Can a lawyer leaving a firm agree, in exchange for periodic payments, not to practice for current or former firm clients, and can the firm keep using his name after he returns to practice?

Plain-English summary

A firm had practiced for years as "A, B & C," with the "A" being Lawyer A's surname. Lawyer A left the firm and stopped practicing law. As part of winding down his practice, he signed an agreement letting the firm keep using the "A, B & C" name and giving him periodic payments. In exchange, he agreed not to represent any current or former clients of the firm, to use best efforts to help the firm collect its receivables, and not to act in a way that would stop the firm from using his name. The agreement cut off his future payments if he breached, and added a large liquidated-damages payment if he resumed practicing under his own name. Years later, Lawyer A decided to return to practice under his own name with no firm relationship.

The Committee concluded the practice-restricting agreement did not violate the Rules. Rule 5.06(a) bars a partnership or employment agreement that restricts a lawyer's right to practice after the relationship ends, "except an agreement concerning benefits upon retirement." Because the restriction was tied to retirement benefits paid after Lawyer A ended his practice, it fell within that exception.

On whether Lawyer A could nonetheless return to practice despite the agreement, the Committee concluded the Rules did not prohibit him from doing so. Whether the agreement's terms bound him, and what the firm's and his rights and obligations were, was a question of law not principally governed by the Disciplinary Rules, so the Committee did not opine on it.

On the firm name, the Committee concluded the Rules did not require the firm to drop Lawyer A's name. Rule 7.04(a) permits a firm to keep in its name the name of a retired member or of a predecessor firm in a continuing line of succession. Because Lawyer A had retired from the firm, the firm could leave its name unchanged after he resumed practice, provided it did not act in a way that would lead firm clients or the public to think Lawyer A was still practicing with the firm. Rule 7.04(d) bars a lawyer from holding himself out as a partner or associate of lawyers who are not in fact his partners or associates.

Currency note

This opinion was issued in 1990, under the Texas Disciplinary Rules of Professional Conduct that took effect January 1, 1990. Texas did not adopt the ABA's Ethics 2000 revisions; its rules have been amended only piecemeal since, including the comprehensive 2021 revisions adopted by Texas Supreme Court order. 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 firm condition a departing lawyer's retirement payments on his agreeing not to take firm clients?

A: The Committee concluded yes. Rule 5.06(a) bars agreements restricting a lawyer's right to practice after termination, but excepts agreements concerning retirement benefits, and the Committee treated this arrangement as falling within that exception.

Q: If a lawyer signed such an agreement, do the Rules stop him from returning to practice under his own name?

A: Per the opinion, no. The Committee concluded the Rules did not prohibit his return; whether the agreement itself bound him was a question of contract law the Committee declined to decide.

Q: Can a firm keep a retired lawyer's name in the firm name after he goes back into practice?

A: The Committee concluded yes, under Rule 7.04(a), so long as the firm does not take actions that would mislead clients or the public into thinking the lawyer is still practicing with the firm (Rule 7.04(d)).

Background and rules framework

The opinion interprets Texas Disciplinary Rule 5.06(a) (no agreement restricting the right to practice after a relationship ends, except agreements concerning retirement benefits; analogous to ABA Model Rule 5.6(a)) and Rule 7.04(a) and (d) on firm names (analogous to ABA Model Rule 7.5 on firm names and letterheads as it then stood). The Committee read the practice restriction as part of a retirement-benefits package and treated the firm-name question as turning on whether continued use of the retired member's name would mislead about the lawyer's current relationship to the firm.

Citations and references

Rules of Professional Conduct:

• MR 5.6(a) (no agreement restricting a lawyer's right to practice after termination, except retirement benefits)
• MR 7.5 (firm names and letterheads)
• Texas Disciplinary Rule 5.06(a)
• Texas Disciplinary Rule 7.04(a), (d)

See also

• TX Ethics Op. 656: Of-Counsel Agreement Restricting Practice After Departure
• TX Ethics Op. 505: Settlement Restricting Future Solicitation or Fee-Sharing Against an Opposing Party
• ABA Formal Op. 06-444: Restrictive Covenants and Retirement Benefits

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-466/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_466.pdf

Original opinion text

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

QUESTION PRESENTED

Is the agreement between Lawyer A and the A, B & C law firm permissible under the Texas Disciplinary Rules of Professional Conduct (the "Disciplinary Rules")?
Under the Disciplinary Rules, is Lawyer A prohibited from returning to the practice of law under his own name?
Under the Disciplinary Rules, must the A, B & C law firm change its name if Lawyer A returns to the practice of law?

