Lawyers no longer stay at one firm their entire career. Some may desire to leave a firm to join another firm, while other may choose to transition to a role in government, in-house, non-profit, or even retire. What is extremely clear under the ethics rules is that lawyers have a right to leave, and the clients have a right to follow them. This article addresses key issues that IP lawyers (and their firms) should pay attention to when transitioning between law firms.
Lawyers and their Law Firms Don’t Own Clients
The heading says it all—no one owns clients. See, e.g., Heller Ehrman, LLP v. Davis, Wright, Tremaine, LLP, 527 B.R. 24, 25 (N.D. Cal. 2014) (“A law firm—and its attorneys—do not own the matters on which they perform their legal services. Their clients do.”); see also ABA Form. Op. 489 (“…clients decide who will represent them going forward when a lawyer changes firm affiliation.”). Both departing lawyers and their law firms must pay close attention and not get emotionally attached to the idea of ownership or control.
While law firms cannot generally contract with their lawyers to prohibit solicitation, they may have an ownership interest in certain things—like trade secrets or confidential business records of the firm itself. Nevertheless, as noted below, departing lawyers may have overriding ethical obligations that require disclosure of certain materials (i.e., information to evaluate conflicts of interest).
Practice Tip: Departing lawyers should review their employment and other contracts with their law firms to get an understanding of what may be ahead of them. For example, many law firm partnership agreements have strict schedules for notifying firms and clients. While an excessively burdensome set of requirements might be deemed unenforceable, it is helpful to review those provisions early on with counsel.
Related to the topic of client ownership, client files belong to the client—not the firm or the departing lawyer. While each of the latter may have a vested interest in wanting to keep the file, it is the client’s right to have the file, and to ensure the client’s lawyer and firm (whoever that may be) has access to the file.
Communication is Key
Since lawyers and law firms don’t own clients, and it is a client’s right to choose their counsel, how do we appropriately notify clients of their rights? The answer is seemingly simple—work together to notify them. However, that does not always go smoothly, as each side often desires to put a “spin” on their contributions and the ability for the other to continue the representation.
An important consideration in deciding to even communicate at all is the lawyer’s representation of the client. The ABA says that “[d]eparting lawyers should communicate with all clients with whom the departing lawyer has had significant client contact that the lawyer intends to change firms.” See ABA Form. Op. 489. The ABA has described significant client contact as a test that a client who identify that attorney by name. In other words, a first-year associate that drafted a memo and whose name may have only appeared on a bill may not require client notification, but a more senior associate or partner who communicated regularly with the client would require notification. The test for communication does not rely on whether it would be reasonable for a client to depart with the lawyer, but just whether there was significant contact. As such, a Fortune 500 company could still require some notice as to the transition of a lawyer with whom they had regular contact, even if that lawyer would be entering into solo practice and might be unable to handle the client.
Practice Tip: The communication to clients should be tailored to the relationships. As such, in the example above, a departing lawyer may work with the firm to draft a joint letter that notifies the client of the departure, but does not necessarily offer the client to join the departing lawyer (for obvious reasons). Moreover, a review of Outside Counsel Guidelines may be prudent to ensure specific notification requirements for clients are met.
Speaking of communication, lawyers owe fiduciary duties to their law firms. As such, they should avoid informing clients of a transition prior to notifying their law firms. Traditionally, departing lawyers work cooperatively to send joint communications. Though some law firms may delay such written notices, necessitating the departing lawyer to have timely discussions with clients after notifying their law firm. Simply stated—it is not unethical to have separate conversations with clients regarding the departure, but lawyers should be mindful of their obligations and loyalty to their firm when having these discussions. In fact, these discussions should be about the clients right to transition, and not a sales opportunity.
Conflicts (and Duty of Disclosure)
While departing lawyers are happy to have clients come with them—sometimes they may seemingly not want those clients to follow because of conflicts. However, lawyers should carefully review the former client conflict and imputation rules under 37 CFR 11.109 and 11.110 to ensure they fully understand that simply terminating the representation or not transitioning the client does not always solve a problem when dealing with the same or substantially related matter.
Moreover, while the Duty of Disclosure obligations under patent law are not usually imputed to others in the firm, it is important to carefully review disclosures by the client to others within the firm, and even departed lawyers, to make sure that disclosures to the USPTO are properly made.
Practice Tip: In the event of a transition, lawyers and firms should work with clients to ensure nothing has been lost in pending matter—both to ensure proper disclosures to the USPTO, but also as a risk mitigation to ensure no gaps in communications or understanding of the client’s objectives.
But how do you deal with potential conflicts at your new firm? Luckily, the ABA has opined on that issue stating that lawyers can share basic information for the purposes of determining conflicts of interest. See ABA Form. Op. 445. Moreover, the USPTO’s rules address the same issue explicitly. See 37 CFR 11.106(b)(7) (permitting revelation of information “[t]o detect and resolve conflicts of interest arising from the practitioner’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 practitioner-client privilege or otherwise prejudice the client.”).
Don’t Play Games
I tell lawyers that logic games are for the LSAT. Transitioning lawyers (and especially their law firms) should not engage in unethical conduct to prevent lawyers from leaving, or clients from following them. Simply stated, it is unethical for a law firm to prohibit a lawyer from preparing to compete, so long as the lawyer does not violate other duties. In fact, according to the ABA, the ethics rules regarding supervision are read to imply that: “[l]aw firm management also has obligations to establish reasonable procedures and policies to assure the ethical transition of client matters when lawyers elect to change firms.” See ABA Form. Op. 489. In other words, management of law firms may be held specifically liable for failing to have policies and procedures in the event of problems transitioning clients—even if they were not involved.
More specifically, law firms should not re-assign lawyers to client matters to avoid notification or prevent a client from leaving, though it may be prudent to introduce new lawyers to a client in case a client does stay, in order to have some level of continuity. More importantly, lawyers and law firms should not block access or hide files. This common tactic is used by firms (and sometimes the departing lawyer) to make the transition more difficult but has the added result of potentially harming clients.
Practice Tip: In addition to planning for joint communications and departure dates, departing lawyers and their law firms should plan for file transitions to make sure that there is an understanding of how documents and information will be transferred to the new firm. This is important because many law firms have different policies regarding what information constitutes a client file, and firms should have an opportunity to ensure mis-filed documents are not transitioned accidentally.
Lawyers change jobs more and more. Law firms should work with their internal operations team to ensure they have lateral transition plans appropriate for their size. Departing lawyers should also be mindful that, after the transition date, regardless of whether a client transfers, these clients are “fair game.”
In other words, if a client does not transfer with the departing lawyer, the departing lawyer may still communicate and solicit that client, so long as their communications otherwise comply with the solicitation rules. See, e.g., 37 CFR 11.701 – 11.703. The same applies for the law firm—even after a client has transitioned to the departing lawyer, the law firm may continue to solicit the business back; however, both sides should be mindful not to disparage the other party.