Can a retired New Hampshire lawyer keep an ownership stake in their former firm or share in fees the firm earns after retirement?

Plain-English summary

As a generation of New Hampshire lawyers reaches retirement, the Committee addressed whether a retiring lawyer may keep an ownership interest or management control in the former firm and may continue to receive a share of fees the firm earns after the lawyer retires. The answer turns on whether the retiring lawyer remains a "lawyer" under the rules. New Hampshire has two classes of members, active and inactive; both remain lawyers, while a lawyer who resigns the bar becomes a non-lawyer.

On ownership and control, the opinion concludes that a retiring lawyer who stays a member of the New Hampshire bar or another state's bar may keep an ownership interest or control, with the remaining challenge being a workable business arrangement. But if the retiring lawyer resigns and is no longer a lawyer, retaining ownership or control is not permitted, because Rule 5.4(b) bars a law-practice partnership with a non-lawyer and Rule 5.4(d) bars non-lawyer ownership of a firm that practices law for profit.

On sharing fees, the opinion concludes that fees earned after retirement may be shared with a retired lawyer only if the lawyer remains licensed and the overall fee is reasonable and no larger than the firm would have earned had the lawyer not retired. There is one exception for a lawyer who has surrendered a license: to the extent firm fees became part of the firm's contribution to a pension or retirement plan, sharing those funds with the now non-lawyer is permitted. The opinion also suggests notifying clients of a principal lawyer's pending retirement and assuring continuity through a succession plan.

In practice

The opinion holds that, under the New Hampshire Rules as they stood when it issued, ownership, control, and post-retirement fee sharing with a retired lawyer hinge on the lawyer keeping a license. A still-licensed retired lawyer (active or inactive) may keep ownership or control and share reasonable post-retirement fees that do not exceed what the firm would otherwise have earned. A lawyer who resigns the bar may not keep ownership or control and may receive only retirement or pension-plan distributions funded by past fees, not a direct share of future fees. The opinion treats client notice of a principal lawyer's retirement, paired with a succession plan, as advisable.

Common questions

Q: Can a retired New Hampshire lawyer keep an ownership stake in the old firm?

A: Only if still licensed. The opinion concludes a retired lawyer who remains an active or inactive member, or is admitted elsewhere, may keep ownership or control, but a lawyer who resigns the bar may not, under Rule 5.4(b) and (d).

Q: Can the firm pay a retired lawyer a share of fees from matters after retirement?

A: Yes, with limits, if the lawyer stays licensed. The opinion permits sharing post-retirement fees with a still-licensed retired lawyer if the overall fee is reasonable and no larger than the firm would have earned absent the retirement.

Q: What if the lawyer gives up their license entirely?

A: Then the lawyer is a non-lawyer and generally cannot share future fees. The opinion allows an exception only for distributions from a pension or retirement plan funded by fees the firm earned.

Q: Is an "inactive" lawyer treated as a non-lawyer for fee sharing?

A: No. The opinion states inactive members remain lawyers for purposes of fee sharing and sharing management control with the former firm.

Background and rules framework

The opinion interprets New Hampshire Rule 5.4 (professional independence of a lawyer), specifically the bar on partnership with a non-lawyer in 5.4(b) and the bar on non-lawyer ownership of a law-practice entity in 5.4(d), along with the fee-sharing provisions and pension-plan allowance in Rule 5.4(a). It reads these against the New Hampshire distinction between active, inactive, and resigned (non-lawyer) status, and references the Rule 1.5 reasonableness limit on fees.

Citations and references

Rules of Professional Conduct:

• MR 5.4 / NH Rule 5.4(a), (b), (d) (professional independence; fee sharing and non-lawyer ownership)
• MR 1.5 / NH Rule 1.5 (reasonable fees)

Other references:

• "Closing a Solo Practice in New Hampshire," New Hampshire Bar News (May 2007)

See also

• ABA Formal Op. 06-444: Restrictive Covenants and Retirement Benefits
• ABA Formal Op. 468: Facilitating the Sale of a Law Practice

