[00:00:00] Welcome to the Founding Partner Podcast. Join your host, Jonathan Hawkins, as we explore the fascinating stories of successful law firm founders. We’ll uncover their beginnings, triumph over challenges, and practice growth. Whether you aspire to launch your own firm, have an entrepreneurial spirit, or are just curious about the legal business, you’re in the right place.

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Jonathan Hawkins: We are getting to that time of the year where lawyers are starting to think about moving to new law firms or maybe starting their own. This time of year, I start getting a lot of calls for people that are sort of laying the foundation for a new start, usually in January definitely first quarter.

So today we’re gonna talk about lateral moves and really three important issues for both for the lawyer leaving a firm and for the firm that’s [00:01:00] being left. You know, these kind of moves can cause a lot of tension. And that’s just part of this business, and this is the time of year where it really, really kicks into overdrive.

So, today, three things I’m gonna talk about are notice to the firm, notice to clients, and then client files. But before I dive in, this is legal information only. This is not legal advice. If you have specific questions, you need to reach out to a lawyer, tell them your specific facts, and get advice for that.

So do not rely on anything I say today as legal advice. And the other thing is you know, there are differences in different jurisdictions. I’ll touch on a few of those. But you need to make sure that what you’re doing is in line with your jurisdiction and any agreements that you may be under.

So let’s start with notice to the firm. So, before you leave, at some point, you’re gonna have to give notice to your firm, tell [00:02:00] them you’re leaving. And so people often call and they ask, you know, “When do I have to give the notice?” And, “What can I do before the notice?” Et cetera. So let’s touch on a few big issues.

So generally speaking it is not a breach of fiduciary duty for you to make plans and start planning for what you’re gonna do after you leave. You can make logistical arrangements like setting up an entity, getting malpractice insurance in place, setting up bank accounts, that sort of thing. Although there may be reasons why you wanna be careful on that.

I tell people a lot, you know, the old saying, “Loose lips sink ships.” If you get out there too much word may get out before you’re ready for it to get out. I’ve heard so many stories over the years where, you know, someone talks to a real estate broker or maybe a malpractice broker, and they start talking about this and they start blabbing their mouth and it gets back.

So again, be careful about who you tell and when. [00:03:00] But back to the thing. So you can make plans to leave but there is a line. You cannot start competing. You can’t go solicit clients. You can’t start marketing a new firm. You can’t do all that stuff until you’ve told your firm, and likely till after you’ve left your firm.

So you gotta be careful there. All right, so there’s also a potential dividing line on when and what obligation you have to provide notice if you’re a partner or an owner versus just an associate or an employee attorney. And so generally speaking a partner does not have a duty to disclose that they’re thinking about leaving.

But sometimes, you know, once that possibility becomes the real thing, the obligations to tell and when to tell start to go up. So let me give you a couple examples. So if you know you’re leaving, if you’re a partner and you know you’re leaving and your firm is about to make a big decision, some sort of big investment, like sign a [00:04:00] new 10-year lease or go hire a bunch of people or make some huge technology investment partly in relying on you continuing to be there and you know you’re leaving you need to tell them before they make that decision.

Because in part they may be relying on you continuing to be there. And if you have a team with you, you and your team staying there. So it could be that such a decision like that might elevate or accelerate the timing element of when you need to tell them. Another thing you gotta worry about too, when you’re a partner, you have fiduciary duties.

And you know, typically you can’t lie, but oftentimes you cannot omit either. And so if other partners come to you and say, or the firm comes to you and say, “Are you leaving?” And you know you’re leaving, you can’t lie about it. You gotta tell them. So that’s another element. And for another thing you gotta think about too, if you are a partner, many, many partnership [00:05:00] agreements contain notice provisions in there, and they say you gotta say, you know, 30, 60, 90.

Some are even longer than that. Who knows if those are truly enforceable or not. But you have to give notice per the agreement. So always, if you have a written agreement, check that in terms of when and how you might be giving notice. And back to non-partner or non-owner attorneys if you have some sort of written agreement, employment agreement or something like that with the firm, it may contain notice provisions in there.

So, you really need to think through that. Make sure you are in line with any requirements that you may have contractually. Okay. So, moving on to the next thing. Notice to the clients. This is always a biggie. You know, when can I tell my clients? You know, a lot of people may not wanna leave unless they think their clients are gonna come with you.

