051319 NYEO, ETH 1168

Docket Nº:ETH 1168
Case Date:May 13, 2019
Court:New York
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...

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