Risk Update

Lawyer Laterals and Law Firm Restructuring — Ethics Opinion on Lateral/Client Relationship Rules, Another Firm Bids Farewell to China

US law firm Mayer Brown to split from Hong Kong partnership” —

  • “U.S. law firm Mayer Brown said on Thursday that it plans to separate from its current Hong Kong operations, as many international law firms rethink or reduce their presence in China.”
  • “Mayer Brown has roughly 170 lawyers in Hong Kong, Beijing and Shanghai, with the majority in Hong Kong, according to its website.”
  • “Clients of Mayer Brown’s China practice have included Chinese conglomerates CITIC, Fosun and Sinochem, and non-Chinese multinationals ConocoPhillips, Nestlé and Unilever, the firm’s website said.”
  • “A growing number of U.S. and international law firms have pulled back from the Chinese market amid growing pressures on foreign businesses and converging economic and geopolitical challenges.”
  • “New Chinese government rules on data privacy and cybersecurity were among the reasons cited by law firm Dentons last year when it ended its combination with China’s Dacheng, an 8,000-lawyer firm that accounted for its entire presence in mainland China.”
  • “The major U.S. firms with a presence in China are all revisiting their footprint in the market, legal industry consultant Peter Zeughauser said.”

Texas Bar Opinion 700 (February 2024)

  • “A lawyer has departed a law firm for a new practice. Some clients chose to leave the lawyer’s former firm and follow the lawyer to the new practice. The lawyer believes that the prior firm’s legal services agreement forms the basis for a client’s relationship with the lawyer’s new practice. Therefore, the lawyer does not ask these clients to enter into new legal services agreements with the new firm. Further, the lawyer concludes that there is no ethical obligation to advise the clients regarding their potential financial obligations under the prior firm’s legal services agreement before the lawyer begins representing them in the lawyer’s new practice.”
  • “With respect to a lawyer who has departed a firm:”
    • “Must the lawyer enter into a new legal services agreement with clients who followed the departed lawyer to a new firm, or may the lawyer rely on the former law firm’s legal services agreement as continuing to serve as the contract with those clients?”
      • “Under the Texas Disciplinary Rules of Professional Conduct, a lawyer who has departed from a law firm must enter into a new legal services agreement with a client who terminates the lawyer’s prior firm and follows the lawyer to a new practice.”
    • What disclosure obligations does that lawyer have in advising clients who propose to follow the lawyer to the new practice regarding the clients’ financial obligations under the prior firm’s legal services agreement?
      • “Before contracting with clients who propose to follow the departed lawyer to a new practice, the lawyer must alert the clients to any continuing financial or other contractual obligations known to the lawyer that the clients may have to the prior law firm.”

Texas Bar Opinion 699 (February 2024)

  • “A lawyer employed by a law firm plans to leave the firm. When the lawyer joined the firm, the firm insisted on a written employment agreement, to which the lawyer agreed. That contract contained provisions (1) requiring that the lawyer give at least 90 days’ notice of departure; (2) prohibiting the lawyer, post-departure, from soliciting the firm’s clients; and (3) prohibiting the lawyer from retaining client information or files upon departure, absent written direction of the client.”
  • “When the lawyer informed the firm of the impending departure, the firm did not agree to the lawyer’s proposed departure announcement to clients whom the lawyer currently represents. Further, the firm directed the lawyer not to communicate with the firm’s clients about the lawyer’s departure. The firm refused to provide any written announcement to the lawyer’s clients about the lawyer’s impending departure.”
  • “The lawyer has given 30 days’ notice of departure and disagrees with the employment agreement’s 90-day minimum departure notice provision. The lawyer also plans to make copies of client files and retain client information regarding matters on which the lawyer has actively worked, including information relating to schedules and deadlines. Further, the lawyer disagrees that the firm may ethically prohibit the lawyer from soliciting clients of the firm after the lawyer has departed. The firm has invoked its employment agreement with the lawyer to prevent these actions.”
  • Through an employment agreement between a law firm and its lawyers:
    • “May the law firm impose a minimum departure notice period for lawyers who wish to depart the law firm?”
      • “Under the Texas Disciplinary Rules of Professional Conduct and notwithstanding any agreement to the contrary, a lawyer may not attempt to impose or enforce an unreasonable minimum departure notice period upon a departing lawyer, reassign a client matter to new attorneys (absent client direction or exigent circumstances required for the protection of the client’s interest) in a way that prevents a departing lawyer from fulfilling ethical obligations owed to the client before departure, or deny a departing lawyer access to firm resources necessary to continue to represent clients competently and efficiently during the pre-departure period. Similarly, with respect to client matters for which a departing lawyer is personally responsible, the lawyer must make reasonable efforts to avoid materially jeopardizing or disadvantaging those client matters by the timing or manner of their voluntary departure.”
    • “May the law firm prohibit a departing lawyer from accessing and copying client information and files?”
      • “A law firm’s employment agreement may not contain a blanket prohibition that prevents a departing lawyer from making and retaining copies of any client files or information on matters in which the lawyer has personally represented the client. A departing lawyer must be allowed to retain sufficient former client information to avoid conflicts of interests involving the lawyer’s new practice (or subsequent practices with future firms or in various co-counsel arrangements) and, therefore, be available to serve clients where no conflict exists.”
    • “May the law firm prohibit a departing lawyer from notifying clients of the impending departure?”
      • “Assuming that a departing lawyer is responsible for a client’s representation or currently plays a principal role in the law firm’s delivery of legal services to that client, the departing lawyer has a duty to ensure that a client is timely informed (a) that the lawyer is leaving the firm, (b) that the client has the ultimate right to decide who will continue the representation, and (c) whether there are any contractual or financial ramifications of the client’s decision. Preferably, the law firm and the lawyer will agree on a joint announcement regarding the lawyer’s departure. When the firm and the lawyer have provided a joint notification, or when the firm has made a timely, accurate, and adequate unilateral announcement regarding the lawyer’s departure, the lawyer is not obligated to provide a redundant announcement. A lawyer must provide notice of departure to a client, notwithstanding contrary instructions from the law firm, if the lawyer knows the law firm has not provided timely, accurate, and adequate notice. There may be instances in which both the firm and the lawyer make separate announcements, consistent with the clients’ best interests and any legal and ethical obligations that the firm and the lawyer may have to the clients and to each other.”
    • “May the law firm prevent a lawyer from soliciting the law firm’s clients after the lawyer has departed from the firm?”
      • “Finally, a lawyer may not participate in offering or making a partnership or employment agreement that restricts the right of a lawyer to solicit clients after termination of the relationship between the lawyer and the law firm, except an agreement concerning benefits upon retirement.”