When a client follows a departing Texas lawyer to a new practice, must the lawyer enter a new fee agreement, and what must the lawyer disclose about possible continuing obligations to the prior firm?
Texas Ethics Opinion 700: New Legal Services Agreement and Required Disclosures When Clients Follow a Departing Lawyer
Short answer: Per the Committee, a Texas lawyer who has departed a law firm must enter into a new legal services agreement with a client who terminates the prior firm and follows the lawyer to a new practice; the lawyer may not rely on the prior firm's contract as the contract with the new firm. Before contracting, the lawyer must alert the client to any continuing financial or contractual obligations the lawyer knows the client may owe the prior firm. In contingent-fee matters, that disclosure must include the risk of double contingent-fee liability under Texas common law; a knowing failure to disclose may also violate Rule 8.04(a)(3).
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Texas Disciplinary Rules of Professional Conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.
Plain-English summary
The opinion addresses a Texas lawyer who has left a firm and is being followed to a new practice by some of the prior firm's clients. The lawyer assumes the prior firm's legal services agreement carries over and does not draft a new agreement or disclose any continuing obligations the client may owe the prior firm.
The Committee rejects that approach. Texas lawyer-client relationships are contractual; Rule 1.04(d) (and Tex. Gov't Code § 82.065(a)) require contingent-fee agreements to be in writing, and Rule 1.04 Comment 2 says other agreements should be in writing as well. When the client terminates the prior firm and follows the lawyer to a new practice, a new agreement is required. The lawyer may use the same or similar terms, but must make clear the new agreement is with a new practice and that any prior agreement is with the prior firm only; acceptance of the new agreement does not extinguish the client's obligations to the prior firm under the prior agreement.
The Committee warns that if the departing lawyer proposes terms differing from the prior firm's terms, Archer v. Griffith, 390 S.W.2d 735 (Tex. 1964), and the Committee's prior Opinion 688 (May 2020) caution that courts may apply a presumption of unfairness to modifications, even though the new agreement is a separate contract.
On disclosure, the Committee builds on Opinion 699 (Feb. 2023): the departing lawyer must inform the client (a) that the lawyer is leaving, (b) that the client decides who continues the representation, and (c) of any contractual or financial ramifications. Per Opinion 546 (Dec. 2002), the Texas Supreme Court's holdings in Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 561 (Tex. 2006), and Mandell & Wright v. Thomas, 411 S.W.2d 841, 847 (Tex. 1969), in contingent-fee matters the client's termination without cause may result in liability to two firms for two full contingent fees. The lawyer should consider whether the proposed new contingent fee, in light of that exposure, may be unconscionable under Rule 1.04(a). Knowingly withholding the double-liability information may itself violate Rule 8.04(a)(3) (dishonesty, fraud, deceit, or misrepresentation).
In practice
Under this opinion, conduct involving a Texas departing lawyer representing followed clients without entering a new written engagement and without disclosing the prior firm's continuing claims is prohibited by Rule 1.03(b) and Rule 1.04. Per the opinion, in contingent-fee matters the lawyer should also weigh the unconscionability risk under Rule 1.04(a) given potential double-fee exposure.
Common questions
Q: Can the lawyer use the prior firm's fee agreement as the basis for the new representation?
A: No. Per the opinion, the lawyer must enter into a new agreement with the followed client. Per the opinion, the lawyer may use the same or similar terms but must be explicit that the new agreement is with the new practice.
Q: Must the lawyer disclose that the client may owe two contingent fees?
A: Yes, in contingent-fee matters. Per the opinion, Hoover Slovacek v. Walton and Mandell & Wright v. Thomas control: a client's no-cause termination of the prior firm may result in obligations to both firms. The departing lawyer must disclose that risk so the client can make an informed decision.
Q: What if the departing lawyer and the prior firm negotiate a fee split?
A: Per the opinion, a Rule 1.04(f) and (g) fee-sharing agreement may be workable, but if no agreement is reached, the departing lawyer should consider whether the proposed fee is unconscionable under Rule 1.04(a) in light of the client's potential exposure to two full fees.
Q: Can hiding the double-liability risk be sanctionable beyond fee-disclosure rules?
