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2008 Edition: Tennessee Rules of Professional Conduct Download Rules as a PDF | Return to Rules home page |
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Rule 1.17
SALE OF A LAW PRACTICE (a) A lawyer or a law firm may sell or purchase a law practice, including good will, if the following conditions are satisfied: (1) The seller ceases to engage in the private practice of law in the geographic area in which the practice has been conducted; and (2) The practice is sold as an entirety to another lawyer or law firm, and the seller provides the buyer with written notice of the fee agreement with each of the seller’s clients and any other agreements relating to each client’s representation; and (3) Written notice is given to each of the seller’s clients regarding the proposed sale, the client’s right to retain other counsel or to take possession of the file, and the fact that the client’s consent to representation by the purchaser will be presumed if the client does not take any action or does not otherwise object within thirty (30) days of receipt of the notice. (b) If a client cannot be given notice under paragraph (a)(3) above, the representation of that client may be transferred to the purchaser only upon entry of an order so authorizing by a court having jurisdiction or by the presiding judge in the judicial district in which the seller resides. The seller may disclose to the court in camera information relating to the representation only to the extent necessary to obtain an order authorizing the transfer of a file. (c) Unless the client consents in writing after consultation, the fees and expenses charged a client shall not be increased by reason of the sale, and the purchasing lawyer shall abide by any agreements between the selling lawyer and the client with respect to the representation as are permitted by these Rules and of which the purchasing lawyer was given notice prior to the transfer of the representation. COMMENTS [1] The practice of law is a profession, not merely a business. Clients are not commodities that can be purchased and sold at will. Pursuant to this Rule, when a lawyer or an entire firm ceases to practice and another lawyer or firm takes over the representation, the selling lawyer or firm may obtain compensation for the reasonable value of the practice, as may withdrawing partners of law firms. See RPC 5.4 and 5.6. Termination of Practice by the Seller [2] The requirement that all of the private practice be sold is satisfied if the seller in good faith makes the entire practice available for sale to the purchaser. The fact that a number of the seller’s clients decide not to be represented by the purchaser and take their matters elsewhere, therefore, does not result in a violation. A selling lawyer’s return to private practice as a result of an unanticipated change in circumstances also does not result in a violation. For example, a lawyer who has sold the practice to accept an appointment to judicial office does not violate the requirement that the sale be attendant to cessation of practice if the lawyer later resumes private practice upon being defeated in a contested or a retention election for the office. [3] The requirement that the seller cease to engage in the private practice of law does not prohibit his or her employment as a lawyer on the staff of a public agency or a legal services entity that provides legal services to the poor, or as in-house counsel to a business. [4] The Rule permits a sale attendant upon a lawyer’s retirement from the private practice of law within the jurisdiction. Its provisions, therefore, accommodate the lawyer who sells the practice upon the occasion of moving to another state. Tennessee is sufficiently large that a move from one locale therein to another is tantamount to leaving the jurisdiction in which the lawyer has engaged in the practice of law. To also accommodate lawyers so situated, the Rule permits the sale of the practice when the lawyer leaves the geographic area in which he or she is practicing as well as when the lawyer leaves the state. Single Purchaser Client Confidences, Consent and Notice [6] Negotiations between the seller and a prospective purchaser prior to disclosure of information relating to a specific representation of an identifiable client no more violate the confidentiality provisions of Rule 1.6 than do preliminary discussions concerning the possible association of another lawyer or mergers between firms, with respect to which client consent is not required. Providing the purchaser access to client-specific information relating to the representation and to the file, however, requires client consent. The Rule provides that before such information can be disclosed by the seller to the purchaser the client must be given actual written notice of the contemplated sale, including the identity of the purchaser and any proposed change in the terms of future representation, and must be told that the decision to consent or make other arrangements must be made within thirty (30) days. If nothing is heard from the client within that time, consent to the sale is presumed. [7] A lawyer or law firm ceasing to practice cannot be required to remain in practice because some clients cannot be given actual notice of the proposed purchase. Since these clients cannot themselves consent to the purchase or direct any other disposition of their files, paragraph (b) of this Rule requires an order from a court having jurisdiction authorizing their transfer or other disposition. The Court can be expected to determine whether reasonable efforts to locate the client have been exhausted and whether the absent client’s legitimate interests will be served by authorizing the transfer of the file so that the purchaser may continue the representation. Preservation of client confidences requires that the petition for a court order be considered in camera. [8] All the elements of client autonomy, including the client’s absolute right to discharge a lawyer and transfer the representation to another, survive the sale of the practice. Fee Arrangements Between Client and Purchaser [9] The sale may not be financed by increases in fees charged the clients of the practice. Existing agreements between the seller and the client as to fees and the scope of the work must be honored by the purchaser, unless the client consents after consultation. Other Applicable Ethical Standards Applicability of the Rule [12] This Rule applies to the sale of a law practice by representatives of a deceased, disabled or disappeared lawyer. Thus, the seller may be represented by a non-lawyer representative not subject to these Rules. Because, however, no lawyer may participate in a sale of a law practice that does not conform to the requirements of this Rule, the representatives of the seller as well as the purchasing lawyer can be expected to ensure that the requirements are met. [13] Admission to or retirement from a law partnership or professional association, retirement plans and similar arrangements, and a sale of tangible assets of a law practice do not constitute a sale or purchase governed by this Rule. [14] This Rule does not apply to the transfers of legal representation between lawyers when such transfers are unrelated to the sale of a practice. DEFINITIONAL CROSS-REFERENCES “Consents in Writing” See RPC 1.0(b) |
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