A common provision found in many law firm partnership agreements, which requires a written-notice period prior to a partner’s withdrawal from the partnership, can have calamitous results, particularly when combined with the competing fiduciary duties law firm partners owe to both their partners and their clients.
Such provisions often place the departing partner in a state of limbo — neither “fish nor fowl” — because, during this interim period, the rights and obligations of the departing partner and the partnership are unclear.
This article discusses notice provisions and analyzes the practical and ethical dilemmas they often raise. It then makes several suggestions for provisions in law firm agreements aimed at ameliorating this problem.
The typical and seemingly benign reason given for the inclusion of a notice provision in a law firm partnership agreement is to provide stability and time for a professional transition concerning the departure of a law partner from a law firm partnership. The time period should permit clients to make an informed choice and allow the firm and partner the time to transition client and administrative matters. Typical provisions include a 30- to 90-day notice period. A representative clause is as follows:
“A partner may withdraw from the partnership upon 60 days written notice to the executive committee of his or her intent to depart from the partnership. Such time period may be shortened by the firm’s executive committee in its discretion.”
Accordingly, pursuant to the plain language of this typical provision, departing partners are required to provide their firm’s executive committee with written notice of their intent to withdraw as partners in 60 days. Upon receipt of the notice, the executive committee can choose to do nothing and simply permit the 60-day default period to run or can elect to shorten the period, thus requiring the partner to leave prior to the contractual notice provision.
From a practical perspective, partners who wish to withdraw from a firm prefer to do it quickly and do not wish to remain at their current partnership during the contractual notice period. Instead they often prefer to build client relationships and work on and bill client matters as a partner in their new firm. Partnerships, upon being informed of a partner’s intent to withdraw from the partnership, typically — at least, initially — seek to enforce the notice provision and to require a partner to remain a partner during the contractual period.
While partnerships often use these contractual periods to shore up their relationship with clients and to aid in transition, the practical reality is that having a partner in the office who has announced that he or she is leaving is, at a minimum, uncomfortable for all the parties.