“Sublime band sues attorneys over business deal losses” —

• “Members of the band Sublime accused their former attorneys with King, Holmes, Paterno & Soriano LLP of legal malpractice for allegedly playing both sides in business deals and pushing the musicians into merchandising deals they claim led to losses of several millions of dollars.”
• “Sublime’s complaint says King, Holmes, Paterno & Soriano breached its duty to Sublime with ‘conflicts galore.'”
• “It alleges that the firm did not disclose a conflict before representing the band and their one-time manager in the same transactions, in which the firm is accused of favoring the manager in the negotiations.”
• “It says that they directed the band toward a merchandising deal with another KHPS client without disclosing the conflict or taking Sublime’s merchandise out for bid.”
• “And it calls out the firm’s Peter T. Paterno, claiming he obtained a producer credit and $30,000 producer fee on a Sublime documentary. ‘To add insult to injury, Paterno felt entitled enough to bill Sublime for negotiating his own ego trip — that is — the time he spent negotiating his own producer credit and producer fee. Thus, KHPS charged Sublime tens of thousands of dollars for legal fees so that Paterno could collect a producer fee, and satiate his ego and need for Hollywood "street cred" with a production credit,’ reads the complaint.”
• “Managing partner and named defendant Howard E. King responded to an emailed request for comment with a brief statement: ‘Welcome to Fantasyland. Please enjoy the ride.'”

“Contract requiring exiting lawyer to pay fee for every client he takes can’t be enforced, top state court says” —

• “The Colorado Supreme Court ruled Tuesday [Jan 16] that a law firm can’t enforce a contract provision that required departing lawyers to pay $1,052 for each client they take with them when leaving.”
• “The state supreme court ruled for Grant Bursek, a former Denver associate at Johnson Family Law, which did business as Modern Family Law, Law360 reports. The firm told Bursek that he was required to pay $18,936 when he left the firm with 18 clients.”
• “The Colorado Supreme Court said the contract provision violated a Colorado ethics rule banning employment and partnership agreements that restrict the right of a lawyer to practice when leaving.”
• “‘There may be circumstances in which a firm can seek reimbursement of specific client costs when the client leaves a firm to follow a lawyer,’ the Colorado Supreme Court said in its Jan. 16 opinion. ‘But a firm may not require a departing attorney to pay an undifferentiated fee in order to continue representing clients who wish to maintain their relationship with that attorney.'”
• “The firm had characterized the fee as reimbursement for marketing expenses that were difficult to determine for clients. Bursek signed the agreement in April 2019 and left Modern Family Law in September 2019. Reimbursement applied only to clients gained while Bursek was working with the firm. If he did not pay within 30 days of leaving, the contract said, he would be assessed 1.5% in monthly interest on unpaid amounts.”
• “States that have adopted ethics rules similar to the one cited by the Colorado Supreme Court have adopted differing approaches to agreements that impose financial costs on lawyers leaving firms.”
• “The majority view is that any financial burden imposed on departing lawyers is a violation of the ethics rule, the Colorado Supreme Court said.”
• “The minority view is that financial disincentives to departure are not per se violations of the ethics rule. Instead, disincentive agreements are reviewed based on a balance of interests. On one side are the interests of client choice and attorney autonomy. On the other are a firm’s interest in financial and practice stability.”
• “The Colorado Supreme Court also endorsed the minority view requiring a balancing approach with a reasonableness inquiry. But in Bursek’s case, the ‘undifferentiated fee’ assessed for clients following the departing lawyer is a violation of the ethics rule, the state supreme court said.”

On this one, Brian Faughnan comments: “Another failed effort to pretend Rule 5.6(a) has no teeth” —

• “The courts ultimately determined that such a “per client” charge in a set amount was incompatible with the prohibition in the ethics rules on restrictions on lawyer’s ability to practice.”
• “This outcome is not at all surprising. After all, even though the Colorado Supreme Court decided to align itself with a minority of jurisdictions and conclude that a ‘reasonableness’ analysis rather than a per se prohibition was the right standard, it was easily able to brush aside the notion that such a per client fee could ever be reasonable:”
• “The fact that the firm in question put such a provision into their contract with the attorney also, sadly, isn’t surprising. The economic issues in law firms and the viewpoint that prevails often that firms should be able to protect themselves from having lawyers leave and take clients with them often pushes lawyers to tread up as close to the line as possible to try to disincentivize something that the rules say is fair game.”
• “But the fact that the firm decided to file a lawsuit over $18,000 and put their partners at substantial risk of discipline when the associate refused to pay is quite surprising.”
• “It appears clear from the opinion that they had able counsel to represent them in the litigation, but I am highly curious about whether those lawyers ever got the opportunity to try to talk the firm out of filing such a suit or not.”