How a Law Firm Can Protect Itself From the ‘Grab and Go’?

• Law firms should recognize that lawyer resignations and the loss of clients are inevitable in the modern law practice due to prohibitions on agreements that restrict competition.

• Law firms can protect the interests of clients and the firm by adopting best practices that govern lawyer resignations.

• Law firms should recognize the investments made in the firm’s intellectual property and adopt policies that limit misappropriation.

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Law firms must survive in a world in which key employees are free to leave at any time and to take as much of the firm’s business with them as they can.  Many lawyers, motivated by the financial incentives that are part of their separation,  believe that there are no rules limiting their solicitation of clients, copying of key documents and compensation for their old firm.  This view may be mistaken, but sorting it out after the resignation or withdrawal is expensive, time-consuming and threatens to draw off the time and attention of key managers.

The grab and go is the unexpected resignation without notice combined with the immediate unilateral solicitation of clients. Its corollary is the law firm lockout, in which a lawyer that has indicated his or her intention to leave is locked out of the firm and cut off from clients while the clients are intensely solicited by the firm.

Best Practices to Manage Lawer Resignations

Here is a list of some of 10 policies that a law firm should have in place before a key lawyer decides to move his or her practice.  But first, the reality check.  Lawyers will leave and lawyers will take clients.  Not only that, but lawyers have a right to leave and take clients.  The only issue on the table is managing the process.

Law firms, the individual lawyers that work there and the clients that we serve are better served by articulating a clear set of rules beforehand, by adopting key internal policies and by recognizing that resignation need not equate with conflict.  Lawyers and their former law firms should remember that life goes on after the departure.  But when one side tries to gain an unfair advantage over the other, however, life gets complicated and messy.

And through any of the chaos caused by the resignation, the participants must remember one key fact.  Everyone involved, including the old firm, the new firm, and the individual lawyers, have an ongoing responsibility to keep the client informed – even if the individuals involved are no longer on speaking terms – and to assure that the advocacy provided to the client is unchanged.  These obligations can, and sometimes are, a liability trap.

1. Require employment agreements.  Both the individual lawyers and the firm must be bound by a written agreement that governs the terms of the employee’s activities as an employee and their activities if and when they decide to leave. The agreement must comply with the prohibition on the restrain of a lawyer’s ability to practice law and represent clients.
2. Maintain a comprehensive employment manual.  The practice of law is increasingly digital and much of the battleground with outgoing lawyers may be fought for control of data.  Digital files, from client matter documents to client lists, to brief banks, can be readily copied and moved.  I personally have seen case management systems duplicated in a cloud location so that the departing lawyers could take over matters without any advance notice to their old firm.  These practices are likely unlawful, but they are difficult and expensive to prove and enforce.  The best way is to cover the terrain in an employee manual and in written contracts with the professionals of the firm.
3. Use minimum notice provisions.  A minimum notice provision that assures the orderly transfer and reassignment of matters is an ethically permitted means of avoiding the chaos that so often accompanies an unexpected move.  For the small firm, such a requirement may be critical to the financial stability of the firm and to avoiding claims from disgruntled clients.
4. Impose data security and use logs.  Along with the employment manual, the imposition of data security within a firm’s IT system limits the firm’s exposure to loss of non-protected data and intellectual property.  The best way to avoid wholesale copying of such things as client addresses and mail lists, marketing materials, operations manuals, brief banks, automated data forms and other intellectual and proprietary property in which the firm is likely to have a substantial investment is to treat this data like the valuable asset that it is and to be prepared to protect it if is misappropriated.
5. Agree on the division of fees in advance.  Disputes over the payment or division of fees are messy and unnecessary.  Hourly cases may present collection issues, but contingent fees present a difficult issue that may lead to litigation.  Payment of fees may be contingent in any number of matters, including personal injury, matrimonial litigation, civil rights, and employment litigation and qui tam lawsuits.  A firm that has not protected its financial interest in a future fee and that did not consider how to value that right is likely to end up in litigation.
6. Require joint notification of clients.  A key aspect of the grab and go, and from the law firm’s perspective, the lockout is the edge that one side can gain by being the first to communicate with clients.  This may be particularly true in matters in which departing lawyer’s direct contact with individual clients is more attenuated, such as in the resignation of an attorney who supervises a practice group.  Most professional ethics authorities favor joint notification and it should be a requirement of employment and the form of the notification should be agreed to in advance.
7. Do not overlook the non-professional staff.  The grab and go is often combined with a coordinated solicitation of the support and para-professional staff that have worked on individual client matters.  In some practices, the non-attorney staff may be as important to the book of business as the lawyers that are professionally responsible.  Individual lawyers should agree to limit solicitation of employees.  Likewise, it is at least arguable that non-solicitation agreements while the attorney is still affiliated with a firm do not violate applicable ethics rules.
8. Be prepared to assert security interests when necessary.  All states permit attorneys to assert liens against future recoveries in some circumstances.  In many cases the litigation over future fees is the most critical aspect of the post-termination dispute.  Contractual liens may also exist and be enforceable.  In some jurisdictions, the lawyer may have a right to hold the file as security against payment of a fee and someone in the firm should understand the applicable rule in all the jurisdictions in which the firm has a presence.  These “retaining liens” are unethical in New Jersey, where I principally practice but may be enforceable in some circumstances in other jurisdictions.  Equally important, the firm must not hold a file when it is unethical to do so.
9. Review engagement agreements and have a plan to communicate with former clients.  Many lawyers will take the position that once a client has signed a document electing to be represented by another lawyer, then the prior lawyer is no longer permitted any communication with that client.  Firms need to have clear policies in place on the client’s obligations if the firm is terminated without cause from the representation (particularly in contingent fee matters in which expenses are advanced) and to be able to communicate those policies to the former clients.  In my experience, unsophisticated clients may not realize that choosing a new firm requires them to fire the old firm, which may trigger an immediate financial obligation.
10. Agree on the procedure for transferring files.  It has been my experience that a lawyer may take an entire practice group without notice and then demand the immediate transfer of files.  The old firm, however, now has no one to perform the physical labor of transferring the files.  I have also been involved in cases in which the cost of making the transfer files – labor and copying costs – was the subject of dispute.  Deciding how and when files will be transferred, and either including the procedures in an employment agreement or notifying the departing lawyer when notice is received is a critical, but often overlooked aspect of an attorney departure.