Florida Bar will file petition with Florida Supreme Court with revisions to Rule 4-5.8 to clarify which clients must be notified of lawyer’s departure

Hello and welcome to this Ethics Alert which will discuss the proposed additions to the Comment to Florida Bar Rule 4-5.8, which addresses the issue of what firm clients must be notified of a lawyer’s departure from the law firm.  The BOG approved the rule amendments and the Bar will file an Omnibus Rules Petition with the proposed rule amendment with the Florida Supreme Court on October 15, 2016 (along with other proposed rule amendments).  The new Rule 4-5.8 language and Comment is below with new language underlined and proposed rule revisions are here:  2016 Annual Florida Bar Rules Proposals.

RULE 4-5.8 PROCEDURES FOR LAWYERS LEAVING LAW FIRMS AND DISSOLUTION OF LAW FIRMS

(a) Contractual Relationship Between Law Firm and Clients. [no change]

(b) Client’s Right to Counsel of Choice. Clients have the right to expect that they may choose counsel when legal services are required and, with few exceptions, nothing that lawyers and law firms do affects the exercise of that right.

(c) Contact With Clients.

(1) Lawyers Leaving Law Firms. Absent a specific agreement otherwise, a lawyer who is leaving a law firm may not unilaterally contact those clients of the law firm for purposes of notifying them about the anticipated departure or to solicit representation of the clients unless the lawyer has approached an authorized representative of the law firm and attempted to negotiate a joint communication to the clients concerning the lawyer leaving the law firm and bona fide negotiations have been unsuccessful.

(2) Dissolution of Law Firm. Absent a specific agreement otherwise, a lawyer involved in the dissolution of a law firm may not unilaterally contact clients of the law firm unless, after bona fide negotiations, authorized members of the law firm have been unable to agree on a method to provide notice to clients.

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Comment

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Lawyers and firms should engage in bona fide, good faith negotiations within a reasonable period of time following their knowledge of either the anticipated change in firm composition or, if the anticipated change is unknown, within a reasonable period of time after the change in firm composition. The actual notification to clients should also occur within a reasonable period of time. What is reasonable will depend on the circumstances, including the nature of the matters in which the lawyer represented the clients and whether the affected clients have deadlines that need to be met within a short period of time.

For purposes of this rule, clients who should be notified of the change in firm composition include current clients for whom the departing lawyer has provided significant legal services with direct client contact. Clients need not be notified of the departure of a lawyer with whom the client has had no direct contact. Clients whose files are closed need not be notified unless the former client contacts the firm, at which point the firm should notify the former client of the departure of any lawyer who performed significant legal services for that former client and had direct contact with that former client.

Although contact by telephone is not prohibited under this rule, proof of compliance with the requirements of this rule may be difficult unless the notification is in writing.

In order to comply with the requirements of this rule, both departing lawyers and the law firm should be given access to the names and contact information of all clients for whom the departing lawyer has provided significant legal services and with whom the lawyer has had direct contact.

If neither the departing lawyer nor the law firm intends to continue representation of the affected clients, they may either agree on a joint letter providing that information to those clients, or may separately notify the affected clients after bona fide, good faith negotiations have failed. Any obligation to give the client reasonable notice, protect the client’s interests on withdrawal, and seek permission of a court to withdraw may apply to both the departing lawyer and lawyers remaining in the firm. 

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One of the issues which frequently comes up when a lawyer leaves a law firm is which clients must be notified of the lawyer’s departure under this rule.  The new Comment language addresses this issue and states that the “clients who should be notified of the change in firm composition include current clients for whom the departing lawyer has provided significant legal services with direct client contact.”  Of course, the language in the proposed rule is subject to interpretation; however, it should provide more guidance to lawyers and law firms regarding client notification when a lawyer leaves the firm.  The Comment also states that the “obligation to give the client reasonable notice, protect the client’s interests on withdrawal, and seek permission of a court to withdraw may apply to both the departing lawyer and lawyers remaining in the firm.”