A: Per the opinion, yes. A lawyer who knowingly withholds that information to induce the client to transfer the matter may also violate Rule 8.04(a)(3) (dishonesty, fraud, deceit, or misrepresentation).
Background and rules framework
The opinion interprets Texas Disciplinary Rules 1.03(b) (communication sufficient for informed decisions), 1.04(a) (unconscionable fees), 1.04(d) (written contingent-fee agreement), 1.04(f), (g) (fee-sharing between separate firms), and 8.04(a)(3) (dishonesty). Statutory backdrop: Tex. Gov't Code § 82.065(a). Texas Rules correspond to ABA Model Rules 1.4, 1.5, and 8.4 respectively.
Citations and references
Rules of Professional Conduct:
- Texas Disciplinary Rule 1.03(b) (informed-decision communication)
- Texas Disciplinary Rule 1.04(a), (d), (f), (g) (fees; contingent-fee writing; fee splits)
- Texas Disciplinary Rule 8.04(a)(3) (dishonesty)
Statutes:
- Tex. Gov't Code § 82.065(a) (written contingent-fee agreements)
Cases:
- Archer v. Griffith, 390 S.W.2d 735 (Tex. 1964)
- Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 561 (Tex. 2006)
- Levine v. Bayne, Snell & Krause, Ltd., 40 S.W.3d 92 (Tex. 2001)
- Mandell & Wright v. Thomas, 411 S.W.2d 841, 847 (Tex. 1969)
- Stephens v. Three Finger Black Shale P'ship, 580 S.W.3d 687 (Tex. App.-Eastland 2019, pet. denied)
Other opinions cited:
- Texas Op. 546 (Dec. 2002) - departing associate's disclosure obligations on contingent-fee transfers
- Texas Op. 679 (Sept. 2018) - renegotiating fee during representation
- Texas Op. 688 (May 2020) - mid-representation fee modifications
- Texas Op. 699 (Feb. 2023) - departing-lawyer client-notice obligations
- ABA Formal Op. 11-458 (2011) - changing fee arrangements during representation
See also
- TX Ethics Op. 699: Departing Lawyer Restrictions - companion analysis under Rule 5.06
- TX Ethics Op. 701: Subscription Legal Fees - contemporary fee-agreement framework
Source
- Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-700/
- Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_700.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
QUESTION PRESENTED
With respect to a lawyer who has departed a firm:
Must the lawyer enter into a new legal services agreement with clients who followed the departed lawyer to a new firm, or may the lawyer rely on the former law firm's legal services agreement as continuing to serve as the contract with those clients?
What disclosure obligations does that lawyer have in advising clients who propose to follow the lawyer to the new practice regarding the clients' financial obligations under the prior firm's legal services agreement?
STATEMENT OF FACTS
A lawyer has departed a law firm for a new practice. Some clients chose to leave the lawyer's former firm and follow the lawyer to the new practice. The lawyer believes that the prior firm's legal services agreement forms the basis for a client's relationship with the lawyer's new practice. Therefore, the lawyer does not ask these clients to enter into new legal services agreements with the new firm. Further, the lawyer concludes that there is no ethical obligation to advise the clients regarding their potential financial obligations under the prior firm's legal services agreement before the lawyer begins representing them in the lawyer's new practice.
DISCUSSION
The Need for a New Legal Services Agreement
Lawyer-client relationships are contractual in nature. Under Texas law, such contracts may be express or may be implied from the parties' actions. See, e.g., Stephens v. Three Finger Black Shale P'ship, 580 S.W.3d 687, 721 (Tex. App.—Eastland 2019, pet. denied) (holding there must be objective evidence that both parties intended to create a lawyer–client relationship). Contingent fee agreements must be in writing and must be signed by both the client and the lawyer. See Rule 1.04(d) of the Texas Disciplinary Rules of Professional Conduct; Tex. Gov't Code § 82.065(a). Preferably, other legal services agreements should be in writing as well, because "a written statement concerning the fee reduces the possibility of misunderstanding." Rule 1.04, comment 2. Informing a client of the basis or rate of the fee at the outset of the matter is "one facet of a lawyer's duty to the client." Levine v. Bayne, Snell & Krause, Ltd., 40 S.W.3d 92, 96 (Tex. 2001).
