1.17 Sale of Law Practice

A lawyer or a law firm may sell or purchase a law practice, including good will, if the parties comply with the other applicable provisions of these rules, and the conditions of this rule are satisfied.

(a) The selling attorney or each attorney in the selling firm has retired, become disabled or has died; or the selling attorney or each attorney in the selling firm has ceased to engage in the private practice of law in the State of Maine.

(b) If the seller is or was a solo practitioner, then the entire law practice must be sold as a single unit. If the seller is or was a law firm, then the entire practice of the firm must be sold as a single unit. The entire law practice, for purposes of this rule, shall mean all client files, for open and closed engagements, excepting only those cases in which a conflict-ofinterest is present or may arise.

(c) The purchaser, who must be registered with the Board as an active member of the Bar of the State of Maine, assumes the obligations of an attorney to the client or clients whose files are transferred.

(d) The seller gives the following notices:

(1) written notice to each of the seller’s clients and to the Board of Overseers of the Bar regarding:

(A) the proposed sale including the name of the purchasing attorney or the names of the attorneys who practice within the purchasing firm;

(B) the client’s right to retain other counsel or to take possession of the file;

(C) the fact that the client’s consent to the transfer of the client’s files will be presumed if the client does not take any action or does not otherwise object within ninety (90) days of receipt of the notice; and

(D) the terms of any proposed change in the fee arrangement authorized by paragraph (e).

If a client 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 single justice of the Maine Supreme Judicial Court, which shall not issue without the Board of Overseers of the Bar having been given notice and opportunity to be heard. 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.

(2) Further notice shall be given by publication in a newspaper of general circulation in each county in which seller has engaged in the practice of law, at least thirty days before the anticipated transfer of files. Such notice shall include the anticipated date of sale and identification of the purchasing lawyer or firm.

(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 other lawyers or firms take 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 the Seller

[2] The requirement that all of the private practice be sold is satisfied if the seller in good faith makes the entire practice available for sale to the purchasers. The fact that a number of the seller’s clients decide not to be represented by the purchasers but take their matters elsewhere, therefore, does not result in a violation. Return to private practice as a result of an unanticipated change in circumstances does not necessarily result in a violation.

[3] The requirement that the seller cease to engage in the private practice of law does not prohibit employment as a lawyer on the staff of a public agency or a legal services entity that provides legal services to the poor, or as in-house counsel to a business.

[4] The Rule permits a sale of an entire practice attendant upon retirement from the private practice of law within the jurisdiction. Its provisions, therefore, accommodate the lawyer who sells the practice on the occasion of moving to another state.

[5] [Reserved]

Sale of Entire Practice

[6] The Rule requires that the seller’s entire 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 Model Rule 1.6 than do preliminary discussions concerning the possible association of another 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 must be told that the decision to consent or make other arrangements must be made within 90 days. If nothing is heard from the client within that time, 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 single Justice of the Maine Supreme Judicial Court authorizing their transfer or other disposition. The Board of Overseers of the Bar must be given notice and an opportunity to be heard in any such proceeding. The Court can be expected to determine whether reasonable efforts to locate the client have been exhausted, and whether the absent client’s legitimate interests 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 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 or area of 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 arrangements between the seller and the client as to fees and the scope of the work must be honored by the purchaser.

Other Applicable Ethical Standards

[11] Lawyers participating in the sale of a law practice or a practice area 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 exercise competence in identifying a purchaser qualified to assume the practice and the purchaser’s obligation to undertake the representation competently (see Rule 1.1); the obligation to avoid disqualifying conflicts, and to secure the client’s informed consent for those conflicts that can be agreed to (see Rule 1.7 regarding conflicts and Rule 1.0(e) for the definition of informed consent); 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 lawyer for the selling lawyer 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 in the sale (see Rule 1.16).

Applicability of the Rule

[13] This Rule applies to the sale of a law practice of a deceased, disabled or disappeared lawyer. Thus, the seller may be represented by a non-lawyer 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 can be expected to 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 or an area of practice.

REPORTER’S NOTES:

Model Rule 1.17 (2002) addressing the issue of the sale of a law practice, corresponds to M. Bar R. 3.14. Until recently in Maine, lawyers were forbidden to sell all or part of their law practices, other than tangible items such as furnishings, equipment, books and leases. Because clients are not the “property” of the lawyer, they could not be “sold.” Moreover, good will was not recognized as an asset of a law practice. Firms could, however, buy-out withdrawing or retiring partners, return their capital and continue to pay distributions and provide benefits to such departing partners, thus affirmatively recognizing that a departing partner leaves behind some value in the firm. Unfortunately, unless solo practitioners joined in partnerships, upon their departure from their “firm” there was no opportunity for them to capture the value they created in their firm.

In 2000 the Maine Supreme Court Advisory Committee on the Rules of Professional Responsibility began consideration of what was to become M. Bar R. 3.14. The Advisory Committee’s deliberations focused on the requirement that seller cease the private practice of law in order to be eligible to “sell” his/her practice. After much discussion, the Advisory Committee recommended allowing the sale of an entire law practice to a single purchaser, subject to narrowly specified exceptions. The Advisory Committee also recommended that Bar Counsel, on behalf of the Board of Overseers, be involved in such sales at an early stage in the process, in order to provide lawyers with assistance in avoiding unintended violations of the rule. (The Board of Overseers is already the central repository of information on attorneys who have ceased practicing law pursuant to M. Bar R. 6(c)(1) and (2).)

After a review and discussion of the Advisory Committee notes on M. Bar R. 3.14, the Task Force recommended the adoption of the form of Model Rule 1.17 (2002), substantively revised to reflect the recent revision of M. Bar R. 3.14.

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