Ethics in the Sale of a Law Firm
Introduction
More and more attorneys consider quitting the practice of law and dedicating themselves to something else or retiring (Poll, 2005). If they simply shut the doors of their offices and leave forever, they will lose the asset they have built through the years of hard work. Another option is to sell the asset. Several decades ago the sale of law practice was contrary to public policy. In Geffen v. Moss, one attorney at law attempted to sell his law practice to another attorney at law. It was found that the sale, among others, involved the sale of goodwill of a law practice. The court pointed out that the sale of goodwill was suspicious, since practice of law involves reputation which depends on “the skill, training and experience of each individual member, and the personal and confidential relationship existing between each such member and the client” (Geffen v. Moss). In 1989, California became the first state that expressly allowed the sale of law practice (Poll, 2005). However, the point made by the court in Geffen v. Moss reveals that sale of a law practice revolves around some important ethical issues. The current paper is an attempt to examine ethical issues that may arise out of the sale of a law practice.
General law/specialization
As every attorney knows one may practice general law and/or specialize in a certain area. When it comes to specialization, the sale may become tricky. Suppose, an attorney practices both general law and intellectual property law. Intellectual property law can be very technical and requires a certain level of expertise. The question is whether when such an attorney decides to sell his practice he may divide it: whether he may sell a general law practice to one attorney and intellectual law practice to another attorney, whom he knows as sufficiently competent in this area of law. In some jurisdictions he can. For instance, Oregon law allows splitting law practice into several parts and selling them separately (Poll, 2005). However, in California an attorney must sell the entire practice (Poll, 2005). This requirement brings an important ethical issue before the selling attorney: the issue of professionalism. As it has been mentioned before, the sale of law practice involves the issue of reputation which depends on, among other things, on skills. It is possible to say that since an attorney sells goodwill, he also sells his reputation and skills. If he sells a practice to a less competent attorney, his clients will suffer.
Suppose one of the attorney’s clients is a music recording studio that relies on his skills and expertise in intellectual property law. If the attorney sells his practice to an attorney who is less competent in intellectual property law, it will be to the studio’s detriment: it will not obtain as qualitative counsel as it used to with the previous attorney. Hence, in California, the challenge for selling a practice …
