Attorneys are on the move. Today’s lawyers rarely stay at the same firm for the duration of their career. Rather, it has become commonplace for associates, partners, of counsel, shareholders, members and any other type of attorney to move at least once before settling on a long-term professional home. Some attorneys leave for money. Some for opportunity or geography. Some leave for personal reasons. Some attorneys may switch firms in the hope that they can transfer business to firms better suited to their particular practice area, or that can better meet their clients’ needs. Regardless of the motivation behind a lateral move, attorneys must consider the ethical consequences of leaving one firm for another.
Attorneys owe an ethical duty to their clients, as well as their law partners. These ethical obligations may conflict when a departing attorney seeks to transfer his clients’ business from the current firm to a new shop. For instance, in Graubard v. Moskowitz, the New York Court of Appeals considered a case where a partner who was considering a lateral move discussed his intentions with his clients and obtained their consent to leave without telling his law partners. When the partners found out about the attorney’s plans, they sued him for breach of fiduciary duty. The partner filed for summary judgment, but the Appeals Court ruled that the lateral attorney’s “solicitation” of firm clients, without prior notice to the firm, could give rise to an actionable breach of fiduciary duty claim.
Similarly, firms hiring new attorneys have an ethical duty to determine the extent of conflicts issues before an offer is made to the candidate. Conflict searches must be performed to identify the existence of any issue between the lateral attorney’s clients and the new firm and the clients of the former firm and the new firm. A delayed discovery of a conflict could result in retraction of the lateral’s employment offer. For example, in Ogden Allied Abatement & Decontamination Services, Inc. v. ConEd, a law firm made an offer to an associate from an adversary firm during the discovery phase of pending litigation, but was later forced to withdraw the offer when the associate’s original firm filed a motion to disqualify given the pending litigation. The court deciding the motion criticized the law firm for conducting an interview with the associate while the litigation was pending with knowledge of the associate’s involvement.
Lawyers and firms can take steps to mitigate the ethical consequences of lateral hires. First, lawyers considering making a lateral move must make a formal announcement of the move to their firm before discussing the move with any potential clients. Once the announcement is made, the lawyer and the firm should consider making joint notification of the move to the client. In this way both the firm and the lateral attorney can comply with their ethical obligation to inform the client of any material developments in the matter, and also balance the ethical obligations of the lateral attorney to his partners. Firms looking to hire lateral attorneys must perform due diligence on incoming attorneys. As part of this process firms should examine the lateral’s background to ensure that she is a good fit for the firm on a personal level, confirm that she is not violating any non-compete agreement, and run a conflicts check to identify any potential client issues before they arise. By taking these precautionary measures, lawyers can help to ensure that the lateral hire will improve the reputation, capability, and profit of the new firm and avoid ethical liability.