to the departing lawyer's new firm, remaining at the current firm or seeking new counsel.

Clients who call the old firm seeking to contact their lawyer need and deserve the truth about the lawyer's whereabouts. It is unethical to conceal from clients contact information for the former employee the client is trying to find. Obviously, it likewise is improper for either side unfairly to disparage the other. Besides being tacky and potentially unethical, this kind of misbehavior is a good breeding ground for a defamation lawsuit.

Law firm departures also are excellent breeders of financial disputes. How much, if anything, is the former firm entitled to collect for its investment in cases the departing lawyer takes? Clearly, advanced costs need to be reimbursed and hourly charges accrued are owed. But what is the former firm's right to share in contingent fees ultimately collected when the cases taken by the departing lawyer generate cash post-departure? This issue is knotty but may be solved in various ways.

The easiest way to solve the problem is to be able to use a road map spelled out either in the lawyer's employment contract or in the client retainer agreement. These contract provisions will state what the firm's rights are to payment for work done on contingent fee cases where the client fires the firm without cause before the case is resolved. If the problem has been anticipated and dealt with contractually, things are simplified. Hint: consider putting some fair payment formula in employment agreements (covering departing lawyers' fee accountability obligations to the firm post-departure), or in client retainer agreements (and button this down by giving the firm a charging lien right).

Absent clearly delineated contract rights, unjust enrichment law provides the chief means of determining the former firm's entitlement to contingent fees generated post-departure by its former clients' matters. Obviously, a quantum meruit claim is better than nothing, but it is a poor second to having a valid contractual right. Having an equitable right to payment is one thing, turning it into a collected fee is something else.

In the quantum meruit setting, the lawyer and his or her former firm need to work out some logical, fair, expeditious way to allocate to the former firm a proper share of fees derived from cases that leave the firm with the former lawyer. Making a painstaking case-by-case analysis can be difficult, contentious and time-consuming, but it is one way to address the problem. There are other ways to do the fee math, principally focusing on rough justice. The parties may agree, for example, that the former firm is entitled to a sliding scale pay-out rate, depending on when the case is resolved following departure, with earlier-resolved cases getting a higher rate. Smart lawyers will want to assure the fee split dealings comport with Rule 1.5(e) (covering fee sharing between lawyers not in the same firm).

What can be done when the parties are at loggerheads over how to split up fees? The smart thing for both sides to remember is that the best use of lawyer time is generating income by solving problems for clients, not fighting other lawyers over fees. If a fee dispute cannot be solved by agreement, one reasonable way to resolve it is to agree to arbitrate it in front of an experienced lawyer, trusted by both sides, with the understanding there will be a fast ruling and no appeals.

Law firm departures are inevitable. They tend to bring on emotional pain and frustration. But even in an era where firm loyalty may be waning, and friendships may start to fray, old-time attributes like courtesy, fairness and mutual respect are still in vogue. Life is short. Professional relationships between lawyers forged over the years almost always hold a healthy measure of positives. Departing lawyers and the firms they leave need to focus on those positives and not be distracted by petty, selfish matters. Taking the high road may seem hard in the short term, but in the long term it means traveling first class in this age of lawyer mobility.