Formal Opinion No. 2014-190
California Ethics Opinions
ISSUES: Upon the dissolution of a law firm, what duties does an attorney affiliated with the firm owe to a client on whose behalf he or she provided legal services if the attorney no longer will be representing the client following the dissolution? How does the fulfillment of those duties differ if the attorney had no connection with or knowledge of the client prior to dissolution of the firm? Do the steps an attorney may be required to take depend on the nature of the attorney's position with the firm?
THE STATE BAR OF CALIFORNIA STANDING COMMITTEE ON PROFESSIONAL RESPONSIBILITY AND CONDUCT
Rule 3-700(A)(2) of the California Rules of Professional Conduct, provides that a member may not withdraw from the representation of a client until the member has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client. The requirements of rule 3-700(A)(2) apply when an attorney's withdrawal is prompted by the dissolution of the attorney's law firm. In the event of dissolution, all attorneys who are employed by or partners of a firm are required to comply with rule 3-700(A)(2) as to all clients of the firm, regardless of their connection to any specific client or the specific nature of their affiliation with the firm. What "reasonable steps" an attorney must take to protect a particular client's rights may vary considerably, however, depending on the circumstances, including the attorney's relationship to the client and its matter and the attorney's position within the firm.
Rules 1-100, 3-110, 3-500, and 3-700 of the Rules of Professional Conduct of the State Bar of California.
STATEMENT OF FACTS
Six months ago, Client, a closely held corporation, signed an engagement letter with Old Firm to retain its services in pursuing certain claims for breach of contract and fraud against a supplier. The engagement letter expressly stated that Client was retaining Old Firm, that Partner A would be primarily responsible for the representation, and that Associate also would work on the matter. At that time, Partner A was a partner in Old Firm, and Associate was an employee of the firm.
From the inception of Client's engagement, Associate has worked with Partner A on the matter. Over the course of the past six months, they have devoted well over a hundred hours to interviewing witnesses, studying accounting and other documents, and otherwise learning the relevant aspects of Client's business in order to prepare an appropriate complaint. Associate and Partner A are both aware that the applicable statute of limitations will soon expire on Client's claims, and that a complaint must be filed in the near-term to preserve Client's rights. No other attorneys at Old Firm have been involved in the matter. Old Firm is comprised of approximately 200 lawyers located in various offices across California.
After months of rumors and speculation, Associate learns that the partners of Old Firm have scheduled a vote to dissolve Old Firm. Partner A then tells Associate that she is considering accepting an offer from Mega Firm, and that, if she does, she likely will not continue representing Client at Mega Firm. Within a few days, Old Firm falls into disarray, with the remaining attorneys openly seeking new employment. Associate accepts an offer from New Firm. Associate does not ask Client if Client would like to be represented by New Firm. Before leaving for New Firm, Associate writes a memorandum to Partner A, which she saves in Client's file, that provides a detailed outline of the status of work she has performed for Client and upcoming dates, including the deadline imposed by the applicable statute of limitations. Associate also calls Client to advise that she is leaving the firm and no longer will be working on the matter.
Because she is worried about Partner A's potential departure, before her own departure Associate talks to Partner B about her concerns with respect to Client. Partner B is a transactional lawyer who specializes in mergers and acquisitions. Partner B assures Associate he will alert the firm's executive committee to the issues raised by Associate with respect to Client.
A few days after Associate's last day of employment with Old Firm, a group of partners, including Partner A and Partner B, vote to dissolve Old Firm. As part of the same vote, the partners form a dissolution committee -comprised of five partners formerly on Old Firm's executive committee - to wind up Old Firm's business. Shortly thereafter, Partner A leaves Old Firm to join Mega Firm. Partner B starts a solo practice, but only after speaking with the newly formed dissolution committee about Client's situation, as relayed to him by Associate. Old Firm begins the process of winding down its affairs.
On her last day with Old Firm, Partner A sends a short email to Client advising that Old Firm has dissolved and that she no longer will be representing Client at Mega Firm. In the email, Partner A recommends that Client promptly engage new counsel. Partner A also mentions the upcoming statute of limitations deadline and warns Client that it must engage new counsel to protect its interests.
What are the respective duties to Client owed by Partner A, Associate, and Partner B?
Rule 3-700(A)(2) of the Rules of Professional Conduct provides:
A member shall not withdraw from employment until the member has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for employment of other counsel, complying with rule 3-700(D) [concerning the delivery of the client's papers