May 2022 Ethically Speaking - “So You’re Leaving the Firm”: Ethical Considerations When a Lawyer Ends Their Employment

by Jason Moberly Caruso

Law has long had an issue with attrition. A recent study revealed that the average rate of associate attrition was 18% annually for the years 2012 through 2018. Put another way, for every twenty associates hired by law firms during that period, fifteen left in the same period. NALP Foundation for Law Career Research and Education & Major, Lindsey & Africa, Keeping the Keepers IV (2020).

The legal field has also not been immune to the so-called “Great Resignation” of 2021. Rather, it has only exacerbated the issue, with associate turnover rates reaching record levels: as of November 2021, the average associate turnover rate reached a staggering 23.2% on a rolling twelve-month basis. Among AM LAW 100 firms, the rate reached as high as 23.7%. Center on Ethics and the Legal Profession at the Georgetown University Law Center & the Thomson Reuters Institute, 2022 Report on the State of the Legal Market: A Challenging Road to Recovery (2022). Of course, firm partners are not immune to employment transitions (though there is a relative paucity of data regarding their participation in the “Great Resignation”).

While attorney departures have been a consistent feature of law firm life, these recent seismic shifts in the hiring and retention environment may bring additional opportunities to consider the ethical concerns attendant to lawyers departing their employment.

Considerations for the Departing Attorney
While courts recognize that “the ability of attorneys and their employees to change employment for personal reasons or from necessity” is a legitimate consideration in determining the ethical ramifications of changes in employment, such considerations yield to “the preservation of public trust in the scrupulous administration of justice and the integrity of the bar.” In re Complex Asbestos Litig., 232 Cal. App. 3d 572, 586 (1991). Simply put, while courts will generally take a practical approach to issues raised by an attorney’s change of employment, the potential to bump up against the hard edges of rules governing the profession cannot be discounted. The overriding ethical principles in such situations “are the protection of the client’s best interests and the client’s right to the counsel of its choice.” Cal. State Bar Formal Opn. No. 2020-201, citing Cal. State Bar Formal Opn. No. 1985-86.

Ethical concerns may be implicated as early as when the attorney is considering departing a firm for a new opportunity. The Rules of Professional Conduct (“Rules”) require attorneys to obtain informed, written client consent where “there is a significant risk the lawyer’s representation of the client will be materially limited by . . . the lawyer’s own interests.” Rule 1.7(b). If the contemplation or pursuit of a new employment opportunity causes an attorney to begin weighing self-interest against a client’s—or worse, to consider pulling punches—it may be necessary to seek a reassignment of the matter, or to withdraw from or decline that particular representation. Rule 1.16(a)(2) & (c).

Once an attorney decides to depart the firm, additional ethical considerations come into play. For example, should affected clients be informed of the departure? Yes: a departing lawyer is required to inform those clients (1) for whose matters the lawyer is primarily responsible, (2) for whom the lawyer plays a principal role in the representation, and (3) the lawyer reasonably believes may wish to transfer their matter to the lawyer after departure. Cal. State Bar Formal Opn. No. 2020-201. This requires a situation-specific inquiry, with specific focus on the client’s best interest and the client’s ability to make an informed choice of counsel—whether that choice is ultimately to stay with the current firm, “follow” the present attorney to new employment, or transfer the matter to new counsel altogether. Cal. State Bar Formal Opn. No. 1985-86; see Jewel v. Boxer, 156 Cal. App. 3d 171 (1984).

When and how should clients be notified? There is no bright-line rule; the timing of the notification must “prioritize [the] clients’ interest in making an informed choice of counsel” and minimize any prejudice to the client. Cal. State Bar Formal Opn. No. 2020-201. Absent compelling circumstances, however, the attorney should ordinarily wait to inform clients regarding a change in employment until after the firm has been informed of the departure. Id. Ideally, such communications would be issued jointly by the departing attorney and the firm, but if cooperation is not forthcoming or not possible, the attorney is permitted (and in fact required) to issue unilateral notice to the client. See ABA Formal Opn. No. 99-414. The contents of the notice should provide the client sufficient information to understand what the departure means for the client’s continued representation, and to exercise the client’s right to choose counsel. The notice should include details such as: when the lawyer is departing; the lawyer’s post-departure contact information; details regarding whether the lawyer and/or the firm is able and/or willing to continue the representation, and the client’s options; and who will be handling the matter in the interim. Cal. State Bar Formal Opn. No. 2020-201.