According to the Bar’s notice of the proposed rule changes: “Members who desire to comment on these proposed amendments may do so within 30 days of the filing of the Bar’s petition(s). Comments must be filed directly with the clerk of the Supreme Court of Florida, and a copy must be served on the executive director of The Florida Bar. Rule 1-12.1, Rules Regulating The Florida Bar, governs these proceedings.”

Bottom line:  If approved by the Florida Supreme Court, this revision should provide more guidance to lawyers and law firms in providing notice to clients; however, it will also require analysis and interpretation of the term “significant legal services with direct client contact”.

Stay tuned…and be careful out there.

Disclaimer:  this Ethics Alert  is not an advertisement and does not contain any legal advice, and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2454 McMullen Booth Road, Suite 431

Clearwater, Florida 33759

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com

Florida Bar’s Board of Governors gives final approval to significant revisions to Comment to Bar Rule 4-5.8 regarding lawyers leaving law firms

Hello everyone and welcome to this Ethics Alert which will discuss the recent decision of The Florida Bar’s Board of Governors of to approve language to be added to the comment to Florida Bar Rule 4-5.8 related to lawyers leaving law firms. An article in The Florida Bar News discusses the proposed revision and is here: http://www.floridabar.org/DIVCOM/JN/jnnews01.nsf/8c9f13012b96736985256aa900624829/7d1fa5d263aee7a585257dc400492f7d!OpenDocument

At its December 2014 meeting, The Florida Bar’s Board of Governors voted final approval of a proposed rule amendment clarifying the duties of lawyers and law firms when a lawyer leaves a law firm or the law firm dissolves. According to the Bar News article, the proposed rule amendment “addresses questions directed to Bar staff through the Bar’s Ethics Hotline by lawyers and law firms and addresses how and which clients must be informed of changes in a firm and provides that such communications must be reasonable in timeliness and nature.” The proposed revision will now be sent to the Florida Supreme Court for review and potential approval and implementation.

The proposed revision to the comment to Rule 4-5.8 is below with significant language in bold:

“Lawyers and firms should engage in bona fide, good faith negotiations within a reasonable period of time following their knowledge of either the anticipated change in firm composition or, if the anticipated change is unknown, within a reasonable period of time after the change in firm composition. The actual notification to clients should also occur within a reasonable period of time. What is reasonable will depend on the circumstances, including the nature of the matters in which the lawyer represented the clients and whether the affected clients have deadlines that need to be met within a short period of time.

“For purposes of this rule, clients who should be notified of the change in firm composition include current clients for whom the departing lawyer has provided significant legal services with direct client contact. Clients need not be notified of the departure of a lawyer with whom the client has had no direct contact. Clients whose files are closed need not be notified unless the former client contacts the firm, at which point the firm should notify the former client of the departure of any lawyer who performed significant legal services for that former client and had direct contact with that former client.

“Although contact by telephone is not prohibited under this rule, proof of compliance with the requirements of this rule may be difficult unless the notification is in writing.

“In order to comply with the requirements of this rule, both departing lawyers and the law firm should be given access to the names and contact information of all clients for whom the departing lawyer has provided significant legal services and with whom the lawyer has had direct contact.

“If neither the departing lawyer nor the law firm intends to continue representation of the affected clients, they may either agree on a joint letter providing that information to those clients, or may separately notify the affected clients after bona fide, good faith negotiations have failed. Any obligation to give the client reasonable notice, protect the client’s interests on withdrawal, and seek permission of a court to withdraw may apply to both the departing lawyer and lawyers remaining in the firm.”

Bottom line: According to the proposed amendment revision, clients who should be notified of the lawyer(s) leaving the law firm include “current clients for whom the departing lawyer has provided significant legal services with direct client contact.” Further, if the lawyer had no direct client contact, “(c)lients need not be notified of the departure of a lawyer.” However, the proposed revision does state that “both departing lawyers and the law firm should be given access to the names and contact information of all clients for whom the departing lawyer has provided significant legal services and with whom the lawyer has had direct contact.”

