Recent ABA Ethics Opinions

By Peter H. Geraghty, Director, ABA EthicSearch

In December of 2006, the ABA Standing Committee on Ethics and Professional Responsibility issued two ethics opinions, Formal Opinion 06-443 Contact with Inside Counsel of an Organization Regarding a Matter When the Organization is Represented in the Matter by Outside Counsel (2006) and 06-444 Permissibility of Restrictive Covenants In Lawyer Agreements Concerning Benefits Upon Retirement (2006).

Can we talk?
Formal Opinion 06-443 [PDF] posed the question of whether a lawyer who opposes an organization can communicate directly with an in-house lawyer, where the organization is represented by outside counsel in the matter.  The opinion began with an analysis of the policy considerations behind Rule 4.2 Communication with Person Represented by Counsel, of the ABA Model Rules of Professional Conduct, stating:

Rule 4.2 protects a "person" against possible overreaching by adverse lawyers who are participating in the matter, interference by those lawyers with the client-lawyer relationship, and the uncounselled disclosure of information regarding the representation. [FN3] Rule 4.2 presumes generally that the client is not legally sophisticated and should not be put by an opposing lawyer in the position of making uninformed decisions or statements or inadvertent disclosures harmful to the organization.  Formal Opinion 06-443 at page 1.

Following this reasoning, the committee found that the policy considerations surrounding the Rule did not apply under these circumstances since the inside lawyer would not need the protections afforded by the Rule and would be unlikely to make harmful disclosures.  The committee stated further that to prevent such communications would be inimical to the functioning of the legal system that depends on communication between lawyers. 

The committee also recognized that in some instances, the in-house lawyer may be considered to be a part of the constituent group that controls or has the authority to bind the organization with respect to the matter, citing to North Carolina State Bar Opinion 128 (1993) (a lawyer may not communicate with an adverse corporate party's house counsel, who appears in the case as a corporate manager, without the consent of the corporation's independent counsel.)  The committee also noted that the opposing lawyer may violate Rule 4.4 Respect for Rights of Third Persons in the event that inside counsel is asked not to communicate with the opposing lawyer about the matter.

Subpart (a) of Rule 5.6 states:

A lawyer shall not participate in offering or making:

(a) a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement (emphasis added).

The corresponding Comment to the Rule states:

An agreement restricting the right of lawyers to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer. Paragraph (a) prohibits such agreements except for restrictions incident to provisions concerning retirement benefits for service with the firm.

The opinion focused on the meaning of “retirement benefits” within the context of Rule 5.6(a):

…To be considered a "retirement benefit" capable of restriction under Rule 5.6(a), the benefit must be one that is available only to lawyers who are in fact retiring and thereby terminating or winding down their legal careers.  Thus, the benefits should be payable only upon the satisfaction of minimum age and years-of-service requirements that are consistent with the concept of retirement. At a minimum, a benefit that is payable to a lawyer who has attained an age at which it is common for employers to offer early retirement and who has worked for the firm or employer for a substantial period of time would constitute a bona fide retirement benefit under generally accepted definitions of that phrase… Formal Opinion 06-444 at page 2.

Other indicia of retirement benefits include the presence of retirement benefit calculation formulas, benefits that increase as the years of service to the firm increase, and benefits that are payable over the lifetime of the retired partner.  The opinion noted further that the agreement could provide that the retiring lawyer cease the practice of law permanently, or that the restriction could be limited to a certain length of time to a geographic area or to a certain type of practice.  The restriction would also be appropriate under Rule 5.6(a) if it permitted the lawyer to practice in a public service or not for profit setting.

In conclusion, the committee noted that Rule 5.6(a) and the Comment strongly disfavors restrictive covenants in lawyer employment agreements and that the exception concerning retirement benefits must be narrowly construed:

…Accordingly, to be considered an agreement concerning retirement benefits under Rule 5.6(a), the provision in question must affect benefits that are available only to a lawyer who is in fact retiring from the practice of law, and cannot work a forfeiture of income already earned by the lawyer. Beyond that, however, law firms and employers have significant latitude in shaping the nature and scope of the restriction on practice and the penalties for noncompliance.  Formal Opinion 06-444 at page 6.

ETHICSearch is intended to stimulate awareness of ethical problems and illustrate the varying approaches of different jurisdictions. It is not intended as legal advice. The ABA Model Rules of Professional Conduct and the opinions discussed are advisory only; the ethics rules, laws and court decisions of your jurisdiction may dictate a different result.

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