Can a Mississippi law firm's partnership agreement reduce a withdrawing partner's payout only if he agrees not to compete in the practice of law?

Plain-English summary

The Committee addressed a lawyer (Lawyer A) who left a law firm as a partner and continued to practice in the same locality. The firm's partnership agreement imposed a substantial monetary penalty for a partner's withdrawal, but provided that the penalty could be reduced if the withdrawing lawyer had been a partner for ten years and assured the remaining partners in writing that he would not engage in the private practice of law in substantial competition with the firm for five years.

The opinion applied Rule 5.6, which provides that a lawyer shall not participate in offering or making a partnership or employment agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement. The opinion concluded that the covenant required a departing partner to restrict his practice in order to obtain funds from his capital account, in violation of Rule 5.6.

The opinion noted that the American Bar Association had found restrictive covenants of this sort to be unethical in ABA Opinion 1301 (1975), and concluded that the covenant in the questioned paragraph violated Rule 5.6 of the Mississippi Rules of Professional Conduct.

Currency note

This opinion was issued in 1991, interpreting the Mississippi Rules of Professional Conduct (adopted effective June 22, 1994, and amended February 5, 1999). Mississippi did not adopt the ABA's 2002 Ethics 2000 revisions wholesale, but 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Can a partnership agreement reduce a departing partner's payout if he agrees not to compete?

A: The opinion concluded no. Conditioning recovery from the partner's capital account on a promise not to engage in the private practice of law in substantial competition with the firm restricts the right to practice in violation of Rule 5.6.

Q: Does it matter that the lawyer keeps his full penalty if he refuses to sign the non-compete?

A: Per the opinion, the problem is that the covenant forces the departing partner to choose between practicing freely and obtaining funds from his capital account; the opinion treated that financial pressure as a restriction on the right to practice.

Q: Are there any partnership restrictions Rule 5.6 allows?

A: The opinion quoted Rule 5.6's exception for an agreement concerning benefits upon retirement, but concluded the questioned covenant did not fall within it.

Background and rules framework

The opinion interprets Mississippi Rule of Professional Conduct 5.6 (restrictions on a lawyer's right to practice), which corresponds to Model Rule 5.6. It relies on ABA Opinion 1301 (1975) treating such restrictive covenants as unethical.

Citations and references

Rules of Professional Conduct (Mississippi; cf. Model Rules):

• MRPC 5.6(a) (restrictions on the right to practice after termination) (cf. Model Rule 5.6)

Other opinions cited:

• ABA Opinion 1301 (1975): restrictive covenants on the right to practice.

See also

• MS Bar Ethics Op. 249: Lawyer Buy-Out Provisions
• MS Bar Ethics Op. 220: Suing a Former Law Partner
• MS Bar Ethics Op. 227: Withdrawing for Impairment

Source

• Landing page: https://www.msbar.org/ethics-discipline/ethics-opinions/formal-opinions/193/
• Original PDF: https://www.msbar.org/media/1452/35a_et_op_193.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

ETHICS OPINION NO. 193

OF THE MISSISSIPPI BAR

RENDERED December 06, 1991

RESTRICTIONS ON THE RIGHT TO PRACTICE: A partnership agreement may not restrict the right of a lawyer to practice law after termination of the partnership.

The Ethics Committee of The Mississippi Bar has been asked to render an opinion based on the following facts:

Lawyer A disassociated himself as a partner in a law firm and continued to practice law in the same locality.

The partnership agreement provides substantial monetary penalty for the withdrawal of a partner. The agreement also provides that the penalty may be reduced..."if the withdrawing lawyer has been a partner for a period of ten years and assures the remaining partners in writing that he will not engage in the private practice of law in substantial competition with the law firm for a period of five years.

Rule 5.6 of the Mississippi Rules of Professional Conduct provides: A lawyer shall not participate in offering or making:

(a) a partnership or employment agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement.

This convenant requires a departing partner to restrict his practice in violation of Rule 5.6 in order to obtain funds from his capital account.

The American Bar Association addressed the question of the propriety of restrictive covenants of this sort and found them to be unethical. ABA Opinion 1301 (1975).

It is of the opinion of this Committee that restrictive covenants contained in the questioned paragraph is a violation of Rule 5.6 of the Mississippi Rules of Professional Conduct.