Virginia Joins Florida as the Second State to Adopt Departing Partner Ethics Rule Regarding Client Notification
- Virginia's recent adoption of new ethics Rule 5.8 will provide guidance on a common issue to lawyers and law firms managing lawyer departures.
- The Florida Supreme Court took on this issue in 2005, noting then that the debates between departing lawyers and their law firms were prioritizing lawyer and law firm interests ahead of the interests of the clients.
- Lateral mobility is not simply a business issue – it is a matter of professional responsibility and carries with it the risk of potential discipline.
Virginia's recent adoption of a new ethics rule will provide guidance on a common issue to lawyers and law firms managing lawyer departures. For years, lawyers and law firms have handled difficult and sometimes contentious departures guided only by a patchwork of ethics opinions and commentator advice. However, the recent codification of Virginia's new Rule 5.8, which goes into effect on May 1, 2015, sets forth specific procedures for client notification prior to a lawyer's departure. The new rule may also signal a trend toward state bar regulators' increased attention to the rules governing lateral mobility and the need for clear guidance on how to effectively comply with the bedrock duty of client communication in the midst of a lateral transition. By passing Rule 5.8, Virginia joins Florida, which was previously the only other state that had passed such a rule.
Virginia's Rule 5.8: Procedures For Notification to Clients When a Lawyer Leaves a Law Firm or When a Law Firm Dissolves
Prior to the adoption of Rule 5.8, the procedure for client notification articulated by ethics opinions and commentators generally recommended that the departing lawyer and their soon to be former firm meet upon notice of the lawyer's resignation and agree on a form of joint notification that sets out each client's choices between the law firms and seeks each client's election.1 These procedures and recommendations have grown from the tension between traditional concepts of fiduciary duties owed to the law firm by the departing lawyer, juxtaposed against the client's right to make informed and voluntary decisions about his or her legal representation.2 In this arguably ideal example, clients learn for the first time of the lawyer's intended departure immediately following notice to the firm, but with sufficient time to exercise choice.
In practice, however, business considerations, pressure from the lateral hiring market and acrimony over lawyer departures have resulted in entirely different procedures. Although unprofessional and probably unethical, it is not completely uncommon for departing lawyers and their old law firms to engage in a variety of "bad behaviors," including departing lawyers secretly soliciting client engagement for the new law firm in advance of notifying the old firm of their intended departure, laterally hiring firms insisting on assurances regarding client transition before making offers to potential lateral candidates, some legal recruiters to similarly insisting that "everyone does it," to law firms attempting to prohibit departing lawyers from contacting clients at all until after their departure, or interfering with notice attempts through lockouts or partnership agreement provisions that impose draconian consequences for attempts at seamless transition. These practices have resulted in a number of expensive disputes between lawyers and law firms, with most playing out in confidential, expensive and protracted arbitrations.
Although Virginia is an early adopter in passing an ethics rule to assist with managing lateral partner departures, it is not the first state to do so. The Florida Supreme Court took on this same issue in 2005, noting then that the debates between departing lawyers and their law firms were prioritizing lawyer and law firm interests ahead of the interests of the clients. Based on Florida's RPC 4-1.4 (the duty of communication) and RPC 4-1.16 (duties upon termination of employment), The Florida Bar enacted RPC 4-5.8, which set out the practices described above as affirmative rules of professional conduct.
By rule change recommended by the Virginia State Bar and adopted Feb. 27, 2015, by its Supreme Court, Virginia has now followed suit. As stated in the Dec. 16, 2014, petition for rule change, these rules "do not change the Committee's interpretation of lawyer's obligations in these circumstances, but it does make clear that these are obligations, not suggestions."
Timely Client Notification and Soliciting Are Defined by Rule 5.8
Virginia's new Rule 5.8 provides clear direction on two important issues related to lateral mobility. First, the rule states – as a matter of ethics – that neither a departing lawyer nor the law firm shall contact a client prior to engaging in a joint effort to affect notification under the rule. This language resolves a common issue that often arises during lateral transitions: attempting to distinguish between timely notification to a client of a lawyer's move and "soliciting" the client's work for a competing law firm in violation of fiduciary duties to the old firm.3 The result is sometimes viewed as a culture of nodding and winking, which Rule 5.8 clearly rejects. Lawyers and law firms must attempt to confer about notification prior to informing a client of a move and must apprise the client of all available representation options.
Notably different than the Florida version of Virginia's rule are the implications for lawyers at the old firm who similarly may not unilaterally contact or solicit a departing lawyer's clients, bringing an end to the practice in Virginia of receiving a lawyer's notice of departure and privately beginning a full court press on clients before any formal notification is issued or while silencing the departing lawyer. The rule encourages – if not insists – upon transparency and communication by and between the departing lawyer and their law firm.
Rule 5.8 Addresses Clients' Failure to Respond to Notification
Finally, the new Rule 5.8 prescribes welcome guidance for situations in which clients fail to respond to the notification. Where a client fails to respond to a notice given by a departing lawyer, the client remains a client of the law firm until the engagement is terminated by either the client or the law firm. In the case where the law firm is dissolving and the client fails to respond to the notification, the client is deemed to be a client of the lawyer primarily responsible for the client's legal services.
Mismanaged Lateral Hiring May Involve Risk of Discipline
Virginia and Florida are not alone in focusing on the ethics of lawyer mobility. On March 28, 2015, the New York State Bar House of Delegates voted to approve new comments to Rule 1.6 of the state's professional conduct rules regarding disclosure of confidential client information in lateral negotiations. Proposed comment 18B to Rule 1.6 describes exactly what client information must remain confidential during the lateral recruiting process and what limited disclosures are permitted for business purposes. The comment seems to seek a balance of confidentiality and business reality, but does so in the context of the lawyer’s ethical duties.
The efforts of state bar regulators in Florida, Virginia and New York, which represent three large legal markets, are almost certainly an indication of increased regulation to come in the area of lawyer mobility. Specifically, the codification of client notification procedures into state rules of professional conduct warrants heightened risk management considerations for both the lawyers and law firms involved in lateral movement. As evidenced by the implementation of these unambiguous rules and procedures regarding lawyer departure and reinforced by the all-important duty of client communication, lateral mobility is not simply a business issue – it is a matter of professional responsibility and carries with it the risk of potential discipline.