Source

• Landing page: https://www.nhbar.org/ethics/opinion-2016-17-01
• Original PDF: https://nhba.s3.amazonaws.com/wp-content/uploads/2019/11/14142647/2016-17-01-REFORMATTED-Obligations-in-Sharing-Fees.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.
NEW HAMPSHIRE BAR ASSOCIATION
Law Firm Obligations in Sharing Fees and Ownership Control with Retired Lawyers
Ethics Committee Advisory Opinion #2016-17/01

ABSTRACT:
A retired lawyer may hold an ownership interest or control in the former lawyer’s firm only if
the lawyer remains on “active” or “inactive” status in New Hampshire or is admitted to practice
in another U.S. jurisdiction (i.e., does not become a “non-lawyer”). A retired lawyer may
receive payment from funds originally earned as fees pursuant to a pension/retirement plan to
which the fees were deposited as a contribution even if the lawyer has become a “non-lawyer”.
A retired lawyer may receive fees from cases on which the lawyer worked while active only if
(1) the lawyer does not become a “non-lawyer” and (2) the overall fee is reasonable and no
larger than the fee earned by the firm if the retired lawyer never retired.
ANNOTATIONS:

“Inactive” members of the New Hampshire Bar are nonetheless lawyers for purposes of fee-
sharing and sharing management control with the inactive lawyer’s former law firm.

If a retiring lawyer resigns from the bar, and is no longer a “lawyer”, active or inactive, then
retention of an ownership interest or control in the former lawyer’s firm is not permissible.

To the extent that the fees earned by a law firm become part of the firm’s contribution to a firm
pension or other form of retirement plan, the sharing of such fees with a retired lawyer who has
elected to surrender the lawyer’s licenses to practice law is permissible.

Provided that the overall fee is reasonable and no larger than the fee earned by the firm if the
retiring lawyer never retired, sharing of fees earned by the firm in a matter following a lawyer’s
retirement with that retired lawyer is permissible if that retired lawyer remains a licensed lawyer.

Firms may be well-advised to notify the client of the pending retirement of the lawyer if that
lawyer was a principal lawyer responsible for the client’s matter, and to assure the client that the
firm can continue to represent the client in the matter (provided that the firm and the retiring
lawyer have created a succession plan that ensures ongoing competent and ethical representation
of the client in that matter), and that the retiring lawyer will be compensated pursuant to an
arrangement satisfactory to the firm and the retiring lawyer that will not affect the fee agreement
originally reached with the client.

It is not permissible for a law firm with whom the retired lawyer was formerly associated to
share fees collected in the future, except pursuant to the pension/retirement plan arrangement,
with that lawyer, if the lawyer is no longer licensed to practice law.

