Legal Ethics Opinion No 1403

  Fees; Law Firms; Employment Agreement: Propriety of
  Employment Agreement; Requiring Client to Contact
  Firm; Retention of Client Files by Firm;
  Division of Fees Between Attorneys.


  You have presented a hypothetical situation in which an
associate is hired by a large law firm upon graduation from law
school. Six months later, he is presented with an agreement which
purports to settle future disputes regarding the allocation of
attorneys' fees upon termination of said associate from the firm.
After three years of employment, the associate and firm agree to
terminate the employment. The associate communicates his belief
that the agreement is unenforceable. The firm seeks enforcement
of the agreement in a civil forum.

  The agreement provides that the attorney agrees that all client
files, client lists, calendars, or any other documents or copies
thereof prepared during the attorney's tenure with the firm, and
related to the attorney's work for the firm, are the property of
the firm and shall not be removed by the attorney from the
premises of the firm in connection with the attorney's intended
or actual termination.

  The agreement also states that the firm will send a letter to
all clients of the attorney, indicating the attorney's
termination and requesting the client to indicate a choice of
attorney for continued representation. Furthermore, the agreement
requires that the attorney will at no time during his/her
association with the firm and thereafter until the receipt by the
firm of a response from the client to the letter regarding
client's election, contact the client regarding his termination
or discuss his termination with the client.

  The agreement further provides for a schedule for the
apportionment, between the attorney and the firm, of all fees
generated by the attorney on any client's case in which the
client elects to be represented by the attorney after the
attorney leaves the firm.

  You have asked the Committee to opine whether, under the facts
of the inquiry, the agreement is proper, with particular
reference to the issues of conditions restricting the attorney's
right to practice and the division of client fees between the
firm and its former associopriate and controlling disciplinary
rules related to your inquiry are  DR 2-105(D),  DR 2-106(A),  DR
2-108(D), and  DR 5-106(B). 

  Disciplinary Rule 2-105(D) states that a division of fees
between lawyers who are not in the same firm may be made only if:
(1) the client consents to the employment of additional counsel;
(2) both attorneys expressly assume responsibility to the client;
and (3) the terms of the division of the fee are disclosed to the
client and the client consents thereto. Disciplinary Rule
2-106(A) provides that a lawyer shall not be a party to
partnership or employment agreement that restricts the right of a
lawyer to practice law after the termination of a relationship
created by the agreement, except as a condition to payment of
retirement benefits. Disciplinary Rule 2-108(D) states that, upon
termination of representation, a lawyer shall take reasonable
steps for the continued protection of a client's interests,
including reasonable notice to the client, allowing time for
employment of other counsel, delivering all papers and property
to which the client is entitled, and refunding any advance
payment of fee that has not been earned. Also, the lawyer may
retain papers relating to the client to the extent permitted by
applicable law. Disciplinary Rule 5-106(B) states that a lawyer
shall not permit a person who recommends, employs or pays him to
render legal services for another to regulate his professional
judgment in rendering such legal services.

  The Committee opines that the provision in the agreement that
the attorney is not to contact a client regarding his termination
until the firm has first received a response to its letter on the
client's election amounts to a restrictive covenant, in violation
of  DR 2-106(A). The policy behind the ban on such restrictions
is to protect the ability of clients to freely choose counsel and
to protect the autonomy of that counsel. The agreement provision
restricts the ability of the client to make an informed and free
choice of couns Committee opines that requiring the client to
contact the firm violates  DR 5-106(B) in that the employer/firm
would be directing and regulating the lawyer's professional
judgment in the providing of legal services to his/her client.

  The Committee has consistently opined that the client, and not
the lawyer or law firm, owns the file, except where a lien to
protect attorney fees is permitted by law. Even where a lien is
appropriate the file must be made available to avoid prejudice to
the client. See LE Op. 1366, LE Op. 1176, LE Op. 1171. Therefore,
the Committee opines that the provision in the agreement which
states that all client files prepared during the attorney's
tenure with the firm are the property of the firm and that the
firm will retain control over the files, violates  DR 2-108(D). 

  As to the division of fees, the Committee has previously opined
that the provisions in any employment agreement must meet all of
the requirements of  DR 2-105(D). The Committee opines that the
division of fees and the sliding fee schedule outlined in the
agreement in question are in violation of  DR 2-105(D), in that
there is no provision for client consent to joint counsel; there
is no provision for both the firm and the attorney to assume
responsibility for the client; and there is no provision for the
terms of the fee division to be disclosed to, and consented to
by, the client.

  Committee Opinion
  March 12, 1991