Rule 1.17 of the Model Rules of Professional Conduct states that after a sale, sellers must “cease to engage in the private practice of law.” Does that mean you must hand over the keys, walk out the door, and immediately ride off into retirement sunset? And if the answer is yes, how is that realistically possible?
The buyer might want you to stay involved in some of the open files, especially when your knowledge of the file could be important. The buyer might not understand the nuances of a lawsuit, for example, or grasp the history of an ongoing deal. However, helping the buyer would still be practicing law.
What the Comments to Rule 1.17 Say
Nothing. And until recently, there were no reported ethics or disciplinary decisions about transitioning a practice to a new owner. That meant you could be disciplined for helping a buyer after a deal closes. Any help you might give after the sale could be subject to discipline. A few years ago however, an ABA ethics opinion (Formal Opinion 468) was issued which offers some guidance regarding the type of activities sellers can perform.
The Rule’s Purpose
Effectively, Rule 1.17 levels the playing field for solo practitioners. Since retiring lawyers from firms have always been permitted to assist former colleagues transition client matters, why should solos be prohibited? In addition, allowing post-sale activities is consistent with Rule 1.16(d)’s overriding philosophy that lawyers continually have a duty to “take steps to the extent reasonably practicable to protect a client’s interest.”
Staying Involved
According to the ABA opinion, you can only perform transitioning activities that are “reasonably necessary to accomplish the orderly transition of active client matters.” You must also stop accepting new matters. How long you can stay involved will “depend on the circumstances, including the rules and rulings of courts or other tribunals in pending matters.”
Accordingly, it would probably be fine for you to conduct a deposition or help negotiate the deal two weeks or maybe two months after you sell your firm. However, it is highly unlikely that those activities would be allowed two years after the sale.
Charging the Client
Rule 1.17 is crystal clear that clients must not experience any adverse economic impact from the sale of your practice. Fees cannot “be increased by reason of the sale … [and] existing arrangements … must be honored by the purchaser.” Therefore, billing for transitioning activities would be an increase that is not allowed. If you want to be compensated for transitioning time, you will have to negotiate your fee with the buyer.
ABA opinions are not binding on the states. Nonetheless, the purpose of Rule 1.17 and the persuasiveness of the opinion means states will likely follow it, but you should do your own research in your jurisdiction.
