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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.

We regret any inconvenience.

Some portions of the collection may already be severely out of date, so please be cautious in your use of this material.


Oregon Legal Ethics

1.17   Rule 1.17 Sale of Law Practice

1.17:100   Comparative Analysis of Oregon Rule

Primary OR References: DR 2-111
Background References: ABA Model Rule 1.17, Other Jurisdictions
Commentary:
OR Commentary: EOL §§ 16.31-.37

DR 2-111(A) clearly recognizes the right of a lawyer or a law firm to sell or purchase all or part of a law practice, including the sale of goodwill. DR 2-107 was amended to clarify that payments received for the sale of a law practice do not constitute an impermissible division of fees.

(A) Notice

The selling lawyer (or, in the case of a deceased or disabled lawyer, the lawyer’s legal representative) must provide a written notice by certified mail to each current client whose work may be subject to transfer. The notice must include (1) that a sale is proposed; (2) the identity of the proposed purchaser and a brief description of the purchaser’s practice; (3) that the client may object to the transfer of its work, may take possession of the client’s files and property, and may retain other counsel; (4) that the client’s work will be transferred to the purchaser and that the purchaser will undertake the client’s representation if the client does not object within 45 days after the notice was mailed; and (5) whether the selling lawyer will withdraw from the representation not less than 45 days after the notice was mailed regardless of whether the client consents to the transfer of its work. DR 2-111(B).

The notice may describe the purchaser’s qualifications, including the seller’s opinion of the purchaser’s suitability to assume the client’s representation if the seller has made a reasonable effort to come to an informed opinion. DR 2-111(C). The purchaser can ethically pay the seller for the seller’s recommendation, so long as it is truthful and represents the seller’s informed opinion.

If certified mail is not effective to give a client notice of the proposed sale, the seller must take reasonable steps to give the client actual notice. DR 2-111(D).

(B) Impact on Fee Agreements

Under DR 2-111(G), a purchaser may not increase the fees being charged to the client unless the client agrees to a new fee schedule.

(C) Substitution and Permissive Withdrawal

DR 2-111(F) requires that the seller ensure that appropriate substitutions are filed as necessary in any ongoing proceedings. DR 2-110(C)(7) includes the sale of a law practice as a basis for permissive withdrawal.

(D) Restrictions on the Seller’s Practice

The sale of a law practice may be conditioned on the seller’s agreeing to terminate the lawyer’s practice in whole or in part for a reasonable period within the geographic area in which the practice has been conducted. DR 2-111(H).

(E) Client Information Revealed During Sales Negotiations [See 1.6:450]

1.17:101      Model Rule Comparison

(A) Notice

DR 2-111(B) requires that the notice delivered to the seller’s clients include identification of the purchasing lawyer or law firm, including the office address(es) and a brief description of the size and nature of the purchasing lawyer’s or law firm’s practice. The MR 1.17(c) notice requirement does not provide for the identification or description of the proposed purchaser.

DR 2-111(D) provides that if certified mail is not effective to give notice, the selling lawyer shall take “such steps as may be reasonable under the circumstances to give the client actual notice.” MR 1.17(c) addresses the possibility of “[i]f a client cannot be given notice” and provides that “the representation of that client may be transferred to the purchaser only upon entry of an order so authorizing by a court having jurisdiction.” For that purpose, the seller may disclose to the court in camera information relating to representation.

Unlike the ABA Model Rules, DR 2-111(C) specifically allows the seller to comment on the purchasing lawyer or law firm’s qualifications and propriety in taking over the client’s representation, so long as the selling lawyer has made a reasonable effort to arrive at an informed opinion.

(B) Client Consent

DR 2-111(E) states that a “client’s consent to the transfer of its legal work to the purchasing lawyer or law firm will be presumed if no objection is received within forty-five (45) days after the date the notice was mailed.” By contrast, MR 1.17(c)(4) provides that the client has 90 days to object to the sale before his or her consent being presumed. MR 1.17(c)(4) does not speak to a default transfer of representation if the client does not object.

1.17:102      Model Code Comparison

There is no ABA Model Code counterpart to this rule.

1.17:200   Traditional Rule Against the Sale of a Law Practice

Primary OR References: DR 2-111
Background References: ABA Model Rule 1.17, Other Jurisdictions
Commentary: ABA/BNA § 91:801, ALI-LGL § 60, Wolfram § 16.2.1
OR Commentary: EOL § 16.31

Before 1995, a law practice could be sold in Oregon, but the practical limitations on such a sale were substantial. See OSB Legal Ethics Op No 1991-106. In 1995, the Oregon Supreme Court approved DR 2-111 and related amendments to DR 2-103(A), 2-107(B), 2-110(C), and 4-101(C).

1.17:300   Problems in Sale of Practice

Primary OR References: DR 2-111
Background References: ABA Model Rule 1.17, Other Jurisdictions
Commentary: ABA/BNA § 91:801, ALI-LGL § 60, Wolfram § 16.2.1
OR Commentary: