The Other Rule 1.17 Conditions

Cessation is the first condition Rule 1.17 sets for selling a law practice, and it is not the last. The rule permits a lawyer or law firm to sell or purchase a practice, or an area of practice, including good will, only “if the following conditions are satisfied.”¹ The seller's cessation of practice in the area and place sold, which the preceding sections developed, is the first of them.² Three more follow: the entire practice or area must be sold,³ each of the seller's clients must receive written notice,⁴ and client fees must not rise by reason of the sale.⁵

Cessation tells the seller what to do, but it says nothing about clients, who are not parties to the sale. The three remaining conditions answer three ways a sale could hurt them. The lawyers could pick through the practice, selling the matters worth having and leaving the rest. Files could change hands without the clients' knowledge. And the buyer could raise fees to recover what it paid.

The conditions work as a checklist. A sale that omits any one of them is not a sale Rule 1.17 permits, and a seller who has plainly retired has answered only the first item. The sections below take up the rest, beginning with the requirement that the whole practice or area be sold.

Sale of the Entire Practice

Rule 1.17(b) requires that the entire practice, or the entire area of practice, be sold to one or more lawyers or law firms.⁶ This condition completes the area-of-practice option. A seller who sells only an area must cease practice in that area,⁷ and that duty means little unless the whole area has changed hands, because a seller who kept some of its clients would still be practicing in the field supposedly sold. The area must therefore move as a unit, so that the seller's departure and the clients' transfer happen together. Some states are stricter still and require that a practice be sold in its entirety, which leaves no room to sell a single area.⁸ When an exam names such a state, the answer on area sales changes.

The seller and the buyer negotiate the sale, and the clients whose files are being transferred take no part in the negotiation. The two lawyers could therefore agree to move only the matters worth having: the buyer takes the files that generate fees, and the seller collects a price for them while keeping the rest. The clients left behind would be unserved or would have to find new counsel on their own. The rule forbids this skimming, and for the same reason it does not permit the sale of individual client matters or of segments of an area.⁹

The family-law lawyer kept files, and the rule forbids that. A seller with no single buyer for everything is differently situated, because the rule allows division among buyers: the condition speaks of “one or more lawyers or law firms.”¹⁰ The practice or area may be split among several purchasers, so long as every client matter in it has been transferred when the sale closes. A sale to more than one buyer should be arranged so that the closing itself completes the transfer.¹¹

Both sellers meant to leave the field, and both sold to other firms. What separates them is where the files sit after closing: the family-law lawyer kept matters, and the criminal-defense lawyer kept none. Dividing an area can send a single client's matter to a single buyer, yet clients remain protected by their right to object, taken up under written notice, and by the continuing demand that every matter in the area be included.¹²

One more situation resembles a gap in the transfer but is not one. The requirement is still satisfied when a purchaser cannot accept a particular client matter because of a conflict of interest, as Comment 6 explains.¹³ The seller offered every matter in the practice or area, and the obstacle lies with the buyer rather than with the bargain.

The result turns on who decided that the matter would not go to the buyer. A conflict that bars the buyer leaves the sale intact, and a seller who keeps a matter by choice has sold less than the entire practice. Because the condition depends on what happens to every file, and not on how the sale is described, the most reliable way to apply it is as an inventory of the practice.

Written Client Notice

Rule 1.17(c) requires the seller to give written notice to each of the seller's clients.¹⁵ The conditions covered so far keep the practice from being picked apart, but none gives a client a voice. A client's matter is not a commodity that the lawyer may sell or trade at the lawyer's option. Each client keeps control of the matter, which may not be transferred to, or even disclosed to, another lawyer without the client's explicit or implicit consent.¹⁶ Notice is how the rule protects that control: the sale may not go through without advance notice to each client and an opportunity to object or to direct the file to another lawyer.¹⁷ The notice must tell each client three things:

That a sale is proposed.¹⁸
That the client may retain other counsel or take possession of the file.¹⁹
That the client's consent to transfer of the client's files will be presumed if the client takes no action or does not otherwise object within ninety days of receiving the notice.²⁰

The first two items give the client what a real choice requires: knowledge that a transfer is coming and alternatives to the proposed buyer. A client can retain a lawyer of the client's own choosing or take the file and handle the matter elsewhere. The ninety-day presumption lets the sale proceed on a client's silence, so a client who ignores the letter does not hold up the transfer, while any client who objects within the window can keep that client's own matter from moving.²¹ Presumed consent does not bind the client afterward. A client who later seeks other counsel, or ends the representation, keeps the absolute right to do so, and the sale does not impair it.²²

The notice period also limits what the buyer may see. A client's matter may not be disclosed to another lawyer without the client's explicit or implicit consent, and implicit consent arises only after the notice has run its course, so the buyer may not receive client-specific information before that process is complete.²³ Showing a file to the buyer discloses the client's confidences to a lawyer the client has not approved, and a client who would have objected cannot undo that disclosure afterward. The same concern explains who sends the notice. The selling lawyer sends it to preserve confidentiality, or, if the seller has died or become disabled, the seller's estate or representative does.²⁴

Once the notices are out, each client's response decides what the seller may do with that client's matter. An express consent approves the transfer at once. A client who objects, takes possession of the file, or retains other counsel has kept the matter from the buyer, and the seller may neither disclose nor transfer it. A client who does nothing is treated as consenting once ninety days have passed since receipt of the notice.²⁵ For a pending lawsuit, the buyer's taking over remains subject to any court rule requiring approval of a substitution of counsel.²⁶

Both clients received the same notice, so the only fact separating them is what each did within the ninety days. Silence supplies consent, an objection withholds it, and the buyer's right to each file follows from which one occurred. The objecting client does not defeat the entire-practice condition, because the seller offered every matter and the client made the choice.

Notice can also fail for reasons that have nothing to do with what a client wants, as when a client has moved and left no forwarding address. Rule 1.17(c) therefore provides that when a client cannot be given notice, the representation may be transferred to the purchaser only upon entry of an order authorizing it by a court having jurisdiction.²⁷ The court stands in for the consent that cannot be obtained. Under Comment 8, it can be expected to decide whether reasonable efforts to locate the client have been exhausted and whether the absent client's legitimate interests will be served by letting the purchaser continue the representation.²⁸ Confidentiality follows the client into the courtroom. The seller may disclose information relating to the representation to the court in camera, meaning privately and outside the view of others, and only to the extent necessary to obtain the order.²⁹ A buyer who simply accepts the file of an unreachable client has skipped the only safeguard left.

Written notice, together with the court-order route for clients who cannot be reached, governs who receives the files. The last condition governs what clients pay once the files have moved.

No Fee Increases

Rule 1.17(d) states the last condition in a single sentence: “The fees charged clients shall not be increased by reason of the sale.”³¹ The earlier conditions decide who ends up holding the files. This one decides what clients pay afterward, which is where a sale could take money out of a client's pocket directly.

The price of a practice is a bargain between two lawyers, and the clients are not parties to it. A buyer who needs to recover that price can draw on its own earnings or charge the inherited clients more. If the second route were open, clients would finance a purchase they had no part in making, paying more for the same work only because a different lawyer now does it. The condition closes that route and leaves the cost of the purchase with the buyer who chose to incur it. It also complements written notice, since a client who stays with the buyer instead of retaining other counsel is not made to pay more for staying.

The phrase “by reason of the sale” ties the prohibition to cause. The rule gives no formula or threshold for measuring an increase, so the question in a fact pattern is whether the sale is the reason fees went up, as when a buyer announces higher rates to cover the purchase price.

The prices are similar, so the amount a buyer pays does not decide the fee condition. What decides it is whether any part of that amount reached clients through higher charges. A buyer remains free to pay a large price; the condition only keeps the buyer from collecting it from the clients.

The condition binds the buyer, but a breach matters to the seller as well, because a transaction must satisfy every condition to be a sale Rule 1.17 permits. A seller who retires cleanly has met only cessation.³² If the buyer then raises rates to recoup the price, the transaction falls short of a conforming sale. On an exam, close the checklist with the fee question: look for any increase in client charges that the facts connect to the purchase.