Most law firms approach their practices optimistically-with a kind of “glass is half-full” outlook. Getting business, building client relationships and creating a brand typically are a firm’s focus rather than thinking about failure or disaster. That is especially so when law firms form. Future developments like mass departures or dissolution usually do not enter into the discussions at inception. Inevitably, when those transitional events occur the thorny issues that can arise, some of which could never have been predicted, finally receive the attention required.
A recent law firm dispute in the news was sparked when a group of lawyers from Nelson Brown Hamilton & Krekstein of Pennsylvania picked up and left. The controversy surrounding their departures demonstrates that disputes can take any form. As is usually the case, a number of the lawyers leaving took with them various client matters. While there is nothing particularly remarkable about lawyers leaving and clients following, the dispute has focused on the fact that the departing lawyers left with laptops and their former firm cried foul. The dispute touches on numerous issues, including the possible violation of the Computer Fraud and Abuse Act, and even though resolution by mediation was been attempted, it remains unresolved.
As the dispute involving Nelson Brown shows, predicting and/or pre-planning for every kind of controversy is an impossible task. Nonetheless, history has shown that in many cases disputes arising from transition have common origins or are traceable to things that are present in every law firm. How a law firm and its departed attorneys deal with these things can be the difference between a smooth transition for all concerned, or a dispute that distracts both sides from the goals of getting business, building client relationships and maintaining or building a brand. Any law firm facing transition caused by departure will experience a favorable or unfavorable outcome depending on how it fares in these four key areas:
Partnership Rights and Obligations. Clarity in a partnership agreement (or shareholder’s agreement) can be critical to a smooth transition. Moreover, if the agreement philosophically seeks to minimize partner claims against the law firm, disputes that arise tend to resolve quickly. Experience tells us that the more recent an agreement has been drafted, the more likely its provisions will follow state-of-the-art trends designed to favor the law firm. If your applicable agreement is simply basic or dated, a revision may be in order.
Client Obligations. Because clients are the life-blood of all law firms and their lawyers, it is not surprising that departing lawyers try to take clients and their former firms try to keep them. Because clients almost always have absolute discretion regarding who will be their lawyer, client retention is mostly a matter of client choice. If a client leaves after having made a reasonable attempt at retention, move on or try to win it back when the next opportunity arises. But don’t put the client in the middle of any dispute.
Ethical Considerations. Fighting with a former attorney over obligations may be justified-after all being a lawyer does not immunize one from fulfilling contractual or fiduciary duties. But disputes can get out of control when the combatants lose sight of their respective ethical obligations, especially when fighting over a client. Many disputes are prolonged because ethical concerns are forgotten.
Emotions. Too many disputes are fueled by emotion and start out or grow to be irrational. In many instances, far too much money and human capital is spent in the controversy before a sense of proportion prevails. Enlisting someone early in the fight to objectively assess or mediate the dispute can save the parties not only a lot of money, but a lot of angst as well.
Law firm departures can conjure up many reactions. In far too many instances the reactions lead to disputes that seldom end with total victory for one side. Firms with foresight and sound judgment tackle the key areas that foment ill will, seek to resolve them quickly and then try to move on. Do you think there is a better approach?