And there is some nuance here, but generally speaking, you cannot tell a client until [00:06:00] you’ve told your firm. There may be a few exceptions to that but that’s a topic for another episode. But so from the general proposition is you should always tell your firm first. Now, then it becomes an issue about, you know, who do we tell?

Which clients? Or maybe the firm says, “Don’t tell any clients.” But generally speaking, a lawyer has a duty to communicate and keep a client informed. And if a lawyer’s departure from a firm is gonna affect a client’s legal matter, then that client needs to be told about it. Usually the rule in just about every jurisdiction is the only clients that need to be told are those that the departing lawyer had material or substantial or significant contacts with.

So if you are on the pleadings, you’re a lead attorney, you’re the lead attorney on a deal, whatever it is they need to know about it. But if you’ve just done some [00:07:00] little side project on a matter, you never talked to the client, and if someone asked them who you were, they wouldn’t even know your name, no.

Those clients do not need to be told. And then all the other clients in the firm that have nothing to do with you or the lawyer leaving need to be told. This is often a question that comes up. Do we need to tell everybody? No. And for those lawyers that are leaving again, the ones, the clients you had significant or material contact with I think it’s both appropriate and probably required under the rules that they be informed.

But it is a big no-no for you to download the entire client list of a law firm and just blast out notice to everybody. That is a big no-no. And frankly, might be a violation of the nonsolicitation rule. So you gotta be very careful there too. And if you are the law firm and someone left and did that you might have an issue there to raise.

So that’s about sort of who to inform. Let’s talk about how to [00:08:00] inform. So a big question that comes up, is it joint notice, sole notice of one side or the other gives notice? Most jurisdictions have, and the ABA as well, have ethics opinions that talk about this. And most people say joint notice is preferred but not required.

There are exceptions to that. There are some jurisdictions that do require at least an effort of both sides to confer, negotiate, and perhaps agree on a notice that’s gonna go out. Jurisdictions like Florida and Virginia have that, for example. I think Florida has built it in to their ethics rules. So always check your rules, your opinions, and your jurisdiction to make sure you comply there.

But again, joint notice is generally preferred but not required. And let’s say one side sends a notice, the other side gets to send a notice as well. [00:09:00] So what does the notice have to say? What’s in it? Again, this is, you know, there’s lots of things you can put in there. There are certain things you have to put in there. So, and there’s certain things you cannot put in there. So obviously you cannot lie, you cannot be deceptive, you cannot be misleading. For example, you can’t go with Joe because Joe is a lying, stealing SOB that’s unethical and is about to get disbarred.

You can’t go there or Joe’s an idiot, doesn’t know what he’s doing, vice versa, you can’t stay with the firm because nobody there knows your case and nobody can practice this area and et cetera, et cetera. You really are not supposed to do anything like that, and that is improper, unethical, and bad.

So generally speaking any communication needs to have these elements. The fact that the attorney’s leaving where that lawyer is going to be that attorney’s willingness or ability to continue to [00:10:00] provide legal service, services to the client or not. And then a disclosure to the client that they have the right to select their lawyer.

They can stay with the firm, they can go with the lawyer leaving, or they can choose another lawyer altogether. Again, depending on the types of client it is, you know, some of this is mere formality. So if you represent big companies that have general counsel and, you know, they’re pretty sophisticated, that’s one sort of situation versus a very unsophisticated consumer-facing type client they may be confused by the whole process completely.

So you gotta be careful what you say, how you say it.

Real quick, if you haven’t gotten a copy yet, please check out my book, the Law Firm Lifecycle. It’s written for law firm owners and those who plan to be owners. In the book, I discuss various issues that come up as a law firm progresses through the stages of its growth from just before [00:11:00] starting a firm to when it comes to an end.

The law firm lifecycle is available on Amazon. Now, back to the show.

Jonathan Hawkins: The other thing I’ll say just to be careful of, I’ve seen this I have seen situations where the lawyer leaving is the only lawyer that does that practice area, and nobody left at the firm really has the expertise or the ability to handle whatever the clients are.

I would just caution any law firm, if that’s the situation, trying to keep those clients. Maybe you think you can quickly hire somebody and bring them in but that’s risky, and if it’s outside of your expertise or any lawyer that’s left behind, I would stay away. So just word of caution there.

