Adopted | amendment to Rule 1.17, Sale of Law Practice, in Comment 12.
Approved by the Supreme Court of Virginia December 23, 2020, effective immediately.
December 23, 2020
On December 23, 2020, the Supreme Court of Virginia approved the amendment to Rule 1.17, Comment 12. Effective immediately.
View the Court's order
(PDF)
October 23, 2020
The proposed amendments were approved by Bar Council on October 23, 2020, and
are pending consideration by the Supreme Court of Virginia.
View the petition to the Court
(pdf)
View appendix to the petition to the Court
(pdf)
August 27, 2020
At its meeting on August 27, 2020, the Standing Committee on Legal Ethics
approved submitting the amendments to the Executive Committee and Bar Council
for approval at their upcoming October meetings.
The Standing Committee on Legal Ethics approved the proposed rule changes but
voted to delay submission to Bar Council pending staff’s decision to make
changes as a result of required minor amendments that address typos or
inconsistencies in the comments to these rules.
May 2019
Pursuant to Part 6, § IV, ¶ 10-2(C) of the Rules of the Supreme Court of Virginia, the Virginia State Bar’s Standing Committee on Legal Ethics is seeking public comment on a proposed amendment to Rule 1.17 of the Rules of Professional Conduct.
The proposed amendment to Rule 1.17 corrects a word choice issue in Comment 12, replacing the word “concluded” with the word “included.”
Inspection and Comment
The proposed rule amendments may be inspected below or at the office of the
Virginia State Bar, 1111 East Main Street, Suite 700, Richmond, Virginia
23219-0060, between the hours of 9:00 a.m. and 4:30 p.m., Monday through
Friday, or by contacting the Office of Ethics Counsel at 804-775-0557.
Any individual, business, or other entity may file or submit written comments
in support of or in opposition to the proposed opinion with Karen A. Gould,
executive director of the Virginia State Bar, not later than May 24, 2019.
Comments may be submitted via email to [email protected].
RULE 1.17 Sale Of Law Practice
A lawyer or a law firm may sell or purchase a law practice, partially or in its entirety, including good will, if the following conditions are satisfied:
(a) The seller ceases to engage in the private practice of law, or in the area of practice that has been sold, in the geographic area in which the practice has been conducted, except the lawyer may practice law while on staff of a public agency or legal services entity which provides legal services to the poor, or as in-house counsel to a business.
(b) The entire practice, or the entire area of practice, is sold to one or more lawyers or law firms.
(c) Actual written notice is given by the seller to each of the seller's clients (as defined by the terms of the proposed sale) regarding:
(1) the proposed sale and the identity of the purchaser;
(2) any proposed change in the terms of the future representation including the fee arrangement;
(3) the client's right to consent or to refuse to consent to the transfer of the client's matter, and that said right must be exercised within ninety (90) days of receipt of the notice;
(4) the client's right to retain other counsel and/or take possession of the file; and
(5) the fact that the client's refusal to consent to the transfer of the client's matter will be presumed if the client does not take any action or does not otherwise consent within ninety (90) days of receipt of the notice.
(d) If a client involved in a pending matter cannot be given notice, the representation of that client may be transferred to the purchaser only upon entry of an order so authorizing by a court having jurisdiction. The seller may disclose to the court in camera information relating to the representation only to the extent necessary to obtain an order authorizing the transfer of a file.
(e) The fees charged clients shall not be increased by reason of the sale.
Comment
[1] The practice of law is a profession, not merely a business. Clients are not commodities that can be purchased and sold at will. Pursuant to this Rule, when a lawyer or an entire firm ceases to practice and another lawyer or firm takes over the representation, the selling lawyer or firm may obtain compensation for the reasonable value of the practice as may withdrawing partners of law firms. See Rules 5.4 and 5.6.
Termination of Practice by Seller
[2] The fact that a number of the seller's clients decide not to be represented by the purchaser but take their matters elsewhere does not result in a violation. Neither does the seller's return to private practice after the sale as a result of an unanticipated change in circumstances result in a violation. For example, a lawyer who has sold the practice to accept an appointment to judicial office does not violate the requirement that the sale be attendant to cessation of practice if the lawyer later resumes private practice upon leaving the office.
[3] Comment [3] to ABA Model Rule 1.17 substantially appears in paragraph (a) of this Rule.
[4] The Rule permits a sale of an entire practice attendant upon retirement from the private practice of law within the jurisdiction.
