. Legal ethics

Lawyer ethics rules are public policy statements. Of course they are.

There is a lot of activity that can take place at the intersection of the lawyer ethics rules and public policy.  There can be issues that aren’t addressed by lawyer ethics rules (or at least not fully addressed) but that are addressed as a matter of state public policy.  What there really can’t be though are issues that are addressed by a state’s lawyer ethics rules but that are not addressed by state public policy.  At least, there can’t be in a state where the attorney ethics rules have been adopted as part of a court rule.

This is because, generally speaking, court rules are elevated in dignity to the equivalent of statutes.  Thus, using Tennessee as an example, the Tennessee Rules of Professional Conduct, enshrined as they are in Rule 8 of the Tennessee Supreme Court Rules, establish the public policy of our state on the issues they address.  Our Tennessee Supreme Court made this point plain in 2002.  Crews v. Buckman Labs, 78 S.W.3d 852 (Tenn. 2002) was an important decision on both questions of lawyer ethics and employment law where the Court explained that a lawyer claiming to have been fired for exercising her ethical duty to report another lawyer’s misconduct could challenge the employment action as an unlawful termination in violation of state public policy.

This point — that attorney ethics rules are state public policy — was a bit lost on one of the litigants in a piece of litigation in federal court in Virginia arising from a dispute among former law partners governed by the D.C. Rules of Professional Conduct.  The point was not lost on the district judge presiding over the litigation, however.

The Moskowitz v. Jacobson Holman, PLLC litigation came about after a lawyer departed his law firm for greener pastures.  The firm, exercising its authority under its operating agreement, denied the lawyer 50% of his equity interest on departure because he took some clients with him when he left.  In response to a counterclaim from the firm, the departed lawyer argued that the provision in the operating agreement allowing such forfeiture violated RPC 5.6 and was void.  On a motion for judgment on the pleadings, the district court ruled that if it is shown that RPC 5.6 was violated, then no additional showing would be required to find that aspect of the contract to be unenforceable.  (Though the suit was filed in Virginia federal court, the D.C. ethics rules applied to the firm’s agreement.)

There are, of course, other contexts where this kind of argument about public policy made by the law firm could be viable.  For example, courts are split about whether an agreement to share fees with a nonlawyer in violation of the attorney ethics rules can still be enforced by the nonlawyer.  Since the party seeking to enforce the terms of the contract is not a lawyer in those instances and the ethics rules do not apply to their conduct, it is not surprising to learn that some courts allow enforcement of such a contract even though the lawyer involved violated his or her ethical obligations under the relevant version of RPC 5.4(a).  In the context of an RPC 5.6 violation though, everyone involved is a lawyer and governed by the ethics rules.

To me, the closer question is the one that the court had to assume was true for purposes of resolving the judgment on the pleadings issue:  whether the kind of forfeiture provision in the law firm’s operating agreement actually violates RPC 5.6(a).

In Tennessee, our version of the rule is identical to the ABA Model Rule and provides that lawyers cannot “participate in offering or making a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.”

Nothing in our Comment to the Rule, nor the ABA’s, elaborates on what terms short of actual restriction on practice qualify as prohibited by the rule.  At least in my state, a robust argument could be had over whether a “financial penalty” alone is something that “restricts the right of a lawyer to practice after termination of the relationship.”  The fact that the “except” language in the dependent clause addresses a financial issue is certainly potentially persuasive evidence that this type of arrangement could be found to violate RPC 5.6(a).

Under the D.C. version of the rule, an additional paragraph exists in the Comment [numbered as Cmt. [2] in D.C.] that states:  “Restrictions, other than those concerning retirement benefits, that impose a substantial financial penalty on a lawyer who competes after leaving the firm may violate paragraph (a).” Yet, D.C.’s word choice leaves an opening.  D.C. went with “may violate” so the potential exists that you could have a provision that imposes a substantial financial penalty on a lawyer who competes after leaving the firm that would not violate RPC 5.6(a).

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