ETH 1168
Ethics Opinion 1168
New York Ethics Opinion
New York State Bar Association Committee on Professional Ethics
May 13, 2019
Topic:
Sale of Law Practice; Use of Firm Name after Sale
Digest:
A lawyer affiliated with firm wholly owned by another lawyer
may purchase the firm consistent with Rule 1.17 and may use
the name of the seller’s firm provided that doing so is
not misleading. The meaning of “retired” for
purpose of such a sale is as set out in Rule 1.17.
Rules:
1.5(h), 1.17(a), 7.5(b), 7.5(c), 8.4(c) Overrules N.Y. State
148 (1970) and modifies N.Y. State 850 (2011)
FACTS
1. The
inquirer is a New York lawyer affiliated with a firm wholly
owned by another New York lawyer (here, “Owner”),
which currently operates under the name of the [Owner] Group,
P.L.L.C.. The firm has offices located in New York City
metropolitan area. The Owner has decided to leave the firm,
to cease practicing law there, and to move to a location in
New York State distant from the metropolitan area, where the
Owner intends to start a new practice. The inquirer wishes to
purchase the Owner’s law practice in the metropolitan
area, and to continue to use the Owner’s name in
conducting the practice as [Owner] Group, P.L.L.C.
QUESTIONS
2. May
a lawyer purchase another lawyer’s wholly owned law
practice, notwithstanding the seller’s continuing in
law practice?
3. May
the buying lawyer continue to use the name of the selling
lawyer’s practice?
OPINION
4.
Standards governing the sale of law practices are of
comparatively recent origin. Before the 1996 adoption of DR
2-111 of the N.Y. Code of Professional Responsibility (the
“Code”) – the predecessor to Rule 1.17(a)
of the New York Rules of Professional Conduct (the
“Rules”) – a lawyer in New York could not
sell a law practice. See EC 4-6 (as in effect prior to 1996);
N.Y. State 707 (1998). The theory, still reflected in Comment
[1] to Rule 1.17, was that “[c]lients are not
commodities that can be purchased and sold at will.”
5.
According to the Report and Recommendations approved by the
New York State Bar Association's House of Delegates on
January 26, 1996, the provision that became Rule 1.17(a) was
designed to "address the disparate treatment of sole
practitioners and members of law firms with respect to the
'good will' of their respective practices". See
also EC 2-34 of the Code. That is, before the adoption of
this rule, a member of a law firm could retire from the
practice of law and receive payments from the firm under a
separation or retirement agreement under what became Rule
1.5(h). But a solo practitioner could not sell a law practice
or divide fees from legal business except in very restricted...