STATEMENT OF FACTS

A law firm has practiced law in the state of Texas for a number of years under the name "A, B & C." The "A" in the law firm name is the last name of Lawyer A. Lawyer A determines to leave the A, B & C law firm and stop practicing law. In connection with the termination of his practice, Lawyer A enters into an agreement with the A, B & C law firm allowing the firm to continue to practice law under the "A, B & C" firm name after Lawyer A leaves the firm. Under the agreement, Lawyer A receives periodic payments from the A, B & C law firm. In consideration for these payments, Lawyer A agrees not to represent any current or former clients of the firm, to make his best efforts to assist the law firm in the collection of accounts receivable, and not to take any action that would prevent the law firm from continuing to use Lawyer A's name in the firm name. Under the agreement, future periodic payments to Lawyer A will stop if he breaches any of the requirements of the agreement and in addition there is a liquidated damages provision requiring a large payment by Lawyer A if he takes any action to practice law in his own name in the future. After several years, Lawyer A determines to return to the practice of law and practice under his own name, but without any relationship with the A, B & C law firm.

DISCUSSION

The agreement between Lawyer A and the A, B & C law firm limiting Lawyer A's rights to practice law as a condition for payments after Lawyer A terminates his practice does not violate the Disciplinary Rules. Rule 5.06(a) of the Disciplinary Rules provides that "A lawyer shall not participate in offering or making: (a) a partnership or employment agreement that restricts the rights of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement. . . ."

Although the Disciplinary Rules permit an agreement limiting Lawyer A's rights to practice law as part of an agreement concerning benefits paid after Lawyer A retires from the practice of law, Lawyer A is not prohibited by the provisions of the Disciplinary Rules from returning to the practice of law contrary to the terms of the agreement. The question of rights and obligations of the A, B & C law firm and Lawyer A in such circumstance is a question of law which does not involve principally the interpretation of the Disciplinary Rules and hence is not a question appropriate for this Committee.

The Committee believes that the Disciplinary Rules do not prohibit the A, B & C law firm from continuing to use the name of Lawyer A in the law firm name if the firm chooses to do so after Lawyer A returns to the practice of law. Rule 7.04(a) of the Disciplinary Rules provides in part that "if otherwise lawful a firm may use as or continue to include in, its name the name or names of one or more deceased or retired members of the firm or of a predecessor firm in a continuing line of succession." In view of the fact that Lawyer A retired from the A, B & C law firm, the Committee believes that the A, B & C law firm may leave its name unchanged after Lawyer A recommences his law practice provided that the A, B & C law firm does not take any action that would cause firm clients or the public to think that Lawyer A is continuing to practice law in the A, B & C law firm. Rule 7.04(d) of the Disciplinary Rules provides that "[a] lawyer shall not hold himself out as being a partner or associate with one or more other lawyers unless they are in fact partners or associates."

CONCLUSION

The agreement restricting Lawyer A's practice of law as a condition for the payment of benefits by the A, B & C law firm after termination of Lawyer A's practice of law is not in violation of the Disciplinary Rules.
Lawyer A is not prohibited by the Disciplinary Rules from returning to the practice of law under his own name. The question of the rights and obligations of Lawyer A and the A, B & C law firm under their agreement is principally a legal question not governed by the Disciplinary Rules.
Unless otherwise required by law, under the Disciplinary Rules the law firm may continue to use the "A, B & C" name after Lawyer A returns to the practice of law so long as the A, B & C law firm does not take any actions that would mislead clients or the public as to the relationship between Lawyer A and the law firm.

Tex. Comm. On Professional Ethics, Op. 466 (1990)