ETH 2020-201
Formal Opinion No. 2020-201
California Ethics Opinion
The State Bar of California Standing Committee on Professional Responsibility and Conduct
2020
ISSUE:
What ethical obligations arise when a lawyer departs from her
law firm?
DIGEST:
The departing lawyer and the law firm each have ethical
obligations in connection with the departure and must
prioritize their ethical obligations to each client above
their own competing interests. Specifically, if the departure
of the lawyer is a significant development to a particular
client, the lawyer and the law firm each have a duty to
communicate the fact of the departure to the client and to
explain the significance of the change in representation so
that the client may make an informed choice regarding counsel
going forward. During all phases of the departure, the lawyer
and the law firm must also be mindful of their continuing
obligations to protect client confidences and to avoid
conflicts of interests with clients. If the lawyer or law
firm is unable to competently handle the client’s
representation as a result of the departure and cannot remedy
that situation, or if the client chooses to make a change in
representation, the lawyer or law firm must comply with rule
1.16, including taking “reasonable steps to avoid
reasonably foreseeable prejudice to the rights of the
client.” Finally, both the departing lawyer and the law
firm have a duty to cooperate in the transition of any client
matter in order to protect the client’s interests.
AUTHORITIES
INTERPRETED: Rule 1.1, 1.4, 1.7, 1.10, 1.16, 1.18,
5.1, 5.2, 7.1, 7.2, and 7.3 of the Rules of Professional
Conduct of the State Bar of California.
Business
and Professions Code section 6068(e).
STATEMENT
OF FACTS
A
lawyer is leaving her law firm (“Law Firm”) and
transitioning her practice to a new firm (“New
Firm”). Prior to making this transition, the lawyer
(“Lawyer” or “Departing Lawyer”)
wants to know what ethical obligations arise for her and the
Law Firm as a result of her departure.
DISCUSSION
Lawyer
mobility is a reality in today’s legal marketplace.
Legal headlines are filled with news of lawyers moving from
one firm to another, sometimes alone, sometimes with groups,
and often accompanied by tales of acrimony or contentiousness
between the departing lawyer(s) and the former law firm.
Almost
all lawyer departures involve the balancing of competing
interests between the departing lawyer and the departed law
firm. In analyzing the rights and obligations of the lawyer
and the law firm to one another, there is frequently a
tension between compliance with the California Rules of
Professional.
Conduct
and other ethical guidelines, the fiduciary duties among and
between attorneys at the law firm, and any contractual
obligations that the attorneys and law firms may have to one
another that govern the departure. Notwithstanding this
tension, the primary directive is that the client’s
interests must come first. Specifically, lawyers and law
firms must prioritize their ethical obligations to clients
above their own competing interests. These ethical
obligations center around the fundamental concepts that the
client has the right to the counsel of his or her choice and
lawyers must protect their clients’ interests during
all phases of any transition.
This
opinion will discuss the ethical obligations lawyers and law
firms have to a client when a lawyer leaves her current law
firm and moves to another law firm. Much of the discussion is
also applicable to lawyers who are moving to an in-house
position or leaving the practice of law altogether. While the
opinion will not seek to resolve all issues of substantive
law, it will identify issues that are often implicated in
attorney transitions since many of these ethical obligations
cannot be analyzed in isolation.
I.
The Client’s Freedom of Choice in Selection of Counsel
and Protection of the Client’s Best Interests are
Guiding Principles
The
guiding ethical principles governing any attorney departure
are the protection of the client’s best interests and
the client’s right to the counsel of its choice. (See
Cal. State Bar Formal Opn. No. 1985-86 [“the interests
of the clients must prevail over all competing considerations
. . . if the practitioner’s withdrawal from the firm is
to be accomplished in a manner consistent with professional
responsibility”]; ABA Formal Opn. No. 99-414 [“A
lawyer’s ethical obligations upon withdrawal from one
firm to join another derive from the concepts that
clients’ interests must be protected and that each
client has the right to choose the departing lawyer or the
firm, or another lawyer to represent him.”].) Thus, the
ethical obligations triggered when a lawyer leaves her law
firm should be viewed through the lens of these
client-centered directives.
The
client’s right to the counsel of its choice has a long
history in American jurisprudence.[1] (Echlin v. Superior Court
of San Mateo County (1939) 13 Cal.2d 368.) It derives
from the concept that a client has the right to discharge its
lawyer at will, with or without cause, a right that has been
recognized in both California statute and case law. (See,
Heller Ehrman v. Davis Wright, Cal. Supreme Court
Case No. S236208, March 5, 2018, citing Fracasse v.
Brent (1972) 6 Cal.3d 784, 790 [100 Cal.Rptr. 385]; Code
Civ. Proc., § 284; and General Dynamics v. Superior
Court (Rose) (1994) 7 Cal.4th 1164, 1174–1175 [32
Cal.Rptr.2d 1].)
Because
clients have the freedom to discharge their lawyer at will
and hire another one, they do not “belong” either
to the law firm or the lawyers that are providing the legal
services. Many law firms use compensation structures that are
tied, in part, to rewarding attorneys for bringing in clients
and generating matters for a particular client, often known
as client origination credits. When those law firms allocate
compensation among certain attorneys, clients may be seen by
lawyers at the firm as belonging to a particular
attorney.2 As the California Supreme
Court has made clear, however, clients are not the property
of any law firm or lawyer.3 In a competitive legal marketplace,
law firms and lawyers must earn each client’s continued
loyalty through outstanding service, quality of
representation and an agreement regarding the value and cost
of legal services.
II.
Departing Lawyer and Law Firm Each Have Ethical Obligations
to Clients in Connection with Lawyer’s
Departure
Departing
Lawyer and Law Firm each have ethical obligations to all
clients who will be materially affected by the departure
and/or whose active matters on which Departing Lawyer is
currently working. The ethical obligations are the same
whether Departing Lawyer is a partner or shareholder, a
non-equity partner, an associate, or some other category of
lawyer such as one designated as “Of Counsel.”
“All attorneys in a law firm owe duties –
including ethical duties – to each of the firm’s
clients.” (See, Cal. State Bar Formal Opn. No. 2014-190
[“When a client retains a law firm, the client’s
relationship generally extends to all attorneys in the
firm”]; see also Cal. State Bar Formal Opn. No. 1981-64
[opining that all attorneys employed by a legal services
program owe identical professional responsibilities to
clients of the program].) This point also is made in numerous
cases in the professional malpractice context. See, e.g.,
PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser,
Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 392
[58 Cal.Rptr.3d 516] [“Unless there is an agreement to
the contrary, the retention of an attorney in a law firm
constitutes the retention of the entire firm.”].
Departing
Lawyer and Law Firm must be cognizant of the ethical
obligations they have throughout the transition period,
irrespective of whether the client decides to leave with
Departing Lawyer, to stay at Law Firm, or choose otherwise.
(See Cal. State Bar Opn. No.2014-190; see also rule 1.16.)
These ethical obligations sometimes can be at odds with the
business interests of Law Firm or Departing Lawyer. In such
circumstances, the client’s interest always remains
paramount.
During
the transition process, Departing Lawyer and Law Firm also
may have legal obligations to one another, which could
include fiduciary duties and contractual obligations. To the
extent possible, when there is a conflict between a
lawyer’s and a law firm’s ethical obligations to
a client and a lawyer’s and a law firm’s
obligations to each other, the former should prevail. For
example, Law Firm should not attempt to enforce contractual...
