Unenforceable Practice Restrictions

Unenforceable Practice Restrictions

Rule 5.6(b) is addressed to lawyers: none may participate in offering or making "an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a client controversy."¹ Discipline is the rule's direct sanction, but the restrictive term has a fate of its own. A contract whose formation is untainted can still go unenforced when the contract itself violates or runs directly contrary to public policy,² and a settlement clause restricting a lawyer's practice fits that description. Such a clause is presumably void as against public policy, so a court asked to enforce it should be expected to refuse. One commentator, discussing Rule 5.6, makes the supporting point: although the rule is an ethics rule, most courts would probably enforce it by invalidating any agreement that violated its provisions.³ That observation appears in a discussion of paragraph (a), but it speaks of the rule's provisions generally. Keep the hedge in your answers. The authorities speak of what courts would probably do and of what a strong case can show, and the decision discussed below voided a covenant in a partnership agreement, not in a settlement.

Discipline and voidness fall on different things. Discipline attaches to the lawyer's conduct, and the rule reaches participation in offering a restriction as well as in making one. A lawyer who proposes a practice restriction is therefore exposed even if opposing counsel refuses the offer and tells the client the provision would be void.⁴ Voidness attaches to the term, and it matters when someone tries to rely on the clause against the lawyer. Because the two consequences operate independently, a lawyer cannot defend an offer by saying the clause would have been unenforceable anyway. A court can likewise decline to enforce the clause without any lawyer having been disciplined.

Both consequences trace to one concern, the choice of future clients. Comment 1 to Rule 5.6 explains that agreements restricting lawyers' right to practice limit not only the lawyers' professional autonomy but also "the freedom of clients to choose a lawyer." Professors Hazard and Hodes and attorney Jarvis describe the rule as "designed to protect present and potential clients from a diminution of their ability to choose counsel."⁵ A later claimant never signed the settlement. Discipline reaches the lawyers who negotiated the term, and voidness strips the term of its effect on claimants who had no part in the bargain.

The decision closest to hand voiding a lawyer's restrictive covenant on the client-choice ground is a partnership case, so it supports the settlement rule only by analogy. In Dwyer v. Jung, the partnership agreement of the firm of Jung, Dwyer and Lisbona barred its lawyers from representing certain insurance carriers in the defense of negligence cases. The court reasoned that an agreement dividing the client market in that way restricts the carriers in their unlimited choice of counsel, and it declared the covenant void as against public policy.⁶ It then stricken the pleadings that depended on the covenant and let the case continue solely for an accounting among the parties.⁷ Because Dwyer involved a partnership agreement and not a settlement, it does not decide the settlement question directly. Its reasoning carries over because the harm fell on people outside the agreement: the carriers there, future claimants here. A clause barring a firm from taking later claims against an opponent divides the client market in the same way, by contract.

A New York court has gone part of the way toward the settlement version. It quoted the older Code of Professional Responsibility rule, which barred a lawyer from agreeing, "[i]n connection with the settlement of a controversy or suit," to a restriction on the right to practice law. It then said that "a strong case can be made" that the provision before it was an impermissible restraint on the firm's practice.⁸ A statement that a strong case can be made shows the court's attitude, but it is not a holding that the clause is void. On an exam, rest on the presumption of voidness and do not say that the court struck the clause.

Applying the two consequences to a fact pattern shows how they split.

The same split resolves the opposite case. If a stem describes only a release, a payment, and a dismissal, no restriction on practice exists to void, and no lawyer has participated in a forbidden term. Aim the analysis at the restrictive term itself and leave the client's own release and payment obligations outside the voiding.