Nancy Crotti, The Daily Record Newswire
Thinking about leaving your firm? You had better think long and hard before loading up the files and the flash drive and disappearing into the night.
The process of leaving a law firm comes with a set of legal, ethical and financial issues for the departing attorney and the firm. Failing to properly deal with those issues can make the process messy, painful and expensive.
The first thing many lawyers do is quietly notify clients of their imminent departure and ask them to consider coming along to the new firm. The first thing they should do is review the contracts or agreements that govern the relationship with the firm they intend to leave, according to Todd C. Scott, vice president of risk management at Minnesota Lawyers Mutual Insurance Co. Minnesota Lawyers Mutual frequently learns of imminent departures before their law firms do because departing lawyers must make sure they will continue to have liability insurance.
Partnership agreements are usually more explicit about the departing partner’s responsibilities than associate agreements, Scott said. The partnership agreement may include punitive clauses on repayment of partnership capital and lost profits from ongoing representation as well as liability for post-departure claims, he said.
These agreements may prohibit a departing partner from taking draws from the partnership. They may also state that future fees earned from a firm client who leaves with a departing partner belong to the firm. Or they may give rise to any number of claims, including breach of the agreement, if the departing partner fails to give 120 days’ notice before leaving, according to Chuck Lundberg, an ethics lawyer with Bassford Remele.
The most common problem with lawyer departures is that both the lawyer and the firm want to keep that lawyer’s business. Some lawyers assume they can take their book of business, when in fact, it is the client’s decision whether to follow the lawyer, remain with the original firm or start over elsewhere, said Lundberg. He believes that the best way to handle who gets the clients is for the firm to issue a joint letter with the departing lawyer asking clients to indicate their choice, and then sign and return the letter.
“The key thing that people sometimes forget is that it’s the client’s file and the client gets to decide who they want to be the lawyer,” Lundberg said. “There is no ‘book of business’; it’s how many clients who, when asked, would ask to go with him.”
Departing lawyers and firms must keep up with the lawyer’s open, active cases or risk a malpractice lawsuit. Clients usually will not know if the lawyer missed a filing deadline or other important step until it is too late, according to Scott. If the client signed an engagement agreement, it may be with the firm and not with the individual lawyer, exposing the firm to liability.
“We want to make sure that if there’s going to be a split, that it’s done in a way that none of the clients fall through the cracks,” Scott said. “We usually have a pretty thorough conversation about the proper way to notify the clients about the situation and the type of feedback they need to get in order to know whose responsibility it will be to continue handling the legal services on behalf of that client.”
If the neglected client sues the firm for malpractice, the firm may then sue the departing lawyer.
“It’s a totally unnecessary way of doing business,” Scott said. “Really, it behooves the firm to make sure all the cases are covered, because they just can’t ignore a client matter in assuming that the departed lawyer has taken care of it. You need to get some clarification that that is really and truly the case or you can be on the hook.”
Good communication is key to avoiding such painful and expensive pitfalls, these experts say. This is difficult when the departing lawyer and his or her former firm are at odds, Scott said.