If approved by the Florida Supreme Court, this revision will clarify, and have a very significant impact on, the ground rules for the notification of clients when a lawyer leaves a law firm or the law firm is dissolved and will significantly restrict the current clients to be notified when a lawyer leaves a law firm.

Be careful out there.

Disclaimer: this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670
jcorsmeier@jac-law.com
http://www.jac-law.com

Indiana Supreme Court imposes reprimand on lawyer for, inter alia, making agreement limiting ability of associate to notify clients of departure

Hello everyone and welcome to this Ethics Alert blog which will discuss the recent Indiana Supreme Court disciplinary opinion which imposed a public reprimand on a lawyer for, inter alia, making an associate sign and trying to enforce a separation agreement that limited the ability of associates to notify clients of their departure. The opinion is In the Matter of Karl N. Truman, No. 10S00-1401-DI-55 (Indiana Sup. Ct. 4/29/14) and the disciplinary opinion is here: http://www.in.gov/judiciary/opinions/pdf/04291401per.pdf

According to the opinion, the lawyer hired an associate to work for his law firm in October 2006. As a condition of employment, the associate signed a Confidentiality/Non-Disclosure/Separation Agreement which stated that if the associate left the law firm, only the law firm could notify clients that the associate was leaving, prohibited the associate from soliciting and notifying clients that he was leaving, and prohibited the associate from soliciting and contacting any clients after he left. The Separation Agreement also included provisions for the division of fees if the associate left the firm which were structured to create a strong financial disincentive in order to prevent the associate from continuing to represent clients that he had represented while employed by the law firm.

The associate informed the lawyer that he was leaving the firm in October 2012. At the time that he advised the lawyer of his departure, the associate had substantial responsibility regarding over 12 clients. The lawyer insisted on enforcing the terms of the Separation Agreement and sent notices to the those clients announcing the associate’s departure; however, not all of the client notices advised the clients that they could choose to be represented by the associate. The notices also did not provide clients with the associate’s contact information. The Separation Agreement provided that the lawyer would provide the associate’s clients with his contact information only if they requested it. The lawyer did provide the contact information to any clients who requested it.

Notwithstanding the restrictions in the Separation Agreement, the associate sent out notices to the clients which advised that the client could choose to be represented by the lawyer or the associate and included the associate’s contact information. The lawyer then filed a lawsuit against the associate seeking to enforce the Separation Agreement and a settlement was reached through mediation. The Indiana Bar Disciplinary Commission began investigating the lawyer. According to the opinion, immediately after the Commission began its investigation, the lawyer discontinued the use of the Separation Agreement.
The opinion found that the lawyer violated Indiana Professional Conduct Rule 5.6(a) by making an employment agreement that restricted the rights of a lawyer to practice after termination of the employment relationship and the Court imposed a public reprimand.

Bottom line: This Indiana lawyer tried to limit his associate’s ability to practice/keep clients after he left the law firm. Such a limitation is prohibited in most states, including Indiana and Florida (and Ohio, to which the opinion makes reference). Florida Bar Rule 4-5.6(a) states that “a lawyer shall not participate in offering or making: (a) a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.

Let’s be careful out there.

Disclaimer: this Ethics Alert blog is not an advertisement and does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670
jcorsmeier@jac-law.com
http://www.jac-law.com

The Florida Bar’s Board of Governors considers revisions to confidentiality, trust account and fee rules and include definitions of retainers, flat fees, and advance fees

Hello and welcome to this Ethics Alert blog which will discuss the recent Notice of the Florida Bar’s Board of Governors of its intent to consider changes to the Rules Regulating The Florida Bar. The Notice is in the February 15, 2014 Florida Bar News and is on the Bar’s website here: http://www.floridabar.org/DIVCOM/JN/jnnews01.nsf/8c9f13012b96736985256aa900624829/d77053b5698a70ef85257c7b004b3384!OpenDocument

The most significant of the proposed revisions would amend Rule 4-1.6 to permit lawyers and law firms to reveal some confidential client information when a lawyer is changing law firms or law firms are merging if the confidential information will not injure the client. The proposed change to Rule 4-1.6 would add subsection (c)(6) to provide for limited disclosure of information “to detect and resolve conflicts of interest between lawyers in different firms arising from the lawyer’s change of employment or from changes in the composition or ownership of a firm, but only if the revealed information would not compromise the attorney-client privilege or otherwise prejudice the client.” Language would also be added subsection (e) to provide that, “A lawyer must make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.”