[5] This Rule also permits a lawyer or law firm to sell an area of practice. If an area of practice is sold and the lawyer remains in the active practice of law, the lawyer must cease accepting any matters in the area of practice that has been sold, either as counsel or co-counsel or by assuming joint responsibility for a matter in connection with the division of a fee with another lawyer as would otherwise be permitted by Rule 1.5(e). For example, a lawyer with a substantial number of estate planning matters and a substantial number of probate administration cases may sell the estate planning portion of the practice but remain in the practice of law by concentrating on probate administration; however, that practitioner may not thereafter accept any estate planning matters. Although a lawyer who leaves a jurisdiction or geographical area typically would sell the entire practice, this Rule permits the lawyer to limit the sale to one or more areas of the practice, thereby preserving the lawyer's right to continue practice in the areas of the practice that were not sold.
Sale of Entire Practice or Entire Area of Practice
[6] The Rule requires that the seller's entire practice, or an entire area of practice, be sold. The prohibition against sale of less than an entire practice area protects those clients whose matters are less lucrative and who might find it difficult to secure other counsel if a sale could be limited to substantial fee-generating matters. The purchasers are required to undertake all client matters in the practice or practice area, subject to client consent. This requirement is satisfied, however, even if a purchaser is unable to undertake a particular client matter because of a conflict of interest.
Client Confidences, Consent and Notice
[7] Negotiations between seller and prospective purchaser prior to disclosure of information relating to a specific representation of an identifiable client no more violate the confidentiality provisions of Rule 1.6 than do preliminary discussions concerning the possible association of any lawyer or mergers between firms, with respect to which client consent is not required. Providing the purchaser access to client-specific information relating to the representation and to the file, however, requires client consent. The Rule provides that before such information can be disclosed by the seller to the purchaser the client must be given actual written notice of the contemplated sale, including the identity of the purchaser and any proposed change in the terms of future representation, and must be told that the decision to consent or to make other arrangements must be made within 90 days. If nothing is heard from the client within that time, the client's refusal to consent to the sale is presumed.
[8] A lawyer or law firm ceasing to practice cannot be required to remain in practice because some clients cannot be given actual notice of the proposed purchase. Since these clients cannot themselves consent to the purchase or direct any other disposition of their files, the Rule requires an order from a court having jurisdiction authorizing their transfer or other disposition. The Court can be expected to determine whether reasonable efforts to locate the client have been exhausted, and whether the absent client's legitimate interest will be served by authorizing the transfer of the file so that the purchaser may continue the representation. Preservation of client confidences requires that the petition for a court order be considered in camera.
[9] All the elements of client autonomy, including the client's absolute right to discharge a lawyer and transfer the representation to another, survive the sale of the practice.
Fee Arrangements Between Client and Purchaser
[10] The sale may not be financed by increases in fees charged the clients of the practice. Existing agreements between the seller and the client as to fees and the scope of work must be honored by the purchaser, unless the client consents after consultation.
Other Applicable Ethical Standards
[11] Lawyers participating in the sale of a law practice are subject to the ethical standards applicable to involving another lawyer in the representation of a client. These include, for example, the seller's obligation to assure that the purchaser is qualified to assume the practice and the purchaser's obligation to undertake the representation competently (seeRule 1.1); the obligation to avoid disqualifying conflicts, and to secure client consent after consultation for those conflicts which can be agreed to (seeRule 1.7); and the obligation to protect information relating to the representation (see Rules 1.6 and 1.9).
[12] If approval of the substitution of the purchasing attorney for the selling attorney is required by the rules of any tribunal in which a matter is pending, such approval must be obtained before the matter can be included concluded in the sale (seeRule 1.16).
Applicability of the Rule
[13] This Rule applies to the sale of a law practice by representatives of a deceased, disabled or disappeared lawyer. Thus, the seller may be represented by a nonlawyer representative not subject to these Rules. Since, however, no lawyer may participate in a sale of a law practice which does not conform to the requirements of this Rule, the representatives of the seller as well as the purchasing lawyer shall see to it that they are met.
[14] Admission to or retirement from a law partnership or professional association, retirement plans and similar arrangements, and a sale of tangible assets of a law practice, do not constitute a sale or purchase governed by this Rule.
[15] This Rule does not apply to the transfers of legal representation between lawyers when such transfers are unrelated to the sale of a practice.