                                         OPINION

QUESTION:
May a retired lawyer (i) retain an ownership interest in or management control over the lawyer’s
former firm, and/or (ii) share legal fees earned by that lawyer’s former firm for work performed
after the lawyer retires?
BACKGROUND:
The significant growth of the New Hampshire Bar in the last thirty to forty years and the aging of
the generation that initially spurred that growth now tees up some interesting retirement issues
for that same generation. Recently, the New Hampshire Bar Association Ethics Committee
received inquiries about the crossroads between retirement from a firm or partnership and the
continued receipt by a retired lawyer of financial compensation based on fees earned following
the lawyer’s retirement in matters on which the retired lawyer worked while at the firm, as well
as the retention of an ongoing ownership interest or control in a law firm if the retired lawyer
elects to resign from the Bar.
Before analyzing these issues, two issues are worthy of mention. First, in New Hampshire, there
are two classes of lawyers – “active” members of the Bar and “inactive” members of the Bar.
The distinction (besides the annual dues) between the two classes of membership is that active
members may practice law while inactive members may no longer do so. Nonetheless, both
classes remain “lawyers” for purposes of this opinion. Second, the Committee notes that the
broader topic of closing a solo law practice and tips on succession planning for solo attorneys
was the subject of a 2007 article. See “Closing a Solo Practice in New Hampshire“, New
Hampshire Bar News, May 2007. For solo attorneys contemplating retirement, the article is well
worth reviewing. It provides some helpful general tips and an excellent description of some
succession planning resources not only for lawyers who are in solo practice but for those in small
law firms.
Retirement: Retention of Ownership Interests/Control
The analysis of this issue is fairly simple. Obviously, if a retiring lawyer elects to remain a
member of the New Hampshire bar or another state’s bar, and thus, remains a “lawyer” pursuant
to the New Hampshire Rules of Professional Conduct (“NHRPC”), then retention of an ownership
interest or control in that lawyer’s firm is not problematic from an ethical perspective. In this
instance, the challenge comes in reaching an acceptable business arrangement with the lawyers in
the firm continuing in active practice.
Conversely, if the retiring lawyer resigns from the bar, and is no longer a “lawyer”, active or
inactive, then retention of an ownership interest or control in the former lawyer’s firm is not
permissible. NHRPC 5.4(b) prohibits lawyers from forming “a partnership with a nonlawyer if
any of the activities of the partnership consist of the practice of law.” Likewise, NHRPC 5.4(d)
prohibits a lawyer from practicing:
“…with or in the form of a professional corporation or association authorized to practice law for
a profit if:
 1. a nonlawyer owns any interest therein, except that a fiduciary representative of the estate
of a lawyer may hold the stock or interest of the lawyer for a reasonable time during
administration;
2. a nonlawyer is a corporate director or officer thereof or occupies the position of similar
responsibility in any form of association other than a corporation; or
3. a nonlawyer has the right to direct or control the professional judgment of a lawyer.”
Thus, as thoughtful a gesture as it might be to allow the retired “nonlawyer” to retain an
ownership interest, however small, or some modicum of direction or control over the activities of
the firm, such provisions are not ethically permissible.
Retirement: Sharing of Fees
The remainder of this opinion deals with whether a firm may share legal fees earned on a matter
in which the retired lawyer worked, for the firm’s work on that matter after that lawyer retires.
Before analyzing this issue, the Committee notes that there are specific rules governing fee
sharing with a lawyer who sells his/her practice or an area of his/her practice pursuant to NHRPC
1.17. Specifically, a lawyer or law firm may share such fees pursuant to a purchase of “the
practice of a deceased, disabled or disappeared lawyer” as part of the performance of an agreed-
upon purchase arrangement. Those fees are typically paid to the estate or other representative of
the selling lawyer. See NHRPC 5.4(a)(2). Likewise, if the selling lawyer remains an active or
inactive member of the New Hampshire Bar, fee sharing is appropriate. That analysis is beyond
the scope of this opinion.
Like the previous issue, the fee sharing analysis turns to some degree on whether the retiring
lawyer elects to remain a licensed “lawyer”.
First, to the extent that the fees earned by a law firm become part of the firm’s contribution to a
firm pension or other form of retirement plan, the sharing of such fees in the context of those
plans is permissible with a retired lawyer who has elected to surrender the lawyer’s licenses to
practice law. NHRPC 5.4(a)(3) provides that “a lawyer or law firm may include non-lawyer
employees in a compensation or retirement plan, even though the plan is based in whole or in
part on a profit-sharing arrangement.” Thus, the law firm and a retired lawyer, even if that
lawyer has resigned from the bar, may ethically participate in a pension or other form of
retirement plan fueled by earned fees.
Second, to the extent that the overall fee is reasonable and no larger than the fee earned by the
firm if the retiring lawyer never retired, sharing of fees earned by the firm in a matter following a
lawyer’s retirement with the retired lawyer is permissible if that retired lawyer remains a licensed
lawyer.1 NHRPC 1.5(f).2 Indeed, Comment 8 to NHRPC 1.5 states that the division of fees to be
received in the future for work done when lawyers were previously associated in a law firm is
permissible, and not regulated by the fee sharing rules. However, even if NHRPC 1.5(f) does not
literally apply, perhaps the best practice is to (i) notify the client of the pending retirement of the
lawyer (which likely invokes NHRPC 1.16(d)3 if the retiring lawyer was a principal lawyer
responsible for the client’s matter), (ii) assure the client that the firm can continue to represent
the client in the matter (provided that the firm and the retiring lawyer have created a succession
plan that ensures ongoing competent and ethical representation of the client in that matter), and
(iii) inform the client that the retiring lawyer will be compensated pursuant to an arrangement
satisfactory to the firm and the retiring lawyer that will not affect the fee agreement originally
reached with the client.
Third, it is not permissible to share fees collected in the future, except pursuant to the
pension/retirement plan arrangement described above, with a retired lawyer who is no longer
licensed to practice law. NHRPC 5.4(a) generally prohibits the sharing of legal fees with a non-
lawyer. To be certain, NHRPC 5.4(a)(1) allows for an ” … agreement by a lawyer with the
lawyer’s firm, partner or associate which provides for the payment of money over a reasonable
period of time after the lawyer’s death, to the lawyer’s estate or to one or more specified
persons”, but that exception is confined to a lawyer’s death. Whether sensible or not, it does not
apply to retirement – even an involuntary retirement, such as a disability short of death.
However, this prohibition does not prevent a firm from sharing fees collected post-resignation
with the former attorney for work performed prior to that attorney’s surrender of his or her
license. This result is consistent with opinions which prohibit ongoing fee-sharing arrangements
with attorneys after they are suspended or disbarred, but permit fee-sharing for work performed
up to the point of disbarment or suspension.4
Thus, to the extent that a law firm wishes to compensate a retiring lawyer based on fees earned
after the retiring lawyer surrenders his or her license to practice law, that arrangement is not
permissible except through a pension or retirement plan under NHRPC 5.4(a)(3).

