The questions presented deal with the propriety of restrictive covenants in employment contracts between lawyers employed as associates of a law firm, as employees, and a law firm, as employer, and the propriety of restrictive covenants in partnership contracts.
Specifically, the inquiries are:
The Code of Professional Responsibility deals with such problems in Disciplinary Rule 2-108, as follows:
"Agreements Restricting the Practice of a Lawyer.
(A) A lawyer shall not be a party to or participate in a partnership or employment agreement with another lawyer that restricts the right of a lawyer to practice law after the termination of a relationship created by the agreement, except as a condition to payment of retirement benefits.
(B) In connection with the settlement of a controversy or suit, a lawyer shall not enter into an agreement that restricts his right to practice law."
It is noted that DR 2-108 makes no distinction between employment agreements and partnership agreements and applies equally to both. The only exception provided for in DR 2-108 concerns the allowable restriction of the right to practice law as a condition to payment of retirement benefits. It is further noted that none of the 4 inquiries make any reference to payment of retirement benefits or any condition pertaining thereto, as a part of the restrictive covenants of the agreement.
While no annotations appear pertaining to DR 2-108, it would seem that the lack of litigation in Texas dealing with the subject of restrictive covenants is probably due in part to the clarity of the Disciplinary Rule.
Other jurisdictions have wrestled for years with the problem of restrictive covenants as they affect the practice of law. Olavi Maru, in the Digest of Bar Association Ethics Opinions, cites approximately 20 opinions of different jurisdictions in their efforts to deal with the problems of restrictive covenants. American Bar Association Informal Opinion 1072 (1968) succinctly states:
"The license to practice law in a given jurisdiction may not be limited by private agreements." ABA Formal Opinion 300 (1961) and ABA Informal Opinion 1171 (1971) and ABA Informal Opinion 521 (1962) and ABA Informal Opinion 1417 (1978) all deal with restrictive covenants, and each concludes, in response to similar inquiries as now posed to this committee, that such restrictive covenants are improper. Opinion 109 of the New York County Lawyers Association (1943) stated: "Clients are not merchandise. Lawyers are not tradesmen. They have nothing to sell but personal service. An attempt, therefore, to barter in clients would appear to be inconsistent with the best concepts of our professional status." A New Jersey Court found a partnership agreement that divided the clients of a dissolved partnership among its former members to be against public policy because it restricted the clients' choice of counsel. Dwyer v. Jung, 133 N. J. Super. 343, 336 A.2d 498 (1975). See 4 Fordham Urb. LJ. 195 (1975).
Canon 2 of the Texas Code of Professional Responsibility, as amended Sept. 1, 1982, provides: "A lawyer should assist the legal profession in fulfilling its duty to make legal counsel available." A basic tenet of the professional responsibility of lawyers is that every person in our society should have ready access to the independent professional services of a lawyer of integrity and competence. EC 1-1.
While the first inquiry is additionally couched in the language of the inquirer to provide for a one (1) year restriction and applicability to an area of one (1) county, we note that DR 2-108 prohibits a lawyer from being a party to, or participating in, any agreement that restricts the right of a lawyer to practice law, without reference to any time or area parameters. It appears that anyone practicing law at any time within any given area might be considered as being "in competition" with all other lawyers who are practicing law in that area. Also, an agreement contemplated by the first inquiry would explicitly, by its own language, restrict the right of a lawyer to practice law. We believe, therefore, that the first inquiry is controlled by the clear prohibitions of DR 2-108.
The key word in the second inquiry is "soliciting." The word "solicitation" can mean virtually everything to some and nothing to others, and, therefore, may not be a term of art. Sutton, The American Bar Association Code of Professional Responsibility: An Introduction, 48 Tex. Law Review 255. The word has been used, however, in indexing a number of prior Texas Professional Ethics Committee Opinions. It may involve the use of some form of advertising, as contemplated in the case of Bates v. State Bar of Arizona, 433 U.S. 350, and as now regulated in Texas by DR 2-101 and addressed in Ethics Opinions Nos. 413, 414, 416 and 418. Also, it may involve the matter of in-person solicitation, the U.S. Supreme Court cases of Ohralik v. Ohio State Bar Association, 436 U.S. 447, and In Re Edna Smith Primus, 436 U.S. 412, did so. If the second inquiry relates to advertising, then DR 2-101 is pertinent and allows and controls, as a part of the practice of law, publicity and advertising, and a restrictive covenant in a contract is not needed to assure compliance of a lawyer therewith. If the second inquiry relates to other forms of solicitation, then DR 2-103 and DR 2-104 are pertinent and allow and control, as a part of the practice of law, suggestions of need of legal services, and a restrictive covenant in a contract is not needed to assure compliance of a lawyer therewith. We believe that the second inquiry is controlled by the prohibitions of DR 2-108.
The third inquiry involves the prohibition by contract of acceptance of employment by a lawyer of employment by the firm's current clients. We must assume that the client desires to employ such lawyer or otherwise the lawyer would not have opportunity to accept such employment. Such restriction could result in hardship to present and potential clients in that they would be deprived of obtaining counsel of their own choice. Basic among the ethical considerations of the Code of Professional Responsibility is the premise that clients should have the right of informed choice of an attorney of competence and integrity to represent them. We believe that the third inquiry is controlled by the prohibitions of DR 2-108.
The fourth inquiry pertains to the continued representation of a client by a lawyer after disassociation from the partnership. Since the inquiry speaks of "continued representation" of the client, we must assume that the withdrawing lawyer is representing the client at the time of withdrawal, although the client may have been brought to the firm by one of its remaining partners. We must also assume that the client is desirous of continuing the representation by the lawyer; otherwise, the client would be presumed to have the right to dismiss such lawyer and to select other counsel of his choice. Again, such a restriction would seem to contravene the right of informed choice by the client of an attorney of competence and integrity. Additionally, the lawyer may have a duty to the client of completion of work undertaken as well as the problem of adverse effect on or harm to the client in the event of his withdrawal from representation. EC 2-32, DR 2-110, DR 7-101 (A)(2) and (3). We believe that the fourth inquiry is controlled by the prohibitions of DR 2-108.
Except as a Condition of Payment of Retirement Benefits:
1. It is not proper for a firm to have a contract of employment with an associate lawyer providing that, upon leaving the firm, the associate would be restricted from practicing law;
2. It is not proper for a firm to require its associates to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from soliciting any of the firm's current clients, as otherwise may be permitted and controlled by DR 2-101, DR 2-103 and DR 2-104;
3. It is not proper for a firm to require its associates to enter into an agreement providing that, upon termination of the associate's affiliation with the firm for any reason, the associate would be prohibited from accepting employment by any of the firm's current clients;
4. It is not proper for a law partnership agreement to provide that an exiting partner, then not otherwise prohibited from practicing law, whether leaving by choice or expelling, is prohibited from continued representation in legal matters of clients brought to the firm by any of its remaining partners; and
5. Each lawyer who is a party to, or participates in, such a partnership or employment agreement, as discussed in the above four conclusions, which restricts the right of a lawyer to practice law after termination of the agreement, except as a condition to payment of retirement benefits, would be in violation of DR 2-108. (8-1)