When a lawyer departs a firm for a new practice and a client chooses to terminate the prior firm and follow the lawyer to the new firm, the lawyer must enter into a new agreement with that client, consistent with the Rules and other Texas law. A departing lawyer may agree to represent a client on the same or similar terms as those in the client's agreement with the prior firm; however, the lawyer should make clear that the client is entering into a new agreement with a new practice and that any previous agreement is with the prior firm only. The lawyer should also make clear to the client that acceptance of the new agreement does not relieve the client from any obligations owed to the prior firm under the prior agreement.
There may also be instances where the client prefers that both the departed lawyer and the departed lawyer's prior firm jointly continue their representation of the client; however, that scenario does not relieve the departed lawyer of the obligation to reach an agreement with the client regarding the terms of their new contractual relationship.
The Committee cautions that if the departed lawyer proposes terms that differ from the terms of the client's agreement with the lawyer's prior firm, those differences may receive stricter scrutiny under common law. As the Committee noted in Opinion 688 (May 2020):
A lawyer should be mindful that courts "scrutinize with jealousy" all modifications to a client fee agreement during the representation. Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1964). "There is a presumption of unfairness or invalidity attaching to the contract, and the burden of showing its fairness and reasonableness is on the attorney." Id. See also Opinion 679 (September 2018) (renegotiating fee during representation) and ABA Formal Opinion 11-458 (2011) ("Changing Fee Arrangements During Representation").
Although the proposed new agreement is a separate contract with a new firm, the client may consider the modifications to be changes made "during the representation" by the departing lawyer. If a court were to rule that the new agreement is tantamount to a mid-representation modification, Archer v. Griffith's presumption of unfairness would apply, and a lawyer seeking to enforce the agreement would have the burden of proving that the new agreement was "fair and reasonable" to the client.
Disclosure Obligations Regarding Ramifications of a Prior Legal Services Agreement
Assuming that the departing lawyer is responsible for a client's representation or currently plays a principal role in the law firm's delivery of legal services to that client, the departing lawyer has a duty to ensure that a client is timely informed (a) that the lawyer is leaving the firm, (b) that the client has the ultimate right to decide who will continue the representation, and (c) whether there are any contractual or financial ramifications of the client's decision. Opinion 699 (February 2023).
Thus, before contracting with clients who have proposed to follow the departed lawyer to a new firm, the lawyer must alert such clients to any continuing financial or other contractual obligations, known to the lawyer, that the clients may have to the prior law firm. See Opinion 546 (December 2002) ("In this connection, the associate would have to explain that the contingent fee agreement may be enforceable, depending on the circumstances, in which case the client would be obligated to the lawyer under that agreement in addition to whatever amount the departed associate might charge the client"); see generally Rule 1.03(b) ("A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation"). Therefore, in contingent fee matters, this disclosure should include the possibility that, under Texas law, a client's termination of the prior firm without "cause" may obligate the client to the payment of separate contingent fees to two or more law firms in the event of a recovery. Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 561 (Tex. 2006) (citing Mandell & Wright v. Thomas, 411 S.W.2d 841, 847 (Tex. 1969)). Although in many contingent fee matters the departing lawyer and the previous firm may be able to negotiate a contingent fee-sharing arrangement that is acceptable to the client and complies with Rule 1.04(f) and (g), if the parties cannot reach such an agreement, the departing lawyer should consider whether the proposed fee is unconscionable under Rule 1.04(a) due to the possibility that the client may be liable for two full contingent fees.
A departed lawyer who knows that the client may face double contingent fee liability, but who knowingly withholds that information in order to induce the client to transfer a matter from the prior firm to the lawyer's new firm, may also violate Rule 8.04(a)(3) ("A lawyer shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation").
CONCLUSION
Under the Texas Disciplinary Rules of Professional Conduct, a lawyer who has departed from a law firm must enter into a new legal services agreement with a client who terminates the lawyer's prior firm and follows the lawyer to a new practice.
Before contracting with clients who propose to follow the departed lawyer to a new practice, the lawyer must alert the clients to any continuing financial or other contractual obligations known to the lawyer that the clients may have to the prior law firm.
Tex. Comm. On Professional Ethics, Op. 700 (2024)