Why Law Firms Should Use Separation Agreements for Departing Lawyers: Vance v. Griggs

more+
less-

Vance v. Griggs2 interprets Missouri Supreme Court Rule 4-1.5 to allow a lawyer to claim a share in fees earned after the lawyer leaves a law firm. Law firms should therefore consider using separation agreements to ensure departing lawyers cannot make a claim for a share of fees received after the lawyer departs.

As a lawyer who advises law firms on ethics and risk management issues, I find that law firms frequently fail to document the most fundamental and important transactions. For example, many law firms lack partnership agreements and engagement agreements with some of their most important clients.

This failure to document often becomes more serious when a law firm fails to document the terms on which a partner or other lawyer should leave the firm. Having worked at three firms, ranging from 10 to approximately 500 lawyers, I have never been asked to sign an employment, separation or similar agreement.

Perhaps law firms fail to use employment or separation agreements because they believe that the risks surrounding the departure of lawyers are comparatively small. This is false.

Experience with law firm separations proves a departing lawyer may cost a former firm a substantial amount in damage to reputation, lost business, and legal fees litigating issues arising from the separation.

Perhaps, instead, law firms believe they cannot do much to encourage good conduct or discourage bad conduct. After all, Missouri Supreme Court Rule 4-5.6 largely prohibits law firms from entering post-employment noncompetition

agreements with their lawyers. Yet a careful reading of Rule 4-5.6 reveals that, although it prohibits non-compete agreements, it still allows firms to use separation agreements to guide many aspects of a lawyer’s departure. Moreover, the case of Vance v. Griggs should serve as a warning to law firms that if the law firm does not document terms for a lawyer’s departure, a departed lawyer may have a claim for legal fees received after the lawyer leaves the firm.

Vance v. Griggs suggests that a 2008 amendment to Missouri Supreme Court Rule 4-1.5 permits a departing lawyer to claim a share of attorney fees for work the lawyer performed while at a firm but received after the lawyer left that firm.

The remainder of this article discusses the law on fee sharing for lawyers, including those who leave a firm, both before and (according to Vance v. Griggs) after the 2008 amendment to Rule 4-1.5.

Background on Sharing Fees Among Lawyers

Like the ABA Model Rules of Professional Conduct3 and the law of most jurisdictions, the Missouri Rules of Professional Conduct – both before and after 2008 – distinguish between fee sharing (a) by lawyers who are all associated in a firm and (b) by lawyers who are not associated in a firm.

Sharing by Lawyers at the Same Firm

When the lawyers who will share in a fee are associated in a single firm, the Missouri Rules of Professional Conduct allow those lawyers to divide and share fees in any manner they want. As long as the total fee the lawyers collectively

receive is not “unreasonable,” a requirement imposed by Rule 4-1.5(a), lawyers in a law firm may divide fees for legal services without limitation under the Missouri Rules of Professional Conduct.

LOADING PDF: If there are any problems, click here to download the file.

Published In: Professional Malpractice Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Armstrong Teasdale LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »