Lawyers on the move

The NYT reports on a dispute between NY’s Coudert Bros and SF’s Orrick Herrington & Sutcliffe over the move of 11 Coudert partners to Orrick.  This looks like a potentially messy dispute, involving possible breach of fiduciary duty claims. But at the heart lies the fact that non-competition agreements binding partners to law firms are not fully enforceable under legal ethics rules.

I have written about this area in my treatise, Bromberg & Ribstein on Partnership, Section 7.12; my Unincorporated Business Entities casebook, section 9.06 (both linked in the sidebar) and my article, Ethical Rules, Agency Costs and Law Firm Structure, 84 Va. L. Rev. 1707 (1998). 

The bottom line is that ethical rules (particularly in NY) prevent firms from protecting their goodwill, and therefore from building reputational capital.  This is supposed to protect clients’ ability to choose their lawyers, but it relates only to the lawyers’ movement among firms.  Surely clients could gain from firms’ ability to build reputational capital and to protect their continuity, just as non-law firms do.

Of course it is also said that we don’t want unseemly all-out competition among lawyers for filthy lucre.  Fortunately the ethical rules have fully protected us from that.