Is a departing attorney permitted to solicit existing clients (or other firm employees) to follow the attorney to the new employment? Solicitation of clients with whom the lawyer has an existing “professional relationship” is ethically permitted, so long as the attorney complies with Rules 7.1 to 7.3 and other applicable regulations governing client solicitation and advertising. The details of those requirements are beyond the scope of this article. The departing lawyer should carefully consider any contractual obligations that may prevent or limit solicitation of clients (or certain types of clients). Further, the departing lawyer should consider potential tort liability for interference with the firm’s contractual relations with clients or other employees. See Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 5th 1130, 1141 (2020) (interference with at-will contracts); Yang v. Wang Chien Ego Hsiao, No. B302443, 2021 WL 671215 (Cal. Ct. App. Feb. 22, 2021) (unpublished) (interference with attorney fee agreements).

The departure of a firm partner (or all partners, in the context of a firm dissolution) may also implicate broader issues of partner­ship fiduciary duties and other ethical respon­sibilities. Cal. Corp. Code § 16404(b)(3) (partners have a fiduciary duty “[t]o refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership”); Heller Ehrman LLP v. Davis Wright Tremaine LLP, 4 Cal. 5th 467, 474 (2018); Cal. State Bar Formal Opn. No. 2014-190 (attorney responsibility for informing clients in change of representation resulting from firm dissolution).

Keep in mind that an attorney’s change in employment does not automatically sever an existing attorney-client relationship, and does not automatically absolve the attorney of continued compliance with the Rules and other client obligations. Cal. State Bar Formal Opn. Nos. 2014-190 and 1985-86. The departing attorney must therefore take all “reasonable steps to avoid reasonably foreseeable prejudice” that may befall the client in connection with the departure. Cal. R. Prof. Conduct, Rule 1.16(d). The departing attorney cannot assume that such steps will be appropriately taken by the firm after departure; accordingly, the departing attorney should take care to leave the attorney’s files and matters in a reasonable state. Changing employment also does not automatically remove an attorney from a court’s electronic notice system or update that system with new contact information; avoid future administrative headaches and potential liability for errant notices by appropriately informing the applicable court. See, e.g., United States District Court, Central District of California, Notice of Appearance or Withdrawal of Counsel, Form G-123 (form to be utilized where attorney is no longer involved in matter, but “at least one member of the attorney’s firm or agency will continue to represent that party”).

Obviously, departing attorneys must keep in mind their ongoing obligations regarding client conflicts and duties of loyalty to former clients. Cal. R. Prof. Conduct, Rules 1.7 (current client conflicts), 1.9 (duties to former clients), 1.10 (imputation of conflicts), and 1.11 (special conflict rules for former and current government officials and employees). Despite the judicial recognition that attorney employment transitions are a fact of life, noncompliance with conflict rules may result in harsh, disastrous consequences. See, e.g., National Grange of Order of Patrons of Husbandry v. Cal. Guild, 38 Cal. App. 5th 706 (2019) (firm disqualified from two significant trial court matters and an appeal as a result of associate attorney “changing sides,” despite implementation of ethical screen).

Special considerations may apply in unique employment transitions. The departing attorney should consider the ethical and practical ramifications of seeking and/or obtaining such employment. See City & Cnty. of S.F. v. Cobra Sols., Inc., 38 Cal. 4th 839 (2006) (City Attorney personally disqualified due to personal conflict with prior client, resulting in vicarious disqualification of entire office); City of Santa Barbara v. Superior Court, 122 Cal. App. 4th 17 (2004) (trial court granted motion to disqualify entirety of City Attorney’s office when residents’ attorney obtained employment with City Attorney during pendency of action against residents); and Cal. R. Prof. Conduct, Rule 8.2(b) & (c) (lawyer seeking judicial office must comply with Canon 5 of the Code of Judicial Ethics, which proscribes “political or campaign activity that is inconsistent with the independence, integrity, or impartiality of the judiciary,” statements of commitment, or false or misleading statements).

Attorney departures may be a heady time or a melancholy one, or both at the same time. In any event, they remain a fact of life, and may well occur more often due to shifts in the business of our profession. Care should be taken to ensure that ethical rules are not lost in the shuffle.

Jason Moberly Caruso is a partner with Newmeyer Dillion in Newport Beach, where he specializes in complex environmental and land use matters, as well as appellate matters in state and federal courts. Mr. Caruso is a member and the secretary of the OCBA’s Professionalism and Ethics Committee. He can be reached at jason.caruso@ndlf.com. The views expressed herein are his own.