Another proposed revision would amend Rule 4-1.5 stating that nonrefundable fees are considered earned on receipt and must not be placed in lawyers’ trust accounts and also providing a definition for retainers, flat fees, and advance fees. The Comment to Rule 4-1.5 would also provide, “A nonrefundable retainer or nonrefundable flat fee is the property of the lawyer and should not be held in trust. If a client gives the lawyer a negotiable instrument that represents both an advance on costs plus either a nonrefundable retainer or a nonrefundable flat fee, the entire amount should be deposited into the lawyer’s trust account, then the portion representing the earned nonrefundable retainer or nonrefundable flat fee should be withdrawn within a reasonable time. An advance fee must be held in trust until it is earned. Nonrefundable fees are, as all fees, subject to the prohibition against excessive fees.”

The proposed revisions would also amend Rule 5-1.1 and create an exception within subdivision (a)(1) related to commingling to permit a lawyer to deposit sufficient funds into the lawyer’s trust account to make up a shortfall in the trust account caused by misappropriation, bank error, bank charge or a bounced check.

The amendments to Rule 4-1.6 resulted from recommendations made by the ABA Ethics Commission 20/20 and, as I pointed out in a previous Ethics Alert, the amendments to Rule 4-1.5 resulted from an earlier attempt by The Florida Bar to amend the Comment to Rule 4-1.5 which was rejected by the Florida Supreme Court in an opinion stating that any definitions should be in the rule, not the comment. According to the Notice, if you would like a copy of the text of any of the proposed amendment, you can e-mail jgreen@flabar.org or call Janellen Green at (850) 561-5751. You should refer to the title or item number and the date of publication (2/15/14).

Bottom line: If approved by the BOG and implemented by the Florida Supreme Court, these rule revisions would clarify issues related to confidentiality when a lawyer leaves a law firm and/or the law firm is purchased, prevent lawyers who place funds into a trust account to reduce shortages from being charged with commingling, clarify the nature of a non-refundable fee, and provide definitions for retainers, flat fees, and advance fees.

Be careful out there!

Disclaimer: this Ethics Alert is not an advertisement and is for informational purposes only. It does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670
jcorsmeier@jac-law.com
http://www.jac-law.com

Philadelphia ethics opinion states that former firm is permitted to review incoming e-mails of departed lawyer and must hold disputed funds in trust

Hello and welcome to this Ethics Alert blog which will discuss the recent Philadelphia Bar Association Ethics Opinion which states that a law firm can review incoming e-mails of former partner and is not required to program the e-mails to just be returned to senders and must also hold fee retainer funds which are disputed because of a separate agreement made by the departing lawyer and client to hold them for an expert.  The opinion is Philadelphia Bar Ass’n Prof. Guidance Comm., Op. 2013-4 (9/2013) and is here: http://www.philadelphiabar.org/WebObjects/PBAReadOnly.woa/Contents/WebServerResources/CMSResources/Opinion2013-4.pdf

The managing partner of a law firm requested an ethics opinion after disputes arose between the firm and a partner who left to start his own practice and took firm clients with him.

The first issue involved the law firm’s handling of the former partner’s e-mail.  When the lawyer left, the firm set up his e-mail account to send a reply to incoming e-mails that the lawyer is no longer with the firm. The firm established a procedure to read the e-mails and forward them to the former partner if they relate to a matter he took with him.  The former partner asked that the firm not read the e-mails to his former e-mail address and to automatically forward incoming e-mails to the senders with a message that his e-mail account had been closed.  The managing partner of the firm asked for an opinion as to whether the firm’s procedures for handling the departed lawyer’s e-mail comply with the Pennsylvania Bar Rules and whether it is required to honor the former partner’s request to forward the e-mails to the former partner without reading them.

