The Business Divorce Law Report
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An agreement that barred a lawyer from soliciting clients within a geographic area was unenforceable after the lawyer left the firm under the rules governing the professional conduct of attorneys.
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An agreement prohibiting a former associate attorney from soliciting clients of the firm after his resignation may be enforceable in New York, thus a case alleging a breach of that agreement could proceed to trial.
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Attorney Rule of Professional Conduct 5.1 that prohibits restrictions on the practice of law is unlikely to shield non-attorneys who act on behalf of a lawyer from liability.
Can a lawyer be prohibited from soliciting the clients of his former firm? The general rule is that restrictions on the practice of law, including any non-competition agreements, are void and unenforceable.
It came as a surprise to me, therefore, that the appellate division in the first department in New York had affirmed the trial court’s decision that let a case go to trial alleging the breach of a non-solicitation agreement signed by a former lawyer.
The case is Feiner & Lavy v. Zohar. Here are the three most important holdings in the decision. First, an agreement prohibiting a former associate of a law firm from competing with his former employer within 90 miles of New York City was void and unenforceable.
No surprise there. Second, at least in this case, unlike the restriction on practice, the breach of an agreement to not solicit clients of a law firm by a former associate actually may be a viable cause of action under New York law. And third, the rule of professional conduct that precludes restrictions on practice may not bar a claim against a former non-lawyer, employee.
In this case, the former employee who solicited clients in breach of a non-solicitation agreement the court said might be held liable for that conduct.
The case involved in immigration firm Feiner & Lavy and a former associate of the firm named Gary Zohar. Also involved was the law firm’s former office manager, Jihan Asli, who left to work for Zohar.
Zohar had executed an employment agreement that contained a non-compete and confidentiality and non -solicitation provisions. The non-compete imposed a three-year bar on soliciting clients of the firm in a bar from competition with the firm within 90 miles of New York City. It also had a prohibition on advertis1ing in Hebrew. After Zohar left and he and Asli solicited the firm’s clients. Feiner & Lavy, filed suit.
Zohar then moved for summary judgment to dismiss the case, arguing that the agreement was unenforceable under attorney Rule of Professional Conduct 5.1. And this rule of conduct prohibits a lawyer or law firm from participating in any contract restraining an attorney’s practice of law. It makes a non-compete essentially unenforceable against lawyer. Most states and most courts give the rule extremely broad interpretation.
They are loath to enforce any contractual provision that appears to limit the ability of a lawyer to practice after leaving a law firm. The rationale behind it is that clients are not assets or property of the firm. They’re free to follow and go with any lawyer that they choose to.
The appellate division in this case affirmed that the geographic restriction was in fact unenforceable, but the court was less clear with the non-solicitation provisions.
The appellate court said that Zohar’s submissions in the case had failed to establish that the non-solicitation clause was unenforceable as an undue restriction on Zohar’s ability to practice law, or that Zohar did not in fact solicit the firm’s clients through Asli in violation of the employment agreement, both of which the court said would be actionable. The court then looked at whether the former office manager might seek protection under the attorney rule of professional conduct that Zohar argued protected him.
The court held that the ethics rule did not protect Asli as a non-attorney acting on Zohar’s behalf from the claim that she had breached the confidentiality agreement that she had executed.
The first department relied on two cases involving attorney behavior that was overreaching and troublesome. The first of these is Grauband Mollen Dannett & Horowitz v. Moskowitz. That’s a 1995 decision of the New York Court of Appeals. The court there held that a departing partner who had surreptitiously solicited clients before informing the firm of his intention to resign could be held liable.
The court held that although restrictions on practice are void, a law firm partner is still liable for breaches of fiduciary duty that occur before he leaves. Soliciting business or clients for a new business venture while still employed by the old is a definite breach of fiduciary duty. The second opinion the court relied on was Feldman v. Minars. This was a 1997 opinion of the first department holding that an agreement made in settlement of a matter to not assist future plaintiffs against a particular defendant was actually enforceable and that it had been violated by the defendant attorney in that case solicitation of potential clients.
What’s the takeaway from the decision involving Zohar? First, it appears that the appellate court views differently non-solicitation provisions than it views agreements not to compete. One of the issues that did not come up in this case is whether a law firm can prohibit a lawyer from soliciting the client on matters that he or she handled directly.
Attorney professional conduct rules indicate that that question would have to be resolved differently because clients have a right to know about changes in the person responsible for their matter, and they have a right to follow that lawyer, if they choose to, when the lawyer leaves the firm.
Second, a non-lawyer “civilian” is not going to get the same exemption from liability, even if it applies, as does a lawyer. There are some decisions in other jurisdictions that have tended to follow this latter view. When a lawyer has executed an agreement not to solicit and uses a non-lawyer to make the solicitations, both may face liability. And the non-lawyer is likely to have a difficult time trying to get the court to use the professional rule as an insulation against the non-lawyer’s own liability.