The Client-Lawyer Relationship · 10-16% of the exam
5.2.3Client-lawyer contracts and non-compete restrictions (Rule 5.6)
On this page
- Client-lawyer contract enforceability and Rule 5.6 — Non-compete restrictions
- Quick review — Rule 1.8(h): limiting or settling malpractice liability
Why
A client bargaining with their own lawyer negotiates against the person they depend on for the information needed to judge the bargain. And an agreement penalizing a lawyer for practicing after leaving a firm narrows the pool of counsel a client can follow or choose. Both concerns protect the client's ability to choose freely and knowingly.
Plain English
Client-lawyer contracts are generally enforceable but may be avoided when the client was at an informational or bargaining disadvantage. A partnership, shareholders, operating, employment, or other similar type of agreement may not restrict a lawyer's right to practice after the relationship ends (retirement-benefit conditions excepted), and a settlement may not be conditioned on such a restriction; a sale of a practice under Rule 1.17 sits outside the rule.
Rule
Client-lawyer contract enforceability and Rule 5.6 — Non-compete restrictions
General rule — case law, not Model Rule text; Rule 5.6 contains no enforceability provision, so this bullet and the two enforceability bullets below state contract doctrine rather than the Rule: client-lawyer contracts are enforceable.
Post-commencement contracts (made after the representation has begun): the client may avoid the contract unless the lawyer can show the contract and its circumstances were fair and reasonable to the client.
Post-completion contracts (made after the representation has ended): the client may unwind the deal when the lawyer withheld information the client needed to judge whether the payments or perks going to the lawyer were appropriate.
Rule 5.6(a) — Non-compete clauses: a lawyer shall not participate in offering or making a partnership, shareholders, operating, employment, or other similar agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.
Rule 5.6(b) — Settlements: a lawyer shall not participate in offering or making an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a client controversy.
Comment [3]: restrictions included in the terms of a practice sale under Rule 1.17 are outside the rule.
Rule
Quick review — Rule 1.8(h): limiting or settling malpractice liability
Quick review — Rule 1.8(h): limiting or settling malpractice liability (taught fully in Chapter 12)
Three points, and the third is the one that does not require independent counsel:
- Prospective limits — 1.8(h)(1)
a lawyer may limit malpractice liability in advance ONLY if the client is independently represented in making the agreement. The client's own informed consent isn't enough.
- Settling with an unrepresented or former client — 1.8(h)(2)
the lawyer must first advise that person, in writing, that independent counsel is desirable — and give a reasonable opportunity to consult one.
Arbitration clauses are the narrower cousin: permitted if proper under local law and the client understands the scope; independent representation not required.
The exam will describe a non-compete clause in a partnership agreement. Rule 5.6(a) applies to partnership, employment, and similar agreements, and the text excepts an agreement concerning benefits upon retirement; a restriction written into a practice sale under Rule 1.17 sits outside the rule under Comment [3]. The same question sometimes moves the restriction into a settlement, which Rule 5.6(b) bars.
Questions · 1
Q 01ch05-e10
Question 1 of 1 · Rule 5.6(a)
Partner sits on the management committee of a firm that handles municipal bond work. Concerned that departing lawyers were taking bond issuers with them, the committee drafted a new partnership agreement for every partner to sign. One clause provides that a partner who leaves the firm may not represent any municipal issuer anywhere in the state for three years, and that a departing partner who does so forfeits the accumulated capital account. A separate clause conditions the ordinary retirement payments on the retiring partner ceasing to practice law altogether. Partner circulated the agreement to the whole partnership with a recommendation that everyone sign it. Is Partner subject to discipline?
Keys 1 to 4 choose.