Conclusion
Based on the applicable rules of professional conduct, in order to share fees earned by that
lawyer’s former firm from a legal matter or to retain control or ownership rights in that law firm,
a retiring lawyer needs to retain his or her status as a duly-licensed lawyer. Once that retiring
lawyer surrenders his or her status as a “lawyer”, there are prohibitions on the retention of
ownership rights and restrictions on the sharing of fees earned by the firm after the lawyer’s
retirement.

ENDNOTES:
[1] In addition to the retention of a lawyer’s status as a lawyer, if that lawyer elects “inactive”
status in New Hampshire, most courts have held that lawyers who are licensed in another United
States jurisdiction are considered “lawyers” and may divide fees with out-of-state attorneys, so
long as such arrangements comply with the applicable rules of professional conduct. ABA/BNA
Lawyers’ Manual on Professional Conduct, §41.707 and cases and opinions cited therein.

[2] Recall that unlike ABA Model Rule 1.5(e) – the ABA version of the rule which addresses fee
sharing, New Hampshire does not require fees to be divided based on the proportion of services
provided by each attorney – in this case, the services to be provided by the retired attorney.
Compare ABA Model Rule 1.5(e)(1) and NHRPC 1.5(f)(1)(b).
[3] NHRPC 1.16(d) states that: “As a condition to termination of representation, a lawyer shall
take steps to the extent reasonably practicable to protect a client’s interests, such as giving
reasonable notice to the client, allowing time for employment of other counsel, surrendering
papers and property to which the client is entitled and refunding any advance payment of fee or
expense that has not been earned or incurred.” The article identified in the opening of this
opinion elaborates on the protection of clients when a lawyer closes his/her practice. Retiring
lawyers must be mindful of those same protections if the lawyer is the principal lawyer or one of
the principal lawyers responsible for the client’s matter.

[4] ABA/BNA Lawyers’ Manual on Professional Conduct, §41.708-709 and cases and opinions
cited therein.

This opinion was submitted for publication to the NHBA Board of Governors at its April 20,
2017 meeting, and was published in Bar News on ???.

NH RULES OF PROFESSIONAL CONDUCT:
NHRPC 1.5(f)
NHRPC 1.16(d)
NHRPC 1.17
NHRPC 5.4(a)(1)
NHRPC 5.4(a)(2)
NHRPC 5.4(a)(3)
NHRPC 5.4(b)
NHRPC 5.4(d)

NH ETHICS COMMITTEE OPINIONS AND ARTICLES:
“Closing a Solo Practice in New Hampshire“, New Hampshire Bar News, May 2007

SUBJECTS:
Sharing of Legal Fees
Withdrawal from Representation
Sale of Law Practice
Professional Independence of a Lawyer
Practice with Non-Lawyers
• By the NHBA Ethics Committee
This opinion was submitted for publication to the NHBA Board of Governors at its April
20, 2017 meeting.