UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER鈥橲 CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 92-22
A South Carolina law firm which advertises on television desires to enter into an Agreement with its associates concerning such advertisements. Pursuant to the terms of the proposed Agreement, after the associate's fifth employment anniversary with the firm, the associate may elect to have his or her name mentioned in the firm's television commercials.
The Agreement further provides that "in the event the Employee elects to have his/her name included in the Firm's television advertising . . . for a period of three (3) years after the Cancellation Date, if the Employee's employment with the Firm terminates for any reason. Employee shall not advertise Employee's service as an attorney in any television advertisement shown or broadcast in the Area as defined hereinabove." If the associate chooses not to include his name in the firm's television commercials, there will be no restrictions on the associate's future advertisements.
Paragraph 5 of the Agreement states that the Agreement is not a restriction of the right to practice law:
Not Restriction On Right to Practice Law. The parties hereto acknowledge that this Agreement does not restrict the right of Employee to practice law after the termination of the Employee's employment relationship with the Firm, and does not limit the freedom of client to choose a lawyer. Thus, both parties hereto acknowledge and agree that this Agreement does not violate Rule 5.6 of the Rules of Professional Conduct. Notwithstanding the foregoing, if a competent authority should determine that the provisions of this Agreement, if effective, would violate Rule 5.6 or any other applicable law or rule governing the practice of law in South Carolina, then this Agreement shall be deemed utterly null and void and neither party shall have any obligation to the other." The advertising restriction is enforceable by an action for injunctive relief, an action for damages, and a right of set-off against any obligation the firm may have to the departing associate.
Question:
Does the proposed agreement constitute a restriction of the right of a lawyer to practice of law prohibited by Rule 5.6(a), South Carolina Rules of Professional Conduct?
Summary:
The proposed Agreement constitutes an indirect restriction on the right to practice law. Such an indirect restriction on the right to practice constitutes a violation of Rule 5.6(a).
Opinion:
Rule 5.6(a) of the South Carolina Rules of Professional Conduct provides that "(a) lawyer shall not participate in offering or making: (a) a partnership or employment agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement." It is improper both for an employer-lawyer to offer a contract restricting a lawyer's right to practice and for an employee-lawyer to accept it. The Comment to Rule 5.6 states in part that An Agreement restricting the right of partners or associates to practice after leaving a firm not only limits their professional autonomy but also limits the freedom of clients to choose a lawyer.
The proposed Agreement is not a typical restrictive covenant found in employment agreements which has been prohibited by Rule 5.6(a). See, for example, S.C. Bar Advisory Opinion No.82-5 and ABA Formal Opinion No. 300 (1961) (these opinions dealt with the prior DR 2-108(A) which contains essentially the same language as the current Rule 5.6(a). The subject Agreement does not fall within the retirement benefits exception under Rule 5.6(a); the issue here is simply whether the subject restriction on future advertising constitutes an agreement restricting the right of a lawyer to practice law within the meaning of Rule 5.6.
A somewhat similar indirect restriction of the practice of law was considered in ABA Informal Opinion 1417 (1978). In that opinion, it was determined that it would violate DR 2-108(A) for a partner leaving his firm to be bound by contract from hiring or otherwise associating with any associate employed by the firm at the time of such departure, for a period of five years. The opinion concludes as follows:
Although the agreement in question does not restrict the right of the individual lawyer to practice law directly, by restricting the right of association between attorneys it restricts such right indirectly and so falls within the prohibition of DR 2-108(A).
In the ultimate sense, the question as to whether a restrictive covenant may be enforced depends on a judicial conclusion in a case presented to a court. Consequently, the Committee does not express an opinion in response to your second query.
ABA Informal Opinion 1417. The Agreement in this case restricts a departing associate's right to advertise his or her service on television. Television advertising is of course not the "practice of law," thus, a restriction of such advertising is not a direct restriction on the right to practice law.
The restriction on advertising for clients is, however, an indirect restriction on the right to practice. A restriction on advertising comes closer to impinging on a client's knowledgeable and free choice of lawyers than the situation addressed in ABA Informal Opinion 1417. The subject Agreement therefore appears to fall within the prohibition of restrictions on the right to practice law under Rule 5.6(a).