Sale of Practice Means Severe Restrictions

Until recently, there were no reported ethics or disciplinary decisions about transitioning a law practice to a new owner, but recent comments have provided some clarity. For example, while Model Rule 1.17 – which most states have adopted in cases of a law firm sale – states that the seller must “cease to engage in the private practice of law,” the comments have clarified that private practice sellers can be treated similarly to larger firm retirees, who may assist former colleagues on transitioning client matters. Those transitioning activities must be “reasonably necessary to accomplish the orderly transition of active client matters.” The rule is also clear that clients may not be subjected to adverse economic impact due to the sale, so billing for transitional activities must be negotiated with the firm’s buyer.