Lawyers have fiduciary obligations to their firms. A fiduciary has a duty to disclose material information to the principal. However, lawyers may engage in preliminary negotiations with prospective new firms and may make plans to open their own practice without disclosing such activities to their current firm. In the leading case of Meehan v. Shaughness, 535 N.E.2d 1255 (Mass. 1989), the Supreme Judicial Court of Massachusetts held that departing partners owed fiduciary obligations to their remaining partners and that they could be held civilly liable for breach of those obligations. However, the court decided that the withdrawing partners did not breach their fiduciary obligations by making “logistical arrangements” for their new firm (executing a lease, preparing a list of clients they expected to retain after their departure, and arranging for financing based on their expected clientele) because fiduciaries may “plan to compete with the entity to which they owe allegiance,” provided that they do not otherwise breach their fiduciary obligations. Id. at 1264.
As a general matter, in my opinion lawyers need not disclose their intention to move until arrangements with the new firm are final. After all, the deal may fall through for many reasons. For example, suppose a lawyer signs an employment agreement with a new firm. Is disclosure to the old firm required at this point? If the employment agreement is subject to any significant condition, such as the satisfactory completion of a conflicts check, which may often be the case, in my opinion disclosure to the old firm would not be required until such conditions are removed and the employment agreement is essentially final. However, if the lawyer is in a management position in the old firm, the lawyer should not be participating in decisions by the firm that are based on the assumption that the lawyer will remain with the firm. If the lawyer is not ready to disclose his intentions at that point, at the very least, he should absent himself from participation in these decisions.
For more information, Nathan M. Crystal.
