The legal industry generally acknowledges that lawyers should maintain the freedom to practice following departure from a firm, the specific parameters of this rule can sometimes get murky. The specifics of what qualifies a restriction recently became the focus of a Maryland Supreme Court case, Jamie Bennett v. Ashcraft & Gere!, LLP.
In this case, attorney Bennett challenged a ‘Prenuptial Agreement’ drawn up with her previous firm, Ashcraft & Gere. The agreement specified a formula for dividing fees for cases that began at the firm but were resolved post-Bennett’s departure. Bennett argued this agreement, which provided she receive only about twenty-five percent of the fee, limited her ability to represent clients. The court disagreed.
According to the ruling, the agreement didn’t infringe on Bennett’s rights to practice or to represent the firm’s previous clients. client ability to select counsel wasn’t affected either. The Maryland court deemed the agreement a valid tool under Maryland common law, not an unlawful penalty. Instead, the court found it to be an equitable division of the fees because the firm had invested significant resources in the case. It was seen as a reasonable prediction of a likely quantum meruit fee arrangement.
As a result of the Maryland Supreme Court ruling, Bennett is set to forfeit approximately $700,000 in disputed fees. But it should be noted that the treatment of such agreements varies across different jurisdictions:
- Michigan – Approved a sliding scale agreement that divides fees depending on the litigation stage when the attorney left, recognizing the firm’s entitlement to fees for work done before the departure.
- Minnesota – Upheld a 50/50 fee split as not restricting an attorney’s practice, impeding competition, or limiting client choice for counsel, stating such an agreement promotes firm stability.
- New Jersey – Affirmed a 50/50 fee split, distinguishing it from competition penalties. The state appreciated that these agreements can prevent fee disputes when attorneys leave with contingent fee cases.
- Louisiana – Favoured agreements allowing orderly fee division on law practice break up, avoiding unnecessary attorney litigation.
- North Carolina – Approved agreements dividing fees based on the client’s time with the firm prior to the attorney’s departure, as long as the agreement compensates the firm fairly for their invested resources.
- District of Columbia – Accepted a sliding scale agreement that divides fees based on the case’s time with the firm prior to departure and time with the departing attorney before fee was realized, to prevent disputes when attorneys take contingent fee cases.
While unfortunate for Bennett, the case outcome isn’t surprising. Both the ABA Model Rules and judiciary tend to protect established firms. However, as Bennett now owns her own law firm, she can take comfort in knowing that all legal fees generated by her cases will be hers.
More details about this case can be found in the original article.