End-of-life notice: American Legal Ethics Library
As of March 1, 2013, the Legal Information Institute is no longer maintaining the information in the American Legal Ethics Library. It is no longer possible for us to maintain it at a level of completeness and accuracy given its staffing needs. It is very possible that we will revive it at a future time. At this point, it is in need of a complete technological renovation and reworking of the "correspondent firm" model which successfully sustained it for many years.
Many people have contributed time and effort to the project over the years, and we would like to thank them. In particular, Roger Cramton and Peter Martin not only conceived ALEL but gave much of their own labor to it. We are also grateful to Brad Wendel for his editorial contributions, to Brian Toohey and all at Jones Day for their efforts, and to all of our correspondents and contributors. Thank you.
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Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.
District of Columbia Legal Ethics
1.17:100 Comparative Analysis of DC Rule
Prior to the DC Court of Appeals' adoption in 2006 of the changes recommended by the Rules Review Committee, the DC Rules did not include any counterpart to Model Rule 1.17, which had been adopted by the ABA in February 1990 and modified on the Ethics 2000 Commission's recommendation in 2002. There was a DC Rule 1.17 dealing with the quite different subject of trust account overdraft notification (which had and still has no counterpart in the Model Rules). That Rule, which is discussed in connection with DC Rule 1.15 at 1.15:101 above, was renumbered in 2006 as DC Rule 1.19, in order to make room for new Rules 1.17 and 1.18 corresponding to their Model Rules counterparts.
Model Rule 1.17 was not among the provisions included in the Model Rules as first adopted by the ABA. It was added in February 2000, and amended in various respects in 2002 pursuant to recommendations of the Ethics 2000 Commission. A corresponding Rule was not added to the DC Rules until 2006, but in December of the same year as Rule 1.17 was added to the Model Rules, the DC Bar's Legal Ethics Committee issued DC Ethics Opinion 294 (2000), which opined that the sale of a law practice was permissible under conditions and restrictions similar but not identical to those set out in the Model Rule. Thus, although the DC of Appeals had not yet addressed the issue, members of the DC Bar were not without authoritative guidance on the matter. The DC Rules Review Committee nonetheless believed that for reasons of conformity and clarity, the authorization of the sale of a law practice should be reflected in a rule rather than solely in an ethics opinion, so the Committee proposed, and in 2006 the Court approved, a Rule 1.17 that was identical to the revised Model Rule in all but few respects.
The DC Rule, like the Model Rule, is structured as an introductory unnumbered paragraph stating that a lawyer or law firm may sell or purchase a law practice or area of practice, provided that specified conditions, enumerated in lettered paragraphs and numbered subparagraphs that follow.
Paragraph (a) of the Model Rule requires that the sale follow from the selling lawyer's ceasing to engage in the private practice either entirely or in an area of practice or a geographic area or jurisdiction, treating the last two variables (geographic area and jurisdiction) as alternatives for an adopting jurisdiction to choose between; in the DC Rule, the jurisdiction was the choice.
Paragraph (b) of the Model Rule requires that the sale be of an entire practice or an entire area of practice, and allows the sale in either case to be to one or more lawyers or law firms. The DC Rules Review Committee, however, believed that the rule should not allow the sale of an area of practice to be made to more than one purchaser, whether a sole practitioner or a law firm, and the DC Rule reflects this view. The Committee was concerned that allowing multiple purchasers of an area of practice would come too close to allowing the sale of individual clients or matters, with more lucrative clients or matters getting more favorable treatment than less profitable ones -- a danger that the Committee thought was more likely when only an area of practice rather than the entirety of a practice is involved.
Paragraph (c) of the Model Rule, regarding the written notice the seller of a law practice must give to each client, and the three numbered subparagraphs that follow it, are included verbatim in the DC Rule, except that in subparagraph (3), which requires the notice to clients to state that the clients' consent to transfer of their files will be presumed unless the client objects within ninety days of receipt of the notice, the DC Rule includes the phrase "to the purchasing lawyer or law firm," so as to make clear who the recipient of the transfer will be. That subparagraph, in presuming consent absent objection from the client, differs from (and overrules) DC Ethics Opinion 294, which opined that affirmative consent by the client was required.
The unnumbered paragraph that follows next in the Model Rule, addressing circumstances where the client can't be given notice, is copied identically in the DC Rule, but the DC Rule then adds a further unnumbered paragraph stating that once a client has consented to the transfer of the client's files, or fails to object within the 90 days provided in the written notice, the purchasing lawyer is responsible for the client's matter(s).
Finally, paragraph (d) in both versions of the Rule states that the fees charged clients shall not be increased by reason of the sale. DC Ethics Opinion 294 had expressly permitted fee increases so long as they were reasonable, but the Rules Review Committee adopted the Model Rule's position instead, reasoning that sales should not be financed by increases in fees charged the clients affected.
The Comments following the DC Rule are largely identical to those of the Model Rule, but also reflect the several minor differences between the two rules.
The Model Code contained one reference to sale of a law practice, in Ethical Consideration 4-6, which stated that "a lawyer should not attempt to sell a law practice as a going business because, among other reasons, to do so would involve the disclosure of confidences and secrets," but there was no Disciplinary Rule addressing the subject.
1.17:200 Traditional Rule Against the Sale of a Law Practice
There appear to be no pertinent DC court decisions regarding sale of a law practice, but there is on ethics opinion on the subject, DC Ethics Opinion 294 (2000), which was issued less than a year after the ABA had added the original Rule 1.17 to the Model Rules. That Opinion noted that although the Model Code of Professional Responsibility had no Disciplinary Rule addressing the subject, there were court decisions in other jurisdictions holding that sales of law practices were unethical, but also noted that the new Model Rule 1.17 took a contrary view, and that some 21 jurisdictions had adopted that rule or one similar to it. The Opinion then considered whether other provisions of the DC Rules applied to sales of law practices, and concluded that such transactions were ethically permissible, subject to conditions and restrictions similar though not identical to those in Model Rule 1.17.
As explained in the comparison of DC Rule 1.17 to its counterpart in the Model Rules under 1.17:101 above, the DC Rules Advisory Committee noted that there were several points regarding the permissible terms of sales of law practices on which the Model Rule differed from Opinion 294 and as to which it viewed the Model Rule's position as the better one, and so incorporated that provision in its proposed DC Rule 1.17 which was adopted by the DC Court of Appeals.
1.17:300 Problems in Sale of Practice
There appear to be no pertinent DC court decisions or ethics opinions on this subject.