Can a law firm require a lawyer to sign a promissory note that becomes payable only if the lawyer competes with the firm after leaving?

Plain-English summary

An employer of lawyers acknowledged that covenants not to compete in the practice of law are unethical, and proposed to reach the same result indirectly: new lawyer-employees would sign a three-year promissory note that became payable only if the employee left and either started a practice or joined another lawyer within a four-county area.

The opinion concluded that this arrangement does not comport with the Rules of Professional Conduct. It read Rule 5.6(a), which bars a lawyer from offering or making a partnership or employment agreement that restricts a lawyer's right to practice after termination, except for retirement benefits. The opinion concluded the conditional note was neither a payment under a separation agreement nor a retirement benefit, and that the firm had performed no services and assumed no responsibility for any post-employment client work that might otherwise justify a fee allocation under Rule 1.5.

The opinion concluded that Rule 5.6(a) reinstated the prohibition on non-competition agreements to preserve lawyers' professional autonomy and clients' freedom to choose counsel. It relied on prior ISBA Opinion No. 91-12 (an agreement restricting a departing lawyer from soliciting firm clients violated Rule 5.6(a) and was void as against public policy) and on Corti v. Fleisher, and surveyed out-of-state authority condemning similar attempts (Howard v. Babcock, Gray v. Martin, Cohen v. Lord, Hagen v. O'Connell, Texas Opinion 459, and Michigan Opinion C-1145). It concluded that because the note restricted the lawyer's right to practice and implicitly deprived clients of their choice of counsel, the proposed arrangement was improper.

Currency note

This opinion was issued in 1994, before Illinois adopted the 2010 Illinois Rules of Professional Conduct. The ISBA Board of Governors affirmed the opinion in January 2010 as generally consistent with the 2010 Rules (referring to Rule 1.5(e)), while noting the specific standards referenced may differ from the 2010 Rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule or requirement mentioned here.

Common questions

Q: Can a firm use a promissory note to discourage a departing lawyer from competing?

A: The opinion concluded that a note payable only if the lawyer competes after leaving is an improper restriction on the right to practice under Rule 5.6(a) and void as against public policy, no different in effect from a direct non-compete clause.

Q: Why are non-compete agreements between lawyers treated differently from other professions?

A: The opinion concluded that Rule 5.6(a) exists to preserve lawyers' professional autonomy and clients' freedom to choose their own counsel, so an agreement that restricts where a lawyer may practice undermines the client's right to choose.

Q: Does the rule prohibit all post-departure payments?

A: No. The opinion concluded that retirement benefits and bona fide separation payments are permitted, but the conditional note here was neither; it was triggered solely by competition and tied to no services the firm performed.

Background and rules framework

The opinion interpreted Rule 5.6(a) (a lawyer shall not offer or make a partnership or employment agreement restricting the right to practice after termination, except an agreement concerning retirement benefits; Model Rule 5.6), read together with Rule 1.5 on the division of fees and separation or retirement payments (Model Rule 1.5).

Citations and references

Rules of Professional Conduct:

• Model Rule 5.6 (restrictions on a lawyer's right to practice) / Illinois Rule 5.6(a)
• Model Rule 1.5 (fees; division and separation/retirement payments) / Illinois Rule 1.5(g), (j)

Cases:

• Corti v. Fleisher, 93 Ill. App. 3d 517, 417 N.E.2d 764 (1981), referral-fee agreement void against public policy
• Howard v. Babcock, 18 Cal. App. 4th 107, 7 Cal. Rptr. 2d 687 (1992), forfeiture clause void
• Gray v. Martin, 63 Or. App. 173, 663 P.2d 1285 (1983), conditioned-payment clause unenforceable
• Cohen v. Lord, 551 N.Y.S.2d 157 (1989), payment conditioned on not competing unenforceable
• Hagen v. O'Connell, 68 Or. App. 700, 683 P.2d 563 (1984), stock-redemption condition improper

Other opinions cited:

• ISBA Opinion No. 91-12: agreement restricting solicitation of firm clients void under Rule 5.6(a)
• ISBA Opinion Nos. 86-16 and 628: earlier treatments of restrictive provisions
• Texas Opinion 459 (1988); Michigan Opinion C-1145 (1986): similar restrictions condemned

See also

• ISBA Ethics Op. 97-09: Non-Compete Provision of a Partnership Agreement

Source

• Landing page: https://www.isba.org/ethics/opinions/9313