Law firm breakups can be tremendously emotional and stressful events, especially because one partner will often attempt to take as many clients as possible to a new firm. This can cause personal strife and unending legal battles, both of which cost a lot of time and money no matter how it all ends. But there’s a right way and a wrong way to deal with the breakup of a firm or the departure of one of its partners.
First and foremost, contracts often restrict certain types of behavior. The LLC agreement most likely lays out the obligations of a partner who decides to leave to start a new firm or join someone else’s. The same agreement tells partners what to do with equity stake, payment obligations, and any income that has yet to be paid out.
Clients will also need to be notified, which is where a lot of the turmoil tends to occur. The original firm’s managers will want to ensure that all a departing partner’s clients still plan to give their business to the firm. Professional obligations almost always require that the client be provided relevant information to how representation will change after a partner leaves the firm, if at all.
A departing partner must notify other partners and clients in a timely fashion. To do otherwise would be to risk lawsuit by the firm for breach of fiduciary duty. This isn’t a retail job you can provide two weeks notice (or not) and hope to be done with it.
It is technically illegal to solicit current or former clients when leaving a law firm and heading to another — but it happens anyway. Partners who are leaving should be careful. Concealing solicitation is a serious violation of legal obligations. Clients always have the option of staying or going whenever they like, but the solicitation is illegal.
Clients should also be provided a notice detailing the partner’s departure. It should include the date of departure, whether or not the partner has a new firm, and a “ballot” for the client to fill out about intent to stay or go. Clients should also be informed that a decision to transfer service to another firm will result in all current financial obligations being billed immediately.
Non-disclosure agreements are most often broken during the transition from one firm to the next, which is why it’s so important for partners to discuss relevant confidential information and how to keep it secure. The laws that govern how to navigate NDAs are complex.