The Ethical Breakup: How to Switch Firms

It’s just business, right? Not when it comes to the ethical and professional requirements associated with the transition to a new professional practice. Many professionals are seeking to expand their practice, or move, or add partners in an effort to acquire new talent. Some firms are streamlining and shrinking their practice. Under the right circumstances, departures may lead to mutually beneficial business opportunities for the departing professional and the former firm.  In other cases, however, the actions taken by departing professionals could lead to costly litigation.

Take, for instance, a recent lawsuit by a California workers’ compensation firm that filed suit against four ex-partners who left the firm. According to the firm, the partners planned the formation of a new firm over a period of 18 months while still employed by their predecessor firm. The firm further alleged that the attorneys used company email and phones to discuss potential office locations for the new firm, and to schedule a meeting with a financial adviser. The complaint also stated that the attorneys took copies of client contact lists and other confidential proprietary information by sending files to their personal email accounts.

After learning of the partners’ intent to set up a new shop, the firm fired the partners. The partners then formed a new workers’ compensation firm.  The lawsuit seeks monetary damages for appropriation of trade secrets, as well as injunctive relief.

Professionals considering a transition must be cognizant of the ethical and legal implications. As a starting point, professionals should review any partnership agreement to determine whether the firm has any restrictions that could apply to professional departures. Additionally, professionals must proceed cautiously where their conduct in forming a new firm could be construed as appropriating confidential or proprietary information. The paramount concern must be the best interests of the client. Professionals who seek to benefit themselves at the expense of their former practice or clients could set themselves up for costly litigation.


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