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LOCATION: 555 Capitol Mall, Suite 1230, Sacramento, CA 95814
PHONE: (916) 996-0400 | FAX: (916) 668-5760

Following is the 68th post in a series from Parker Law Group about recent changes to the California Bar Association (CBA)’s Rules of Professional Conduct (RPC). This rule is found in Chapter 1 – “Lawyer-Client Relationship,” focusing on the conditions that must be met when a law practice is sold.

This Rule of Professional Conduct, as revised, is as follows:

Rule 1.17   Sale of a Law Practice

All or substantially all of the law practice of a lawyer, living or deceased, including goodwill, may be sold to another lawyer or law firm subject to all the following conditions:

(a)  Fees charged to clients shall not be increased solely by reason of the sale.

(b)  If the sale contemplates the transfer of responsibility for work not yet completed or responsibility for client files or information protected by Business and Professions Code section 6068, subdivision (e)(1), then;

(1)  if the seller is deceased, or has a conservator or other person acting in a representative capacity, and no lawyer has been appointed to act for the seller pursuant to Business and Professions Code section 6180.5, then prior to the transfer;

(i)  the purchaser shall cause a written notice to be given to each client whose matter is included in the sale, stating that the interest in the law practice is being transferred to the purchaser; that the client has the right to retain other counsel; that the client may take possession of any client materials and property, as required by rule 1.16(e)(1); and that if no response is received to the notice within 90 days after it is sent, or if the client’s rights would be prejudiced by a failure of the purchaser to act during that time, the purchaser may act on behalf of the client until otherwise notified by the client, and

(ii)  the purchaser shall obtain the written consent of the client. If reasonable efforts have been made to locate the client and no response to the paragraph (b)(1)(i) notice is received within 90 days, consent shall be presumed until otherwise notified by the client.

(2)  in all other circumstances, not less than 90 days prior to the transfer;

(i)  the seller, or the lawyer appointed to act for the seller pursuant to Business and Professions Code section 6180.5, shall cause a written notice to be given to each client whose matter is included in the sale, stating that the interest in the law practice is being transferred to the purchaser; that the client has the right to retain other counsel; that the client may take possession of any client materials and property, as required by rule 1.16(e)(1); and that if no response is received to the notice within 90 days after it is sent, or if the client’s rights would be prejudiced by a failure of the purchaser to act during that time, the purchaser may act on behalf of the client until otherwise notified by the client, and

(ii)  the seller, or the lawyer appointed to act for the seller pursuant to Business and Professions Code section 6180.5, shall obtain the written consent of the client prior to the transfer. If reasonable efforts have been made to locate the client and no response to the paragraph (b)(2)(i) notice is received within 90 days, consent shall be presumed until otherwise notified by the client.

(c)  If substitution is required by the rules of a tribunal in which a matter is pending, all steps necessary to substitute a lawyer shall be taken.

(d)  The purchaser shall comply with the applicable requirements of rules 1.7 and 1.9.

(e)  Confidential information shall not be disclosed to a nonlawyer in connection with a sale under this rule.

(f)  This rule does not apply to the admission to or retirement from a law firm, retirement plans and similar arrangements, or sale of tangible assets of a law practice.

Application:

Previously found in Rule 2-300 of the CBA’s RPC – part of Chapter 2 (“Relationship Between Members”), Rule 1.17 in the new RPC, as set forth above, has changed slightly from the rule’s previous version. The first change is the omission of the sentence found at the end of the previous rule’s subdivision (B)(1)(a), referring to compliance (by the purchaser of a law practice) with requirements set forth in Rule 1-400(D). Rule 1-400(D) related to prohibitions involving “a communication or a solicitation,” along with “any provisions relating to attorney-client fee arrangements.” Subd. (B)(1)(a) in the previous rule corresponds to subd. (b)(1)(i) in the new rule.

A second change is the simplification of most of the wording in subd. (b)(1)(ii) – formerly found in subd. (B)(1)(b). The rewording of this subdivision helps to clarify the meaning behind this portion of the rule, defining “reasonable efforts” to locate a client from whom written consent is needed. A third change is similar to the first – omission of a sentence mentioning compliance with Rule 1-400(D). However, this change, found in subd. (2)(i), affects the seller of a law practice. The final change is that the rule numbers mentioned in subd. (d) of the revised rule are different than those found in subd. (D) of the old version … due to the renumbering of most of the new version’s rules.

The verbiage found in the corresponding rule in the American Bar Association (ABA)’s Model RPC is very different (and far simpler) than the verbiage in the CBA’s revised rule. The ABA’s rule contains nine paragraphs (most of which are very short), while the CBA’s rule has thirteen paragraphs, two of which are quite lengthy.

Benefit:  Generally speaking, the new version of this rule is simpler than the previous one, helping attorneys more easily navigate the challenges often encountered during the sale of a law practice.

The information provided herein is informational only and should not be construed as legal advice or as an agreement for representation. This is not an advertisement. If you have an issue or dispute with your attorney, or are seeking advice with respect to your obligations, you should consult with an experienced attorney. Parker Law Group is a full-service litigation and transactional law firm. Mr. Parker has represented clients in professional malfeasance disputes for over 23 years. If you would like to schedule an initial consultation with Mr. Parker or his team, you can reach them at (916) 996-0400 or at contact@parlawgroup.com. (An email to the law firm requesting a consultation does not create an attorney-client relationship or any agreement for representation by the firm.)

Rules of Professional Conduct, California Bar Association, American Bar Association, Legal Malpractice, Sale of Law Practice, Parker Law Group, Port Parker

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