The opinion reviewed Penn. and Phila. Joint Ethics Op. 2007-300 (2007), which was based on ABA Formal Ethics Op. 99-414 (1999).  Both opinions state that when a lawyer leaves a firm, those with managerial authority in the firm have duties to insure that the interests of clients in active matters are competently, diligently and loyally represented during the transition under the Pennsylvania Bar Rules to keep clients informed about the change as required under Pennsylvania Bar Rule 1.4(b), to make clear that the clients may choose to be represented by the lawyer, the firm, or another lawyer, and to protect the clients’ interests upon withdrawal as set out in Rule 1.16(d).

According to the opinion, the firm’s practice of opening and reviewing e-mails addressed to the  former partner is permitted to the extent necessary to carry their duties and those same duties prohibit the firm from honoring the former partner’s request to return the incoming e-mails.  The opinions stated that some interaction with the substance of the messages is necessary so that the firm can determine its responsibilities to current clients, former clients, clients who have elected to follow the former partner, as well as third parties.  The opinion also states that reply messages to the senders should include the ex-partner’s contact information and that e-mails clearly intended for the departed attorney must be forwarded to him.

The opinion also cited Pennsylvania Bar Rule 4.4(b), which requires a lawyer who receives an inadvertently sent document to promptly notify the sender and stated that this rule applies to e-mail that the managing partner reads when the e-mail is clearly meant for the departed lawyer.  The analysis may also be affected by any partnership agreement, any agreement made with the departing lawyer upon his withdrawal, and the firm’s written and/or customary employment practices.

The second issue involved funds the law firm was holding which were paid by a client who decided to follow the lawyer to his new practice.  The fee agreement between the client and the firm provided that a $50,000.00 retainer would be used for services billed at hourly rates, with the firm handling the matter on a contingency fee basis after the retainer was exhausted; however, without the knowledge and authorization of the managing partner, the former lawyer had brought on an outside attorney as co-counsel and they agreed to reserve $30,000.00 of the client’s retainer for expert fees.

When the lawyer left the law firm, $30,000.00 of the client’s initial $50,000.00 fee retainer remained in the firm’s trust account and the question was whether it was permissible to apply it to the firm’s unbilled time on the matter, which far exceeded the balance of the retainer. The former partner claimed the funds were to pay the expert’s fees and requested that it be transferred to him.  The opinion stated that since the separate arrangement to use the remaining $30,000 for expert fees was contrary to the terms of the fee agreement and the firm has an interest in the funds under that agreement, Pennsylvania Bar Rule 1.15(f) requires that a lawyer who has funds in which two or more persons claim an interest to hold the funds separate until the dispute is resolved; therefore, the firm must keep the funds in trust until the dispute is resolved.

Bottom line: According to this Pennsylvania ethics opinion, when a lawyer leaves a law firm, the former firm is permitted to monitor the lawyer’s incoming e-mails to that e-mail account and was also required to hold disputed funds paid by the client for a fee retainer when they are disputed even though the funds were disputed because of a separate agreement apparently made between the former partner and the client without the law firm’s knowledge.  Lawyers in Florida and other states must consult review Bar Rules and ethics opinions to obtain guidance on these issues; however, it is likely that The Florida Bar would reach the same conclusions.

Let’s be careful out there!

Disclaimer:  this e-mail does not contain any legal advice and the comments herein should not be relied upon by anyone who reads it.

Joseph A. Corsmeier, Esquire

Law Office of Joseph A. Corsmeier, P.A.

2454 McMullen Booth Road, Suite 431

Clearwater, Florida 33759

Office (727) 799-1688

Fax     (727) 799-1670

jcorsmeier@jac-law.com

www.jac-law.com