Okay. Last issue client files. This is another issue comes up a lot. How do you handle the client files? And so for example, can the departing lawyer just take them, take them with you? Just walk out, take them with you, or does the firm have a right to keep a copy even if the client is going with the [00:12:00] other attorney?

Can a firm withhold files until a client pays all the outstanding AR? So these are all questions I’ll address here. So as a general proposition, client files, and most jurisdictions find this, but client files belong to the clients, not the attorneys. And absent good cause, clients are presumptively entitled to their files.

And if a client says, “I’m going with this attorney, transfer my file,” the law firm is required to do that. Now, a departing lawyer unless and until you give notice to the firm, give notice to the client, and get approval for the transfer, you should not just take the files. You’re not supposed to do that.

I know this happens. We know about the midnight raid of the files. You’re really not supposed to do that. There may be some exceptions. I know of situations where people have given notice and gotten kicked out immediately, said, “Get out.” And maybe [00:13:00] less friendly terms. Get out. And they lock them out of all the systems. And they may have a hearing in a day or two. And so then they’re walking to the hearing without their files. I personally know people that’s, that has happened to. That is bad. That’s bad for the firm, that’s bad for the lawyer, and it could put both of you in harm’s way in terms of risk of adverse effect to the client is gonna blow back on both of you.

So, no matter how mad you might be if there is a need for access to the file, you need to give it to it. Again, but if you’re leaving, you shouldn’t just take the files. Now another question comes up is, “Well, I’m taking the files. You don’t get to keep a copy of it.” No, that’s not really right.

The firm has a legitimate interest in keeping the files as of that date. What if a year or two from now, some allegation of malpractice or something happens? The firm is entitled to have at least the files in [00:14:00] their possession up to that date, so they can defend that claim or whatnot. So generally speaking if a client gives direction the firm has to get the files to that attorney where the client directs it, but they also get to keep a copy. So another thing that comes up too is really my opinion, my recommendation is get something in writing from the client for the file.

And this is a CYA for everybody. It doesn’t have to be some letter that’s signed and all that. An email’s typically fine, but you need something from the client in writing that says, “Yes, send my file here,” or, “No.” And then boom, you’ve got something in writing, put it in the file, you have it forever. Again, you don’t wanna be in a situation where you’ve sent the files out and then you find out later the client says, “Why in the world did you do that? I didn’t want you to do that.” And then you might be in a bad spot. So careful on that one.

Another question, another issue that [00:15:00] comes up a lot. Client has said, “Send my file,” and the firm says, “No, we’re not sending the file.” Or they slow play it. Now I get it. Firms are busy. This is all of a sudden you have to do all this stuff. It may take time depending on how the file is kept, et cetera, et cetera. But really, you should not drag your feet for very long. I’ve seen this happen over and over and over. I’ve seen it get to the point where the client goes and files a bar grievance. And you better believe that file is delivered very quickly after that.

But again don’t hold it back for that. Another question comes up, “Well, can I hold it back because they owe the firm money, and we’re not gonna give them the file until they pay us everything they owe us?” In theory, and in some very small number of situations, that might be okay. But generally speaking most jurisdictions will say, “No, you cannot do that.”

Particularly if withholding the files will harm the client. I [00:16:00] think probably most jurisdictions have something on the books called a retaining lien, which means you get to retain the file until you get paid. But in practice, if you look at ethics opinions and interpretations, most authorities will say you cannot do withhold these files to the detriment or to the prejudice of a client.

And that particularly comes into play on active matters. Maybe, again, these are all fact-specific, but maybe there is an old closed matter, long gone. There’s no real prejudice, and the client just has never paid. In that situation, maybe. Again, fact-specific. Don’t rely on this episode for legal advice.

All right. So we’ve covered some of the big issues. There are a ton more too much for this episode. But if you are going into this process or maybe you’re on the other side of this process and you have questions, you know, feel free to reach out. I’ll help you if I can. And again, this [00:17:00] happens every year around this time, and it’s just part of it.

So, don’t step on landmines that you don’t need to. All right. See you next time.

OutroUpdatedWebsite-1: Thanks for listening to this episode of the founding partner podcast. Be sure to subscribe on Apple podcasts, Spotify, or wherever you get your podcasts to stay up to date on the latest episodes. You can also connect with Jonathan on LinkedIn and check out the show notes. With links to resources mentioned throughout our discussion by visiting www.lawfirmgc.com. We’ll see you next time for more origin stories and insights from successful law firm founders.