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LAW PRACTICE - D.C. - RESTRICTION OF RIGHTS OF A LAWYER TO PRACTICE AFTER TERMINATION OF RELATIONSHIP WITH FIRM - BENEFITS UPON RETIREMENT
A former partner in a law firm argued that he was entitled to a lifetime monetary benefit generally payable beginning at age 65 to withdrawing partners who satisfy certain age and longevity requirements, notwithstanding that he fell within an exception withholding the benefits from those partners who leave to engage in the private practice of law somewhere else. He argued that the provision making payment contingent on his decision not to compete violated public policy as expressed by D.C. Rules of Professional Conduct, Rule 5.6(a). The Court rejected that argument, holding that the limitation concerned "an agreement concerning benefits upon retirement", and thus was within an exception to Rule 5.6(a) of the D.C. Rules of Professional Conduct. Rule 5.6(a) generally bars a partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship. This Rule exists to protect the freedom of clients to choose a lawyer. There is an exception for agreements concerning benefits upon retirement. The Court noted that under D.C.’s revised Uniform Partnership Act, D.C. Code §41-158.1(1998), a law firm partnership agreement may modify the default arrangement, imposed by statute, that when a partner withdraws, the partnership itself dissolves, thereby entitling each partner to an accounting for the amount of his or her interest. As consideration for the partner foregoing this otherwise statutory right, a partnership agreement may guarantee the payment to the departing partner of various items, including his or her capital account, net profits earned to the date of retirement, and, perhaps, deferred compensation representing the amount of billed but theretofore uncollected fees. Here, the departing partner was 56 years old, and had been a partner of the law firm for just over 20 years. He commenced practicing with a competing firm in the District of Columbia three days after his voluntary withdrawal. The withdrawing partner claimed the "additional amount" payable under the partnership agreement because he met the "rule of 75" under the agreement - i.e., his age plus his years as a partner equaled 75 or more. But the Court enforced the agreement’s limitation that a partner withdrawing to engage in the practice of law elsewhere in the U.S. was not entitled to this benefit. The Court found it significant here that the "additional amount" at issue came entirely from firm profits that would post-date the withdrawal of the partner. It was not funded in any traceable manner by the partner receiving the benefits. The withdrawing partner, however, was entitled by the partnership agreement to recover his capital account and his share of net profits of the partnership for the portion of the fiscal year, up to the time he left, regardless of his choice to continue practicing law in competition with his firm. "It is only future firm revenues that [the withdrawing partner] will be deprived of, and only because he is at least potentially competing with the firm and affecting a depression of those revenues." Slip Op. at 21. |
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