Can a lawyer price the sale of a law practice as a percentage of transferred clients' fees, or sell the practice gradually over time?

Plain-English summary

A lawyer asked about the purchase of a law practice. On the first question, whether the sale price can be based on a percentage of the gross fees generated by the transferred clients, the committee determined that this would violate RPC 1.5(e). The committee added that it would be permissible to annually adjust the sale price based on the gross receipts of legal fees from transferred cases.

On the second question, whether it is permissible to sell a law practice gradually over a period of time, the committee decided that, under the rules then in effect, a gradual sale is prohibited because, in effect, it is the lawyer's clients that are being sold, in violation of RPC 7.2(c) and 7.3(a).

Currency note

This opinion was issued in 1996, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. 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 Treat this page as historical context, not current guidance.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. Washington's RPC 1.5, 7.2, and 7.3 correspond to ABA Model Rules 1.5 (fees), 7.2 (communications concerning a lawyer's services), and 7.3 (solicitation of clients). Washington later adopted a rule on the sale of a law practice modeled on ABA Model Rule 1.17.

Common questions

Q: Can the sale price of a law practice be a percentage of the transferred clients' fees?

A: The committee determined that pricing the sale on a percentage of the gross fees from transferred clients would violate RPC 1.5(e).

Q: Is any fee-based adjustment of the sale price allowed?

A: The committee said it would be permissible to annually adjust the sale price based on the gross receipts of legal fees from the transferred cases.

Q: Can a lawyer sell a practice gradually over several years?

A: The committee decided that, under the rules then in effect, a gradual sale over time is prohibited because it amounts to selling the lawyer's clients in violation of RPC 7.2(c) and 7.3(a).

Background and rules framework

The opinion applied RPC 1.5(e) (fees, corresponding to ABA Model Rule 1.5, including the limits on dividing fees), RPC 7.2(c), and RPC 7.3(a) (communications and solicitation, corresponding to ABA Model Rules 7.2 and 7.3). The committee distinguished a one-time sale priced on the practice's value, with a permissible annual receipts-based adjustment, from a percentage-of-fees price or a gradual sale, which it treated as, in effect, selling the clients themselves.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.5 (fees); Washington RPC 1.5(e)
• ABA Model Rule 7.2 (communications concerning a lawyer's services); Washington RPC 7.2(c)
• ABA Model Rule 7.3 (solicitation of clients); Washington RPC 7.3(a)

See also

• WA Ethics Op. 1642: Dividing Fees With a Disbarred Lawyer
• WA Ethics Op. 1638: Collecting Claims Owned by a Collection-Agency Client

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=740

Original opinion text

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

Advisory Opinion: 1658
Year Issued: 1996
RPC(s): RPC 1.5(e); 7.2(c); 7.3(a)
Subject: Sale of law practice; sales price based on percentage of fees; sale over a period of time

[The inquiry concerned] the purchase of a law practice. The Committee reviewed the first question of whether the sales price of a law practice can be based on a percentage of the gross fees generated by the transferred clients. The Committee determined that this would violate RPC 1.5(e). However, it would be permissible to annually adjust the sale price based on the gross receipts of legal fees from transferred cases.

The second issue is whether it is permissible to sell a law practice gradually over a period of time. The Committee decided that under the current Rules of Professional Conduct, selling a law practice gradually over a period of time is prohibited because, in effect, it is the lawyer's clients that are being sold in violation of RPC 7.2(c) and 7.3(a).